The Changing Labor Context in China: Workers and Collective Bargaining

September 7, 2012
  • Jason Ho

    Former Manager, Advisory Services & CTI, BSR

Jason Ho, Manager, Advisory Services & the China Training Institute, BSR

In 2012, China’s manufacturing sector has seen growing labor unrest. Wages have increased because of the scarcity of skilled labor, but tensions between workers and employers are high. Normally, a wage increase would be understood as a positive step, so why does the unrest continue, and how can collective bargaining legislation help?

There is no official record of what constitutes a living wage in China. In many instances, wage increases still fail to meet China’s own minimum wage. Furthermore, an increase in the minimum wage will not necessarily appease an already frustrated, new generation of workers who are entering the workforce with high expectations of employers.

Data from BSR’s China Training Institute (CTI) demonstrates that today’s migrant workers are well-educated and seeking a better quality of life; they are looking for a clear career development path and social recognition, yet they are also ill-equipped to deal with setbacks. Overall, this leads to high turnover rates and sometimes extreme behaviors, such as group suicides. 

Although the central government took the extraordinary step of allowing NGOs to advocate on behalf of workers, the recent closure of seven labor NGOs in Shenzhen is at odds with this rhetoric of reform. 

BSR and the Collective Bargaining Forum, a leading think tank in China, held a roundtable in June to explore mechanisms to achieve better worker, employer, and government labor relations.

Highlights of this session include:

  • Workers lack an understanding of collective bargaining. The Corporate Social Responsibility and Labor Relations Research Center of Hunan University found however, that workers do desire to negotiate with employers on wages and benefits.
  • Employers risk losses. Without an independent labor union and collective bargaining legislation, workers are afraid of being arrested and sued by employers for taking collective actions. However, unannounced strikes, such as those in Honda’s factories, have caused huge losses for employers, which could have been minimized through proactive engagement with workers.
  • Workers are empowered through collective action. Recent collective bargaining cases initiated by workers, such as at Honda, Brother, and Shanghai Truckers, resulted in 35 percent, 20 percent, and 60 percent wage increases, respectively, and were covered extensively by the media.
  • Gross profit grows as quickly as increases in compensation. The idea that wage increases result in a loss of profit is a myth: according to research by Xiamen University, Chinese manufacturing workers’ remuneration levels have increased more than 10 percent since 1990, but the unit labor cost (ULC) continued to drop. The ULC in 2009 was less than 90 percent of 1999 levels.

BSR’s roundtable produced three recommendations for labor relations and rights in China:

  • Leverage the legitimacy and power of labor unions. Collective action will most likely be more successful if it is conducted in the name of a recognized government labor union, which offers a legitimate platform that other stakeholders, such as the media, may engage with. For example, in 2010, workers in Honda supplier factories went on strike, but the factory labor union did not support their cause. Once the All-China Federation of Trade Unions supported them, however, they enlisted widespread media coverage.
  • Educate workers on collective bargaining. This process is still a gray legal area and one that depends on the scale of programs. The key is to understand how to use the legal system for collective bargaining, and training will help workers and companies understand strike procedures, licenses, and required documents. 
  • Accelerate legislation that recognizes collective bargaining. If the collective negotiation mechanism is legally stated in related laws and regulations, it will protect worker rights and safeguard collective actions, thereby establishing a robust collective bargaining mechanism in China.

For more information on BSR’s work around collective bargaining and factory training management please visit our China Training Institute (CTI) website.

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