Balancing interests

Cartoon by Gou Ben; Poem by Long Yuan

 

The boss strives to hold down wages,
While workers rebel, and rattle cages.
With financial crisis, companies feel the squeeze,
But labor laws cause the pressure to ease.
The two parties’ mentalities are not the same,
As they are playing a big game.
The balance of labor supply and demand has shifted,
While the level of income inequality has been lifted.
The employment structure has changed,
So salary levels should be rationally rearranged.
The managerial model should be improved,
And double standards should be removed.
Conflicts can be resolved through prevention and meditation,
To protect the interests of all in the nation.

---

 

Since the start of the 21st century, labor disputes have become increasingly frequent in China, often escalating into mass incidents. For instance, the headline-grabbing taxi strike in Chongqing and the strikes at a Honda plant and a major-brand shoe factory in Guangdong Province reflect a greater awareness of legal rights among workers and a lack of legitimate channels through which to seek redress of grievances.

The Chinese Academy of Social Sciences has built a database with information about more than 900 mass incidents. Through sober study of nearly 300 labor-related mass incidents recorded in the database, a clearer picture of the issues involved  comes into focus.

Mass incidents pose a threat to factory production and social stability if they are not dealt with in a timely, effective and equitable way. Labor relations in China are transitioning from an individualist to a collectivist orientation, which can be seen in the increasing scale and frequency of labor disputes in recent years.

 

Features
The study shows that nearly 8 percent of mass incidents took place before 2008, and the frequency of labor unrest skyrocketed after that for two main reasons. The worsening global financial crisis hurt profits, prompting companies to lay off workers or shuts down factories. The new Labor Contract Law issued in 2008 broadened the scope of labor rights, but there are many obstacles to practical implementation. In such circumstances, disputes between laborers and employers increase and the workers tend to engage in mass protests if they lack other outlets for their grievances.

Wages are the most common source of labor disputes and mass protest movements. More than 30 percent of the nearly 300 mass incidents looked at in this article were caused by disputes over wages or welfare benefits, and another 22 percent were caused by the failure of employers to pay workers on time. In eastern, middle and western China, wage-related protests account for 53 percent, 46 percent and 57 percent ,respectively. Nationally, nearly 16 percent of mass incidents pertain to financial compensation, and the proportion is 21.4 percent in the eastern part while 6.5 percent and 2.2 percent in the middle and western regions.
 

Mass incidents concerning financial compensation are mainly attributable to a few key reasons. Laborers generally become unsatisfied with compensation from their employers when they lay off staff upon shutting down, relocate or reform productive or operational strategies. Also, laborers may be unsatisfied with severance compensation when discontinuing their contracts with the employing units.
 

Among all mass incidents, around 17 percent of incidents involve taxis or buses. In terms of location, the eastern region accounts for 11 percent while middle and western regions account for 30 percent and 28 percent, respectively. Taxi employees often strike in response to government policies, such as rent, taxes and gasoline subsidies, or because of anger over the government’s failure to regulate “black taxis,” which operate without licenses. Bus strikes are the outcome of employees’ dissatisfaction about wages or welfare benefits.
 

In terms of scale, about 40 percent of incidents involve more than 100 people. Nearly 40 percent involve 1,000 people or more. Judging from recent cases, mass incidents are dramatically growing in scale. For example, about 30,000 workers at the Yuyuan shoe factory went on strike over invalid contracts in Dongguan, Guangdong Province in 2014.
 

When it comes to location, nearly 190 incidents occurred in the eastern part of China, accounting for 68 percent of the cases studied in this article, and the middle and western parts both account for 16 percent. At the same time, 65 percent of the eastern incidents took place in Guangdong Province.
 

Speaking in terms of forms of ownership, 34 percent of mass incidents involve staff from foreign-funded companies, and nearly 30 percent concerns workers at private companies. Identities of participants vary in different regions. In the eastern region, 80 percent of the total incidents involve employees of foreign-funded and private companies. In the middle and western regions, 80 percent of the total incidents concern taxi and bus drivers as well as employees from State-owned and private enterprises.

 

Reasons
The number of labor disputes started to grow in 2000 and soared after 2008. It can be attributed to the revisions to the Labor Contract Law, which entered into force in 2008, as well as the worsening financial crisis and a greater awareness of legal rights among migrant workers. It is worth noting this range of time paralleled the Lewis Turning Point in the Chinese labor market.
 

The balance between supply and demand in the labor market has changed from sustained oversupply to frequent shortages. Also, wages and welfare benefits have changed. Despite rapid growth in wages—in particular the earnings of migrant workers—the clear income is not very high. The average wage of an urban employee was nearly 3,900 yuan per month, while that of migrant workers was 2,290 yuan in 2012. Without a local hukou, migrant workers have no access to social insurance and many other public services that locals enjoy. These factors have fueled the burst of mass incidents.
 

In addition, the employment structure in the labor market underwent transformation. Starting in 1978, people began to flood into urban areas from the countryside en masse, and their employment rate climbed from almost 30 percent to nearly 65 percent from 1978 to 2012. During the same span of time, more people became employed as the overall employment rate grew from about 30 percent to 54 percent. In this way, more of the Chinese population became industrial laborers who live on wages, leading to a growth in labor disputes.
 

In the study, a majority of mass incidents took place in the labor-intensive manufacturing sector, which depends on low costs for survival. Starting with the opening-up policies, cheap labor became a major advantage for China in global competition, bringing with it a rapid and sustainable economic growth as well as a critical mass of job opportunities. But labor insurance systems lagged behind, and the rigid performance-based management model in the industry further amplified labor controversies, thus leading to mass incidents.

The analysis of mass incidents reveals the features of the Chinese system for managing labor relations. Strategically, Chinese labor unions need to correspond with national economic policies when making organizational strategies due to their political nature. In an atmosphere in which economic development is prioritized, political policies are prone to protect investors and employers, so it is close to impossible to fairly balance the interests of the government, labor unions and employers.
 

Also, legislation on collective bargaining in China is far from perfect. In resolutions of labor disputes, more than 60 percent of mass incidents are handled by government officials or through the use of police, while only a handful are solved through collective bargaining.
 

In addition, employer-led human resource management plays a major role,while  few labor unions and workers are involved. Labor unions are controlled by employers, and union leaders are administrators of the companies. Therefore, company-based labor unions tend to side with employers, losing the trust of workers.

 

Measures
The management of labor relations should take into account national strategies and circumstances concerning industries, enterprises and workplaces, because labor relations are the outcome of external economic conditions and represent the interaction among multiple interest groups. A well-established mechanism for managing labor relations should conform to the country’s economic development, fit with employers’ commercial strategies and labor unions’ political nature as well as favor labor’s appeals to benefits. Emphasis should be put on the following aspects:

Stable labor relations are vital to a healthy economy, so the government must draft new labor policies and strengthen the protection of workers’ rights. Employment legislation and insurance should be improved in order to better the labor benefits such as minimum wage, medical care and professional training. It is necessary to build collective negotiation mechanism on an enterprise level by perfecting related legislation, to solve labor disputes through legitimate methods. At the same time, governments should restrain themselves in regulation and arbitration on labor disputes. Also, there should be guidelines to help enterprises adapt to the new model of economic development and encourage them to promote scientific human resource management, emphasizing to labor benefits and labor involvement.

 

Zhou Xiaoguang and Wang Meiyan are research fellow, research assistant respectively from the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences.