Global Labor Strategies

A GLS Report Back: The Crisis in Chinese Industrial Relations

Take a walk through Beijing or Shanghai or any big Chinese city and you will experience, in a very tactile way, China’s economic miracle. The forest of construction cranes, the neighborhoods being torn down and rebuilt, the shops bursting with consumer goods, the traffic clogged streets, and a prosperous looking citizenry all speak to the country’s remarkable achievements. China’s 20 year run of nearly double digit growth has transformed an economic basket case into a world economic power.

Look a little closer and you can see another side to China’s spectacular growth. The temporary dormitories on building sites for migrant construction workers, the barracks-like housing in the factory districts, the train stations full of workers with bindles or cheap suitcases coming from or going to their hometowns in the provinces. These images graphically portray the turmoil of life for large segments of the Chinese working class and they beg the big question yet to be answered: what role will workers have in the new economic order?

In this and a following post we offer some observations gleaned from recent conversations by GLS staff with dozens of knowledgeable observers—including workers—in China, in the US, and in Europe about what is currently happening inside and outside of China in the battle for economic fairness and labor rights and why it matters for workers everywhere.

When Global Labor and China's Union Talk

(Note: half of GLS's staff is travelling in China, the other half is busy on different assignments, so we will be posting only sporadically until early May.)

In our recently released report, Why China Matters: Labor Rights in the Era of Globalization and in a subsequent post, Labor’s Opening to China, we discuss new and on-going efforts by global labor organizations to open a dialogue with the All China Federation of Trade Unions, China’s only legal union. We argue in some detail that the talks are long overdue but that they pose problems for both sides.

Western unions want a presence on the ground in China where so many of the companies that employ their members have set up shop.  But they worry about giving their stamp of approval to a state/party affiliated union that may sign sweetheart agreements with global corporations. And indeed, at the local level, the ACFTU, by all accounts, often functions as a management dominated company union in the workplaces where it is present. 

The ACFTU wants global recognition and support in a world increasingly skeptical of Chinese institutions but they must also worry that Western unions often talk cooperation abroad and practice protectionism at home.  China bashing is still a standard part of the repertory of many unions despite the fact that it is US based and other foreign corporations—not the Chinese government—that drive much of China’s export oriented economy.

Both sets of concerns are legitimate.

It is a given that unions, like other organizations, have institutional, industrial , and national interests that they seek to promote and these interests shape their actions abroad to a significant extent.  But unions are also learning an important lesson of modern diplomacy:  it is essential to talk even with those with whom you may not agree.  Engagement need not be a sign of approval, but rather a search for common interests. It is in this spirit that non-Chinese labor organizations and the ACFTU should conduct their dialogues.

Labor’s Opening to China

The announcement in December by the International Trade Union Confederation (ITUC) that it would begin a “dialog” with the All China Federation of Trade Unions (ACFTU) marks a sea change in global labor’s approach to China.  Equally significant is the endorsement of the talks by the AFL-CIO.  Until now, the ITUC, the AFL-CIO, and most national labor federations shunned official contacts with the ACFTU—China’s sole legal union—because they did not consider the party-state controlled organization a legitimate representative of China’s workers. 

But, according to Guy Ryder, the ITUC’s General Secretary,

“By starting a dialogue with the Chinese trade union, ITUC wants to have more influence on the ground in China….It should enable us also to discuss the role of China in the world.”

The action actually caps a gradual shift toward engagement with China by unions from around the world. Some European unions affiliated with the ITUC have been active in China for over a decade. The Change to Win federation in the US began talks with the ACFTU last year. Officials have exchanged visits and plans are underway to expand contacts in the coming months.

The policy shift by the ITUC, the AFL-CIO, and other global unions is long overdue. Three decades of rapid economic growth have transformed China from an economic backwater into the world’s workshop.  Workers, trade unions, communities, and countries throughout the world are confronting the challenges posed by China’s growing role in the world. Today, about 25% of all the workers employed in the global economy are Chinese.  The “China price” sets the global norm for wages and working standards up and down the value chain, from inexpensive garments to sophisticated electronics.  As a result the hard-won gains of workers in the global North are being rapidly undermined, while the aspirations of workers in the developing world are being dashed, as China becomes the wage setting country in industry after industry.

