Wall Street Journal: China’s Continuing Labor Problems

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

27 September 2010

Stanley Lubman, a long-time specialist on Chinese law, teaches at the University of California, Berkeley, School of Law and is the author of “Bird in a Cage: Legal Reform in China After Mao,” (Stanford University Press, 1999).

The outbreak of strikes at foreign-invested enterprises in China during the summer raises significant questions about the future of China’s industrial work force, and highlights a number of tensions at play. The questions involve different sectors of Chinese society, including business; government, including the state-controlled labor union; the All-China Federation of Labor Unions (ACFTU), and the work force. The core question is how the Chinese Communist Party (CCP) will adjust to stronger demands from China’s workers, perhaps supported by a newly more active ACFTU – and the extent to which those demands are seen by the CCP as being at odds with the party-state’s fixation on maintaining social stability above all else. To complicate the picture further, central government support of more vigorous union activity may conflict with local governments’ concern to increase investment in industry.

Since the strikes, some foreign investors have started to move or are considering moving some of their activities inland, away from the coastal cities at which the strikes occurred. China’s leaders have been forced to address the future role of the ACFTU, an affiliate of the Chinese Communist Party (CCP), by enlarging its role at the grass-roots level while forestalling the rise of an effective nationwide representative of worker interests. Workers are unlikely to cease protests against low wages and poor working conditions, and debate will continue about what kind of organizations might represent workers in future struggles for better conditions. Demographic changes and rising expectations within the work force are bound to raise further complications.

The strikes provoked a quick response at the most publicized site because of the enormous size of the affected investor, Foxconn, formally known as Hon Hai Precision Industry, a Taiwan contract electronics company with more than 400,000 Chinese workers in Shenzhen, where a wave of worker suicides preceded the strikes. In June, Foxconn announced that it would more than double base pay for some of its workers. Strikes at plants owned by Honda and Toyota also led to wage increases.

Foxconn subsequently made a bizarre attempt to raise worker morale after the strike. The company put on a rally at one of its locations at which 20,000 employees got T-shirts and pom-poms to wave, dressed in costumes and chanted slogans. In a more serious vein, Foxconn announced that rising wages in factories along the China coast were prompting the company to build facilities in areas inland that are less developed, and where, according to an interview with Foxconn’s chairman, “the typical wages could be two-thirds that of the more-developed coastal provinces, or less.” Other foreign-owned electronics companies were also reported to be relocating facilities to inland provinces that lack such industry and presently are sources of migrant workers leaving to work on the coast.

In the aftermath of the strikes this summer, the current and future role of labor unions is receiving increased attention, and prompting new draft regulations. For the most part, local branches of the ACFTU did not participate in the strikes. Since the strikes, there has been increased government emphasis on expanding the role of the ACFTU. In June, it recommended that all non-public companies, including foreign-owned companies (and those funded from Taiwan and Hong Kong) should have trade unions. More recently, a senior official of the ACFTU said that direct election of grassroots union leaders should replace the widespread practice of having leaders appointed and paid by the companies whose workers they would represent.

The government and the ACFTU are also reportedly considering implementation of a collective bargaining system, and the Guangdong provincial government posted on its official website draft regulations for forming employee representative councils in enterprises as well as procedures for collective wage bargaining. The Guangdong regulations have been called “a major breakthrough” in worker participation by the China Labour Bulletin, a respected workers’ rights organization in Hong Kong. The Shenzhen Economic Zone also issued draft regulations on collective bargaining.

These recent signs of movement should not, however, create any doubts about the CCP’s intention to retain its grasp on the policies and activities of the ACFTU and its commitment to preventing the rise of a nation-wide labor movement outside of Party control. In August, commenting on the push to make unions more independent of their employers, the head lawyer at the ACFTU was explicit on the obligation of the union to follow Party leadership, saying, “Even with the direct elections [of union chairmen] no mode is allowed other than the current unified trade union system, where grass-roots unions are led by their higher authorities.”

It is necessary to look beyond the most recent events. In a recent essay published on China Beat, Professor Mary Gallagher of the University of Michigan, an expert on Chinese labor, suggests that some demographic and social changes will strengthen workers’ expectations. At the same time, however, she also foresees the likelihood that local governments may not fully support enforcement of laws and policies from Beijing that would strengthen local trade unions.

Shortages of labor have begun to appear in south Chinese coastal cities, while many Chinese in the countryside remain underemployed. There has been considerable discussion at many levels of Chinese society about reforming the current household registration (hukou) system, under which citizens in rural areas can work temporarily in the cities but are not permitted to be treated as urban citizens, which leads to the denial of many social welfare and social insurance programs and limits on educational opportunities for their children. If the system is reformed, more workers would leave the countryside to work in the cities, but they would come with heightened expectations for themselves and their children that are likely to be very different from ten years ago. Meanwhile, young migrant workers in the cities, in Gallagher’s words, “tend to be better educated [and] are more acclimated to city life than were their parents,” and they, too, tend to have “wider and different” expectations for the future than their parents.

Faced with worker activism, the government, as noted above, is considering enlarging the role of the ACFTU. However, during the strikes workers expressed considerable distrust of the union, which has a history of close ties to management and local governments and which has not displayed great interest in aggressively representing workers objecting to low wages and to exploitative working conditions. Gallagher urges that to remedy workers’ distrust, “significant institutional reforms” must be made in the unions, as by improving the quality of union leaders in enterprises and mobilizing more support from higher levels.

Gallagher touches on a theme that previous blogs here have mentioned in different contexts, namely the failure of local governments to enforce laws and policies emanating from Beijing. Central government support of more vigorous union activity may conflict with local governments’ concern to increase investment in industry. She concludes on a note of warning: “A key danger going forward is that popular expectations for change and improvements will exceed what local governments actually do.”

The compressed discussion here suggests that there are forces in Chinese society that promise to continue to press for higher wages and better conditions for workers in foreign-owned enterprises. The same forces are also at work in privately owned Chinese enterprises and state- owned enterprises as well. All of these promise to require the CCP to adjust to stronger demands from China’s workers, perhaps supported by a newly more active ACFTU. Heightened demands by workers and their representatives, however, may be seen by the CCP as being at odds with the party-state’s fixation on maintaining social stability, creating a paradox for Beijing with no easy way out.

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