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New China labour law too European say large corporations

by ManfromMiddletown Sat Oct 14th, 2006 at 04:20:38 PM EST

I must have been in high school the first time I signed up for Portside, an American Left Internet reading list, an act that I'm certain has placed me on other lists as a consequence.  And those of you who've been here for a while are aware that I'm a big fan of irony, when wealth and power fail in spite of the advantages they have, I'm even more entertained.

There was a convergence of sorts in my mailbox this morning when I got this Portside article about a new labour law being proposed in China that would  grant local branches of the government trade union, All China Trade Union Federation (ACTUF), collective bargaining power, and create offer workers greater employment protection by making it more difficult to fire workers. The irony involved in corporations moving production from nominally capitalist regions like the US and EU to nominally communist China, and then complaining when the country actually stands up for workers strikes me as extremely ironic.

Some of the world's big companies have expressed concern that the new rules would revive some aspects of socialism and borrow too heavily from labor laws in union-friendly countries like France and Germany.

Among those raising obejctions were not only American corporations, but also the European Chamber of Commerce.  As an expert quoted in the piece states, if existing labour laws were actually enforced the pay of migrant workers who produce goods for Western markets would likely rise by 50% or more.  As Tim Costello of Global Labor Strategies notes corporate objections to the new law lay bare the idea that economic growth alone is sufficient to raise living standards.

"You have big corporations opposing basically modest reforms," said Tim Costello, an official of the group and a longtime labor union advocate. "This flies in the face of the idea that globalization and corporations will raise standards around the world."

There is a corporate class that spans the globe, and as  much as they profess allegiance to the rule of law, the secret of their success has been that they've been able to break laws and regulations without consequence while bemoaning the lack of flexbility in labor markets.

A closer look at the full report issued by Global Labor Strategies shows jus how modest the proposed reforms are, they would essentially raise Chinese labour standards to the level found in most European countries, hence the objections of global corporations, and the slant at European social model.

Contract protections for all workers

The new law would create an implied contract for any worker who receives a wage, giving millions of workers rights and benefits now denied them. It stipulates that any ambiguities in the interpretation of a contract will be made in the employees'favor. AmCham opposes these provisions on
the grounds that, "These provisions are not consistent with the recruitment system of modern enterprises."11 Instead, companies want to set pay and terms of work for all workers without signed contracts unilaterally. Management alone would determine "All problems...such as pay confirmation, the way of handling the social
insurance, the method of dismissal and the standard of compensation."

Collective bargaining with employees

The new law provides for negotiations over workplace policies and procedures, layoffs, health and safety, and firings with a union or an "employee representative." Foreign corporations demand unilateral authority, not negotiation.

Freedom to change jobs

Non-compete agreements are a regressive feature of US and other western systems that have crept into the Chinese economy. They prevent workers from changing jobs easily if they have access to proprietary knowledge as determined by an employer. For a developing economy like China, knowledge transfer is essential. The new law caps damages employers can seek for workers who change jobs, makes it more difficult to claim confidentiality has been breached, and allows for geographic exemptions to foster the spread of skills throughout the country.

Limited probationary periods

Currently corporations can set probationary periods unilaterally, often for an entire year, keeping people in a highly precarious employment status. The new law sets standard probationary periods of from one to six months depending on the type of job.

Payment for training

Under current practice employees sign a separate contract that allows companies to recover any training costs if a worker terminates his/her employment. Under current law almost anything that management considers "training"--including many of the kinds of on-the-job training that are standard for any new job--can be subject to re-payment, leaving a departing worker either in debt or, if unable to
repay the training expenses, bonded to his/her current employer. The new law limits costs employers can recover by, for instance, defining "training" as instruction that takes place "off-the-job," on a full-time basis, and lasting for at least 6 months.
Companies oppose the new law because "the employer would not be entitled toclaim compensation from the departing employee for [on-the-job and other types] of
training experiences."16

Severance payments

There is theoretically no at-will employment in China; all workers are supposed to have labor contracts--although in practice many do not. Most contracts are for a "fixed term," after which an employer can dismiss a worker without penalty and a worker can leave without penalty. This system encourages highly unstable employment relationships. The new proposal encourages stable employment by requiring employers to provide severance pay to workers whose contracts end, but not to those whose contracts are renewed. Management opposes this provision as "most unreasonable."17 A pathway from temporary to permanent work Chinese companies employ a large number of  temporary workers hired through temp agencies. Temporary work encourages management to avoid the  protections and commitment that come with standard employment. Under the new law, temp agency workers would become permanent employees after one year of employment at a client firm, thus reducing the number  of insecure, contingent jobs. According to  the companies, "This stipulation impedes the right of the employer to find the best person for the job and will reduce the flexibility of human resource allocation."18

