China’s economic miracle is beginning to slow as the fallout from the global financial crisis takes hold, hitting exports and prompting a growing number of manufacturing firms to relocate elsewhere in search of cheaper labor. But if job demand slumps, the economy may not be the only thing to suffer, as there are fears that China’s already fragile labor rights record might worsen.
The contraction has started to hit the once-tight job markets, leading Chinese Premier Wen Jiabao to say last month that the employment situation was and “will become more complex and more severe.”
China has long harbored a commitment to promoting a “harmonious society,” where economic development could bloom alongside social cohesion. Sustained economic growth, coupled with the tightening of labor markets has provided a venue to redress the worst abuses, such as excessive working hours.
Authorities have tended to be more lenient with labor rights activists and more understanding of workers’ demands, although how well labor rights will weather the financial storm could be a crucial test of their resilience.
“There is [a] huge income gap between rich and poor in China and if the companies suffer, they will shift their sacrifice to the workers to try and compensate for lost profits,” said Li Qiang, director of US-based rights group, China Labour Watch. “An economic slowdown might create such a shift but for now we have not seen any such trend. It is just a possibility for the future.”
Mapping protection’s growing paper trail
“The company docks our pay, deducts and keeps our deposits, beats, abuses, and humiliates us at will… Now even though we want to leave, we cannot because they would not give us back our deposit and our temporary residential permit, and have not been giving us our wages,” read a letter drafted by workers of Guangdong’s Zhaojie Footwear Company and published by the official workers’ union newspaper Workers’ Daily in 1995.
The letter, which also exposes instances of child labor and forced detention, was indicative of the debilitating conditions found inside some factories. What is notable about it however is its timing, coming shortly after the passage of the 1994 Labour Law that for the first time codified labor policies in China and signalled the government’s growing readiness to engage with labor rights.
The following 13-year period preceding the 2008 global recession was subsequently marked by the introduction of new legislation and a notable improvement in the lives and working conditions of workers.
On paper, there is now a maximum working week, set at 40 hours, and maximum overtime of 36 hours a month, and workers are also entitled to compensation in case of injury.
It was also during good economic times that China finally pushed through national legislation outlawing child labor in 2002, something it had been required to do since signing the Universal Declaration on the Rights of the Child in 1990.
The central government has additionally worked to shore up job security and open up the scope for protest action. The Labour Contract Law, which came into effect in January 2008 has helped educate workers about their rights and give them a firmer basis for appeal. According to China Labour Bulletin, a Hong Kong-based labor rights watchdog, a year after the Act’s passage, industrial protest activity had almost doubled.
“We have seen a continuous trend in that workers are more willing and more able to bargain for their rights,” said Geoff Crothall, communications director at China Labour Bulletin.
“Since 2008 there have been more workers who are aware in terms of their rights, and more workers have been willing to ask for, not only the minimal wage, but what they consider a working wage.”
Legislation as the first facet of a continued struggle
As is often the case, passing legislation is one thing, enforcing it another, and closing the various legislative loopholes a further hurdle still. While the monitoring and prosecution of violators has improved, it remains patchy, and enforcement is largely still dependent upon the employer’s will.
“The responsibility is not on the authorities, it is on the companies,” said Li. “If they do not increase sales – they will want lower cost – and the factories have nothing but to squeeze workers.”
As China Labour Bulletin points out, while the minimum wage was introduced in 1994, it was not until 2004 when labor shortages first appeared that notable increases to the minimum wage were enacted. Increases were then halted in late 2008 as the financial crisis took hold but resumed in 2010 as the situation seemingly calmed, the group said in its 2012 report, “A Decade of Change: The Workers’ Movement in China 2000–2010.”
In contravention to the Universal Declaration of Human Rights, China does not allow the formation of independent unions and has given sole authority to All-China Federation of Trade Union (ACFTU). This notable absence has been linked to workers’ inability to pursue independent agendas.
Even in good times, however, hundreds of millions of workers were falling through the gaps.
According to Crothall there are between 30 and 60 million Chinese who are not covered by the 2008 Contract Law, which has been sidestepped by employers. There are ongoing moves to amend this, although progress has been slow.
Child labor has also remained steady. Ultimately, many commentators agree, modernizing and improving rural schools will be the only way to solve this issue.
The most widely-cited case of sidestepping labor rights obligations, however, remains that of China’s estimated 230 million migrant workers, regarded as some of the most vulnerable.
As migrants, they are treated under the “hukou” system, which restricts almost all social service provisions to native provinces. Migrants therefore tend to have the least job security, work longer than average hours, and can be forced to live on-site in inadequate and cramped accommodation by their employers.
Recognizing their value to the economy, the Chinese cabinet, known as the State Council, has made several steps to alleviate their situation, in March 2006 calling for the “fair and non-discriminatory treatment” of migrants and in June 2010 unveiling a proposal to replace the “hukou” system with a residential permit system that would extend welfare.
“They have been talking about it for 10 years but the problem is a bit like health system reform in the US, it is just too big and too complicated,” said Crothall. “Services are provided by local governments and they decide how inclusive they want to be and oftentimes they decide they do not want to be very inclusive.”
“In order to see a more level playing field for migrants, the government will have to put its money where its mouth is,” Crothall added.
Where do we go from here?
China has made the retention of near full employment a government priority, but it is not clear how far it will go to achieve this and what sacrifices will have to be made. As Wen explained in comments made to the China Securities Journal, “the task of promoting full employment will be very heavy and we must make greater efforts to achieve it.”
So far, the lowest paid sectors, such as manufacturing, have not been particularly hard hit and job demand has not fallen off as badly as in 2008 and 2009, when, according to Chen Xiwen of China’s Communist Party’s office on rural policy, a sudden collapse of exports sent some 20 million Chinese migrant workers homebound.
Part of this cushion can be attributed to the country’s demographic shifts.
A result owed mainly to its one child policy, China’s once rampant population growth is expected to taper off in the next few decades. “This will ensure that labor markets stay tight,” said Li.
Apart from shrinking, the labor force will also become more geographically balanced. In the last few years China has been directing some stimulus money to rural development, encourage industry to shift away from the coast. This has created pull factors for migrants to return home, offsetting some pressure from reported closures in coastal towns.
The transition is a long-term trend, with Crothall estimating it could take “anywhere between five to ten years,” but it has already offered up unexpected opportunities.
Despite poor job figures, the number of industrial strikes in China appear to be rising, with July seeing a 40 percent increase in activity on the June figures, according to findings by China Labour Bulletin.
Some of these have been spurred by cut backs, as workers organize to demand pay increases, as well as compensation for factory relocations and closures.
At present, success has largely been confined to foreign-owned companies that many hope will act as a good example. ACFTU expects that by the end of next year about 95 percent of all Fortune 500 companies operating in China will be actively engaging in collective wage negotiations, up from about 80 percent in November 2011.
Only this month, phone maker Samsung was shamed into reviewing standards when reports of child labor in its factories came to light. Apple and its supplier Foxconn have similarly changed their ways since a string of suicides at their plants shed light on abuses. According to the Fair Labor Association, an organization voluntarily enlisted by Apple to monitor standards, conditions have improved although hours will still have to be reduced by almost a third by 2013 to comply with local regulations. The company has promised to enact further cuts.
How the government will react when it comes to its own industries remains to be seen.
“Much depends on the economy, but it is a little too early to say which way the economy will go,” said Crothall. “How it will develop over the next 6 months is anybody’s guess.”