Labour disputes in China increase as the workforce shrinks

PUBLISHED : Friday, 18 April, 2014, 3:16am
UPDATED : Friday, 18 April, 2014, 3:16am

The mainland's workforce is growing more restive as it shrinks.

The number of strikes so far this year is up by nearly a third, the biggest surge in protests since the global financial crisis, according to one labour group.

The labour unrest is emerging while businesses cut costs and foreign companies restructure or close operations as the world's second-biggest economy cools.

There are no accurate national statistics on the total number of strikes, work stoppages and protests. But China Labour Bulletin, a Hong Kong-based labour rights group, said there were 119 last month alone.

This is going to be a very tough year for employers in China
Lesli Ligorner

Employers are facing an uncomfortable new reality - workers who know their rights and will challenge management to defend them, but who also demand more than the legal minimum.

"This is going to be a very tough year for employers in China," said Lesli Ligorner, Shanghai-based partner at Simmons & Simmons. "There will be more strife and strikes. It's only going to continue."

For nearly two weeks, thousands of workers at a factory in Guangdong run by Yue Yuen Industrial Holdings, the world's largest shoe maker, have been on strike. They have demanded improved social insurance payments, a pay rise and more equitable contracts.

Other companies caught up in the rising tide of unrest include Wal-Mart Stores, which is negotiating with the union at a store it closed last month; IBM, whose staff at a Shenzhen computer server factory protested over insufficient severance pay during the transfer of the plant's ownership to Lenovo last month; and Samsung SDI, whose supplier Shanmukang Technology negotiated with workers over social insurance contributions after a strike last month.

Workers are emboldened by demographic trends. The working age population shrank by almost six million in the past two years to 920 million, National Bureau of Statistics data show.

At the same time, the government has strengthened policies to better protect worker interests after decades of neglect.

The family planning policy, introduced 35 years ago, has cut factories' labour supply for a decade. Parents are more reluctant to allow their children to work in gruelling conditions, particularly as rapid economic growth offers alternatives. Factories first responded to the shortages by adding leisure facilities such as basketball courts and libraries, and later by raising wages.

Few workers globally have seen the kind of explosive wage growth that mainland workers have experienced in recent years.

The average official minimum wage has more than tripled since 2005 to around 1,300 yuan (HK$1,630) a month, according to UBS, a global financial services company. Wages are up 80 per cent since the global financial crisis, yet workers said this has barely kept pace with the rising cost of living.

The central government has overhauled its labour legislation in recent years. A 2008 labour contract law strengthened worker protections, including provisions for better severance pay.

In 2011, a new social insurance law strengthened requirements on companies to contribute to the national social insurance scheme on behalf of their staff.

Draft legislation under consideration in Guangdong would help codify collective bargaining rules there.

Ironically, a more solid legal grounding - which should, in theory, have clarified the rules around labour conflicts - has created fresh dilemmas for both workers and the government.

"It's hard for workers to really press their demands without mandatory arbitration or a strike," said Jonathan Isaacs, special counsel with responsibility for Chinese employment and labour issues at law firm Baker & McKenzie in Hong Kong.