Hard Times: The Current Labor Situation in China

The floating migrant labor population of China exceeds 100 million, which is equivalent to over one-third of the entire population of the United States. Strikes abound. Workers are deprived of their pensions and overtime pay. The government prohibits independent labor unions and punishes workers who attempt to establish them. The "iron rice bowl" of a social safety net disappeared 10 years ago. These are indeed hard times for China's labor force. The Asia Program and the Program on Science, Technology, America and the Global Economy co-hosted a January 25 program that examined the labor situation in China from various angles; e.g., the historical context, labor migration, welfare benefits to workers, and conditions in urban export factories.

Pieter Bottelier, former World Bank official and visiting associate professor at SAIS, led off the discussion by noting that, from a historical perspective, labor problems in China were much worse 25 years ago than today. Before 1978, all rural labor was on collective farms, there was no labor mobility, the government set prices and wages, and the government assigned all jobs in the cities. Today, most farms are family controlled, and the job assignment system has been abolished. Since the 1990's real wages for workers have risen, and they have done so quite rapidly in the last few years. Bottelier also pointed out some serious problems facing workers in China: there is a desperate shortage of low-cost housing, the social security system is shaky at best, labor safety is mostly ignored, and there is frequently non- or late payment of wages, overtime and pensions.

Xiaopeng Luo of Guizhou University focused on the many challenges presented by the continuing waves of labor migration from the country to the cities. There is presently no right of free migration in China, he said. While not really enforced, this does mean that migrant laborers do not have equal rights in the cities comparable to that of their urban brethren. This leads to another problem: if Chinese authorities were to better the conditions of these migrant workers, this would create a magnet effect and result in even greater influxes of illegal workers into urban areas. The other side of the coin, often overlooked, is that local urban authorities and citizens have little control over this influx, which, in areas like the Pearl River delta in southern China, leads to overcrowding, pollution and increased crime. Luo concluded that the discrimination against migrant labor will continue because it functions as the primary measure to keep cities from being flooded by rural migrants.

Mark Frazier of Lawrence University focused on China's welfare state and asked whether it is emerging or collapsing. Responding to his own question, he said the answer is "both." He explained that China is really one country with three welfare systems. First, there is one system for Party and government officials, totaling about 10-12 million. Nothing has changed here. This class receives free health care and generous pensions. The second system, really a non-system, is for rural workers, numbering about 500 million. Again, for rural workers, nothing has changed. There are no benefits. With regard to the third system, encompassing about 275 million urban workers, everything has changed. They have to pay essentially a payroll tax for their health care and retirement benefits, which they think is unfair, because government and Party workers do not have to do this. In addition, pensions are usually underfunded. Interestingly, Frazier's research among urban workers revealed that they still have a socialist mind set, and think that the government should provide health care and retirement benefits. Frazier believes that an economic recession and/or high inflation could create a serious problem and lead to great social unrest. He said he advises his Chinese friends, especially those in local government, that they should allow for enterprise unions and some sort of employer's organization, so that the two sides could bargain together, and negotiate such issues as how much money from workers' salaries should go into health care and retirement. He added China should also allow NGO's to provide informational and technical services to support both workers and employers in dealing with workplace issues.

Daniel Viederman of Verite, an independent, non-profit social auditing, research and training organization based in Amherst, Massachusetts, spoke mainly about the conditions of Chinese workers in export factories. In 2004, his organization monitored 80 factories in southern China. They uncovered many problems. Ninety percent of the factories surveyed had workers working over 60 hours a week, which is illegal. Half the workers were not being paid what they were entitled to under Chinese benefit laws. There was very little in the way of paid vacations, and there were widespread problems regarding safety, especially in the areas of machine safety and exposure to toxic chemicals. Viederman noted that there were some significant positive influences as a result of contracts from Western buyers. Most have codes of conduct, and will send auditors to monitor conditions. This creates welcome transparency. However, these efforts affect only a tiny percentage of Chinese workers. In addition, the constant pressure to lower prices means that in many instances, U.S. companies do not feel compelled to insist that their Chinese factories obey legal requirements in such areas as limits on overtime.

Drafted by Mark Mohr, Asia Program Associate
Robert M. Hathaway, Director, Asia Program, Ph: (202) 691-4020