A fair system for lay-offs

In practice corporations frequently lay-off workers at their own discretion. Under the new proposals, corporations would have to lay people off on the basis of seniority. Management opposes seniority based lay-offs in part on a novel argument: "It is a discriminative policy against the new staffto fire them while they work for the [same] enterprise as the old staff."19

There's a very simple reason why this law is being proposed now. Labour unrest in China has been rising for several years, and it's very clear that the Chinese government is fearful that unless actions are taken to provide workers protections within existing institutions, workers may feel the need to create their own paralell institutions that threaten state power. Above all else stability is preferred, and with the indications are that the ACTUF has been infilitrated by  serious and sincere labor activists.  By changing from within the neededs adjustments cen be had by reform and not revolution, and that's a beautiful.  It's just a shame that American and European companies are fighting this so hard.

I've seen this one too discussed by New Economist, thanks for the diary so I don't have to do it :).

Here is the NYT article.

by Laurent GUERBY on Sat Oct 14th, 2006 at 04:32:12 PM EST
Oh no! Communist China implementing socialist labour laws! What an outrage!

<head explodes>

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Oct 14th, 2006 at 04:38:26 PM EST
When I first read though the NYT article I couldn't stop laughing.  I had this whole schaudenfraude thing going on  thinking about the response of these corporations.  

I do think that this will have a tremedous impact in the long term though.  If China implements these laws, and the significantly raise the standard of living of Chinese workers and divert economic growth from export dependence to a home market, maybe the Chinese still believe in Marx after all.  5 stages and such, with capitalism coming before Communism in Marxist theory.

And if China can sustain growth domestically, instead of being dependent on exports, then it is significantly more  important player on the world stage.  Near peer status with the US would be forthcoming in the next decade in that case.  And the rise of new world powers is rarely painless.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Oct 14th, 2006 at 05:37:42 PM EST
[ Parent ]
Last week, in the stateside Bootrib, there was discussion about labor issues in Mexico. I mentioned in that discussion that I wondered what would happen in China regarding labor. Over here, I saw a diary by colman about living in a zero sum world. It seemed that the two threads needed to be connected and I simply ran out time this week to do so.

When I saw this story on the front page of the NYT on Friday, I set it aside until today. Seemed like it would be a good connector. Thanks for your post. This is an interesting and important development that could have a real positive effect on labor world-wide. Let's hope that China follows through. And what's happening in India?

I'll post a link on BT to send those involved on the earlier discussion over here.

by Teach313 on Sat Oct 14th, 2006 at 06:20:46 PM EST
Wal-Mart agrees to communist cells in its stores (dKos, not sure I crossposted this over here)

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Oct 14th, 2006 at 06:28:58 PM EST
Good for the Chinese. A 50% increase in labour costs wont raise the price of our cheap Chinese price by that much, as most of what we pay goes to intermediaries anyway.

And the point that unfettered globalised capitalism won't raise standards of living sufficiently without some labour protection needs to be stressed.

The irony of the European Chamber of commerce complaining that "French or German levels of protection" will be instituted is too much to bear.

Those whom the Gods wish to destroy They first make mad. -- Euripides

by Carrie (migeru at eurotrib dot com) on Sat Oct 14th, 2006 at 07:51:46 PM EST
Various folks have been saying for years that the Chinese needed to make investments in their work force. Hopefully, this is not the end but a beginning of such.  

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears
by Gringo (stargazing camel at aoldotcom) on Sun Oct 15th, 2006 at 12:25:01 AM EST
I think that this is tremendously good for the global economy, because raising the living standard Chinese workers and the development of a home market will mean that the long term China will be a consumer and not just a producer.

However I think that global corporations that have been able to take advantage of the expansion of the global labor market, and now the integration of new participants in the global labor force is slowing down.  Africa remains to be integrated (and I presume Africa and SE Asia will be the location to which production migrates as Chinese labor becomes more expensive), but for there's an argument that we've reached peak labor.

