2008 Labor Law Creates Major Dilemmas for Chinese Leadership

 

22 June 2010

On a hot morning in late May, while some 2,000 workers at a Honda parts factory were striking in China’s south,

100 irate employees at a hotel in the heart of the capital staged their own protest.

The Honda workers got lots of publicity.

The hotel employees were mostly ignored.

But the undercurrent was the same:

labor disputes are becoming a common feature of the Chinese economic landscape.

 

22 June 2010

On a hot morning in late May, while some 2,000 workers at a Honda parts factory were striking in China’s south,

100 irate employees at a hotel in the heart of the capital staged their own protest.

The Honda workers got lots of publicity.

The hotel employees were mostly ignored.

But the undercurrent was the same:

labor disputes are becoming a common feature of the Chinese economic landscape.

Chinese workers are much more willing these days to defend their rights and demand higher wages,

encouraged by recent policies from the central government aimed at protecting laborers and closing the income gap.

Chinese leaders dread even the hint of Solidarity-style labor activism.

But they have moved to empower workers by pushing through labor laws

that signaled that central authorities would no longer tolerate poor workplace conditions,

legal scholars and Chinese labor experts say.

The laws, enacted in 2008, were intended to channel worker frustrations through a system of arbitration and courts

so no broader protest movements would threaten political stability.

But if recent strikes and a surge in arbitration and court cases reflect a rising worker consciousness,

partly rooted in awareness of greater legal rights, they also underscore new challenges in China.

The labor laws have raised expectations, but still leave workers relatively powerless by Western standards.

The Communist Party-run legal system cannot cope with the exploding volume of labor disputes.

And legal enforcement by local officials loosened when the global economic crisis hit China and resulted in factory shutdowns.

If the expected revaluation of the renminbi, the Chinese currency, makes exports less competitive,

then local officials and mainland companies may collude to ignore laws and ensure that labor costs stay low.

“It’s not enough simply to rely on laws,”

said Liu Kaiming, the head of the Institute of Contemporary Observation, a labor advocacy organization in Shenzhen.

“Laws only provide the bare minimum required,” according to this significant report in the New York Times.

Weaknesses include the fact that Chinese workers still do not have the right

to form unions independent of the one controlled by the government.

The Labor Contract Law enacted in January 2008 tries to guarantee contracts for all full-time employees, but leaves many details vague.

Another law enacted in May 2008 helped streamline the system of arbitration and lawsuits,

but civil courts and arbitration committees, which are made up of government employees, have been overwhelmed by a flood of cases.

Meanwhile, because of lax enforcement, companies dodge other labor laws by cheating on minimum wage requirements and overtime pay.

The leap in worker consciousness is best reflected in the rising number of labor disputes that have gone to arbitration or to the courts.

In 2008, the year factory shutdowns surged, nearly 700,000 labor disputes went to arbitration,

almost double the number in 2007,

according to the Ministry of Human Resources and Social Security.

Last year’s numbers were roughly the same as those in 2008.

If arbitration proves unsatisfactory, Chinese workers or employers can appeal to civil courts.

In 2008, the number of labor cases in courts was 280,000,

a 94 percent increase over the previous year, according to the Supreme People’s Court.

In the first half of 2009, there were 170,000 such cases.

“Publicity regarding the Labor Contract Law had a tremendous impact on raising worker consciousness,”

said Aaron Halegua, a lawyer based in New York who is a consultant on Chinese labor law.

“Even if migrant workers still do not know the specific details of each of their legal rights,

far more came to realize that they have rights and there are laws protecting them.”

One 19-year-old worker on strike last week at the Honda Lock auto parts factory in Zhongshan said:

“We heard about the new labor law, but we don’t know the details.

We know we should fight for our rights.”

In many parts of China, there is now a backlog of labor disputes awaiting resolution.

Some workers have had to wait up to a year for arbitration committees to address their complaints.

Moreover, government officials, perhaps to protect local employers,

have pushed for disputes to be solved through mediation rather than reach the level of arbitration committees or courts,

and they have not enforced labor laws strictly, especially in the aftermath of the mass factory closings, legal experts said.

In late 2008, officials in Guangdong Province, where labor disputes are common,

issued a report saying that 500 or so unofficial lawyers who represented workers were a source of growing trouble.

Western experts say if Chinese leaders were to allow independent unions, that could help defuse labor discontent.

Under the current system, only the government-run union, the All-China Federation of Trade Unions,

which has more than 170 million members, is permitted.

The union only nominally represents workers; in practice, it has close ties with management.

The union has a wide presence in state-owned companies

and has made a big push to establish branches in foreign companies —

its most notable victory was unionizing Wal-Mart stores in 2006.

Private Taiwanese, Hong Kong and mainland Chinese companies often do not have branches of the official union.

Early drafts of the Labor Contract Law had clauses that would have allowed for more independent unions,

but those were excised from the final version,

said Mary E. Gallagher, a political scientist at the University of Michigan who studies Chinese labor.

The final version also left out an earlier clause

that said companies had to get union approval on major workplace changes.

“I would doubt very much that the Chinese Communist Party thinks that

the benefits of an independent Chinese trade union outweighs the costs or outweighs the risks,” Ms. Gallagher said.

Workers for Honda in Zhongshan made the formation of an independent union one of their main demands, along with wage increases.

The main goal of the Labor Contract Law has been to ensure that

full-time employees across all industries work under a contract.

It also tries to mandate severance pay for contracted employees.

But companies find ways around contract guarantees or wage laws.

A common complaint among laborers is lack of overtime pay when a work schedule exceeds 40 hours.

Mr. Liu, the labor advocate, said his group had done a study of 210 factories in the Pearl River Delta and the Yangtze River Delta that showed 90 percent of those factories cheat on overtime:

they often reported employees as working eight-hour days even when the hours were much longer.

Thus, the salaries were much more generous on paper than in reality.

At the Gloria Plaza Hotel in Beijing, workers took their dispute with management to the streets on May 27.

The company that owns the hotel plans to tear it down and lay off the workers.

Although the company had said the workers would get the minimum severance pay required by law,

the employees complained that that was far too low.

“They are a state-owned enterprise, they have the money, but they don’t care about us at all,”

said one woman who declined to be named – for fear of retribution.

Certainly understandable on her part.

But the government and party let the cat out of the bag in 2008

with the promulgation of the first modern Chinese labor law.

The militance now occurring is only the beginning of the nearly-insoluble predicament they will confront for the next ten years at least.

Let’s hope the leadership can figure out how to balance the demands of workers to be treated fairly –

in accordance with the law created by the government and party themselves –  

with the unforgiving discipline of an ever-insistent world political economy.

It’s a dilemma few governments so far have been able to handle successfully.

 

David Caploe PhD

Editor-in-Chief

EconomyWatch.com

President / acalaha.com