Doing Business With China’s New Generation of Workers

November 16, 2010
  • Wei Dong Zhou

    Former , BSR

In December 2009, Time magazine unveiled its short list for Person of the Year. Though the Chinese worker was eventually a runner up to Ben Bernanke, the second-place nomination belies huge changes sweeping across China, as “new generation” workers aspire to more than just higher wages and better working conditions. As we learn from a discussion with BSR’s China Director, these workers represent a significant shift taking place that has implications for global companies, consumers, and 800 million workers in a country that no longer wants to be “the sweatshop of the world.”

LH: Workers in China seem to be taking more action to address labor issues this year. From the strike at the Honda factory earlier this year to the suicides at Foxconn, clearly a shift has taken place among this population. What trends are you seeing in the China labor movement?

WDZ: For labor in general, the biggest change is coming from the so-called “new generation” workers, born around 1990, made up of young people who have migrated from inland China to the coastal, urban regions like Guangdong Province in search of work. It also includes workers who were born in these urban regions and whose parents are also factory workers. China hasn’t seen this kind of group before, and their motivations for migrating and seeking work are part of bigger changes happening across the country.

Let me give you a few statistics: About 71 percent of young workers in China want to stay in urban areas and not return home to rural areas. This is a significant change. In the past, people migrated to earn more money and send it back to their families. The migration was temporary; their intention was always to return home, have a family, and settle in the rural areas. Today, new generation workers are seeking a status change in their hukou (residence permit) system—they don’t want to be recognized as rural peasants but rather as industrial workers. They want to establish their lives in the cities, and this means finding friends, getting married, and being part of a community. They have big dreams—according to a study done earlier this year by the National Federation of Trade Unions Migrant Workers Task Force, 27 percent have plans to launch their own business or be part of a small business.

LH: They sound like an ambitious group. How else do they stand out from previous generations?

WDZ: New generation workers also stand out because they’re more aware of human and labor rights protection than their predecessors, and they proactively seek protection of their rights, either through collaborative action or legal support. At the same time, they have a sophisticated understanding of their rights. Before, we used to talk about worker rights as working hours and wages. But now we’re talking about opportunities for career advancement and positive corporate culture. Beyond that, they’re thinking about their own personal welfare, living conditions, employers’ reputations, and opportunities for personal growth. For companies that are employing this new generation of workers, they are challenged with meeting these new demands.

We are also hearing more about “collective negotiation,” which is similar to collective bargaining, but because the Chinese government has not ratified the ILO convention, “collective negotiation” is a more widely used phrase. This is a Chinese term for an internal process for working through demands from workers. Particularly after the Honda strike, the All China Federation of Trade Unions (ACFTU) has become more proactive in supporting a few one- to two-year pilot projects that test the negotiation model in different regions.

LH: How are Chinese companies responding to these new workers?

WDZ: Global companies have to understand the pressures faced by their suppliers. As much as the labor market is changing, the job market is changing as well. Today there are more options for workers—they can pick and choose among jobs—which is very different from the picture ten years ago, when there were more workers than jobs. Today, because of economic development and government investments in different industries, there are a lot of jobs, so workers can be picky. This means Chinese companies need to pay more attention to what these workers are asking for, which is new for them too.

Previously, workers used to “vote with their feet,” which meant that they could leave factories if they were not satisfied with working conditions. Today, the new generation workers stay in factories and are starting to say “no” to poor working conditions or unfair welfare and wages. This is also why collective negotiation is becoming more important.

LH: We’ve also seen through the media that workers are using social media to bring more attention to their situations. How is social media playing a role with this new generation worker?

WDZ: It’s much bigger than social media—sites like Facebook and Twitter are blocked in China. But sites like Tudou, which is similar to YouTube, and QQ, which is like Skype and Facebook combined, are available, so these young workers are using these sites to communicate with each other. They are also spreading more information about benefits and protection of rights using cell phone text messages and through chatting on the internet. This is driving transparency about problems, about solutions, and collective action to build pressure for change.

LH: There is some research that points to trends toward more local, regional supply chains that are closer to consumer markets. What kind of impact will this have on the labor market?

WDZ: The movement of supply chains and restructuring economic activity isn’t new for China. In 2008, when exports from Guangdong slowed down because of the crisis in the world economy, the Guangdong government started the “double transfer” strategy. This involved moving labor-intensive industries from the Pearl River Delta in Guangdong Province to the less-developed regions in the north, east, and west of the province. At the same time, workers from those less-developed areas were encouraged to work in local manufacturing and service industries, or find jobs in the more advanced sectors. What this says is that China wants to make room for the development of new industries. And at the same time, keep in mind that at any one point in time, more than 120 million workers are moving around the country, which has a lot of social impacts as well. So China also wants to balance economic growth across the entire country to minimize the movement of these 120 million workers and the social impacts. Already, a lot of low-skilled, labor-intensive industries have moved to countries like Cambodia and Vietnam. That’s fine, there are other industries waiting in the wings to move in.

LH: Given all of these trends taking place within labor in China, what’s the role for global companies?

WDZ: First, companies can help make sure basic living conditions are met, and they can also help their suppliers offer workers a living wage rather than just a minimum wage. To put that in perspective, the minimum wage here is 1100 RMB (US$167)/month, but to live in a city like Guangzhou, where BSR has one of our three offices in China, you need at least 2000 RMB (US $300). Companies should start considering the gap between the minimum wage and living wage and how to share the responsibilities with their suppliers to reduce that gap.

Second, companies can support “continuous education” or training for workers. The education and occupational skills of new generation workers are still far below their urban counterparts, and this is potentially a great opportunity for companies to contribute to local development. Earlier this year, the Guangdong government wanted to open a migrant worker community college and BSR brought together four or five apparel companies to discuss getting involved. It didn’t happen, but there’s still a lot of room for improvement here, and a lot of room for companies to be a part of that solution. For example, Nordstrom worked with BSR and a local NGO to develop a professional skills training program for workers that included information on stress management, stronger grievance mechanisms and processes, and personal finance. The company also launched a canteen committee to improve food choices in cafeterias, which is also tied to higher worker retention and productivity rates.

Third, they can support migrant workers’ children. In China, the social welfare system is based on the hukou system—there isn’t one safety net for everyone, it’s based on where you are registered. If migrant workers have children in these urban cities where they are working, their children are not registered in that local hukou system and this means they are not able to access government-supported social services like education and health insurance. That gap between minimum and living wage doesn’t make it easy to provide these basic services for their kids. So global companies have an opportunity to provide that support for migrant workers’ children. There are huge opportunities to focus on the education and training for this next generation of workers that is still untapped.

Lastly, companies can work collaboratively to present one voice to the Chinese government on all of these policy issues related to migrant workers. For example, it’s important that companies participate in dialogues with the Chinese government to let the government know they are interested in helping to find solutions to these issues.

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