By this I mean that the the availiablity of cheap labor has allowed global corporations to change their sourcing in search of ever cheaper labor, but now future gains will have to come not from paying workers less, but having them make more.  And as I've said before there's only so much productivity that can be hand from the end of a whip.  At some point future gains will have to involve investment in human captital.

And in a society where independent action is discouraged that has tremendous ramifications, because in order to make further productitvity gains workers have to be allowed to make their own decisions and act autonomously.  And once workers are allowed autononmy in the workplace, political reform is likely to follow as workers learn to act independently.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Oct 15th, 2006 at 12:56:30 AM EST
[ Parent ]
there's only so much productivity that can be hand from the end of a whip.

would make a great sig for you mfm!

profound post.

peak slavery....hmm

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Oct 15th, 2006 at 02:10:55 AM EST
[ Parent ]
I totally agree with you, Man;

Excellent diary!

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Oct 15th, 2006 at 12:00:59 PM EST
[ Parent ]
Given the serious problems with political stability and government racketeering in much of Africa, I wonder how much industry really could be exported to Africa.  Admittedly, there is still a fair amount of room for the rest of SE Asia to expand, but still.
by Zwackus on Mon Oct 16th, 2006 at 12:26:40 AM EST
[ Parent ]
Stability is important, however in a sourcing system where the international corporation does little more than source products, and locals provide the labor and captial, it matters far less.

Far more important would be the costs of transportation.   Africa has long coastlines, but how many cities have the infrastructure needed to transport goods to export points (ports, railroads for export to Europe, etc)  If the transportation infrastructure doesn't exist then the additional costs of transportation have to be subtracted from the lower labour costs.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Oct 16th, 2006 at 12:57:26 AM EST
[ Parent ]
I thought non-Chinese corporations were afraid of China taking over their markets? And what better way for these corporations to ensure that doesn't happen than to turn them into lazy Frenchies and Germans?
by Alex in Toulouse on Sun Oct 15th, 2006 at 04:06:34 AM EST
Yes, a very important point to remember.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Oct 15th, 2006 at 04:53:24 AM EST
[ Parent ]
I say let them all whine over it and I say good luck to the Chinese trade union.  

Bitsofnews.com Giving you the latest bits.
by Gjermund E Jansen (gjans1@hotmail.com) on Sun Oct 15th, 2006 at 11:55:04 AM EST
I honestly hadn't realised how incredibly poor China was on protection for workers, although I knew it was bad.
I can barely comprehend how a country like China has gone for so long without allowing basic rights for workers.

It was a really informative post, thanks for that.

by In Wales (inwales aaat eurotrib.com) on Sun Oct 15th, 2006 at 02:42:37 PM EST
Well, in a system where obedience has been more important than equal welfare distribution, it is not really surprising that the Chinese workers have had poor protection for workers.  That is one of the main characteristics of totalitarian systems and a known phenomenon even in so called "communist" states, although totalitarian systems with an allegedly left-leaning ideology are known to be more concerned about these issues than right-wing systems even if it this is more theoretical than practical.      

Bitsofnews.com Giving you the latest bits.
by Gjermund E Jansen (gjans1@hotmail.com) on Sun Oct 15th, 2006 at 03:04:21 PM EST
[ Parent ]
It is an interesting step forward, but we must take this information with a grain of salt.

Fist of all, China has not ratified the ILO core Convention on the Right to Organise and Collective Bargaining, nor the Convention on Freedom of Association and Protection of the Right to Organise, nor the Convention on the Abolition of Forced Labour or the Convention on Forced Labour.

Workers are deprived the right to organise freely, to form independent trade unions or join the trade unions of their choice and to engage in collective bargaining. Only one organisation is recognised in law, the All China Federation of Trade Unions (ACFTU) under the authority of the Communist Party. The right to strike is not recognised. The repression of industrial action is very hard and imprisonment of those fighting for workers' rights is frequent.

Finally, having a law is not enough: it must be enforced. According to a report from the National People Assembly of China in December 2005, 80% of the companies do not comply with the existing labour regulations. For example, the weekly working time is legally limited to 45 hours, but a lot of employees work 70 hours a week or more...

And the judicial authorities do not have the means to enforce the law on a large scale.

From the workers' point of view, China is not Europe yet!

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Oct 15th, 2006 at 04:16:00 PM EST

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