China’s export oriented development model has had a particular impact on trade unions everywhere. Multinational corporations—the very firms that employ millions of union members around the world—have flocked to China seeking to take advantage of its low wage workers and business friendly policies, reducing labor’s bargaining leverage and the number of union jobs. These firms have been central to China’s development. Roughly 66% of the increase in Chinese exports in the past 12 years can be attributed to foreign owned global companies and their joint ventures. (Stephen Roach, Business Times, Singapore, 8/8/06) These companies account for 60% of Chinese exports to the US. Despite all of the talk in the current presidential campaign, the “Chinese threat” is less about trade with China than it is about “trade” with US based companies like Wal-Mart, GE, or any of the other of the hundreds of Fortune 500 companies that have set up shop in China to cuts labor costs and avoid environmental regulations. Ways, however imperfect, must be found to reach out to Chinese workers to find mutually acceptable ways to halt a global race to the bottom, which in end, hurts all workers.

Labor after Bali

(first in a series)

Like an oil tanker hurtling toward a shoal, the world, the U.S., and the labor movement are being forced to make a radical change of course by the emerging threat of global warming.  The recent UN conference on climate change, held in Bali last December, showed representatives of the whole world grappling with how to limit the man-made greenhouse gasses that are threatening our biosphere.  The conference ended with the U.S. government, under enormous worldwide pressure, reversing its threat to turn its back on the UN process.  And it revealed what may become a sea change in the attitude of U.S. labor.

Ninety union delegates, more than 20 from North America, participated in the Bali conference.  Blogging from Bali, Abraham Breehey of the International Brotherhood of Boilermakers caught the epochal character of the climate change challenge and the centrality of workers to it.

For the past century, our craft has been involved in constructing infrastructure we now know has contributed substantially to the greenhouse gas emissions that are causing climate change.  For the next century, our craft will be essential to deploying the new technology now available to reduce the carbon emissions associated with energy generation and industrial processes.

Beyond China's New Labor Contract Law

China’s new labor code went into effect on January 1. It could have important consequences for workers in China and in the rest of the world.

The Financial Times on January 2 reports that,

Employers in China fear that a new labour contract law that took effect on Tuesday will intensify growing pressures on manufacturing costs by enhancing the bargaining power of workers.

We estimate that, added together, labour costs [in mainland China] will be close to 40 per cent higher for this year [2008],” said Willy Lin, Hong Kong-based managing director of Milo’s Knitwear (International) Group.

Mr Lin says the new labour contract law, which will make it harder to dismiss workers, could increase costs by about 8 per cent this year, with the rest of the increase caused by higher minimum wages, social security payments and the renminbi’s steady appreciation against the US dollar.

The new law was designed to address some of the rampant abuses in Chinese industry including long hours, dangerous working conditions, and employers that cheat workers out of wages or delay payments.  But like all laws everywhere, the new law will be worth little if it is not interpreted broadly and enforced strictly. If the past is any guide, this could be a problem. China has been notoriously lax in enforcing labor laws. Absent vigorous enforcement, the new law could lead to workers being squeezed even harder in an effort to keep labor costs down. 

Labor and Immigration: Looking Beyond the Elections

Right-wing politicians are trying to fan the flames of passion over immigration during the current election campaign. So far they have met with mixed success, but as the election nears and the Right becomes more desperate, we can expect their efforts to intensify and the flames to grow higher. How should labor respond?

The importance of immigration as a campaign issue varies from region to region and from constituency to constituency. Nationally, just 15% of those surveyed in December in a Los Angeles Times/Bloomberg poll list immigration as a “top priority” in the coming election, and only 27% list it as “one of the most pressing problems facing the country”, but 81% think it is an “important” issue. The two parties are running true to form. Republican candidates, trolling for votes among the nativist wing of the party, are vying to see who can promise the longest and the highest wall along the Mexican border and the most vicious law enforcement in the rest of the country. Democrats, unsure of where key parts of their base stand and unwilling to stick their necks out, are scrambling for cover with rhetoric about the need for “comprehensive” immigration reform.  This duck and cover approach is reflected in replies to a question about immigration and the election posed by the New Republic in November to five prominent Democratic “strategists and consultants” likely to play a key role in the upcoming election.

The press conveniently divides the debate between those candidates who believe in “enforcement only” approaches and those who believe in “enforcement and a road to citizenship”. It is assumed that everyone believes in “border security”.  Other approaches are pushed from mainstream media.

Gone are the hopeful days of two years ago when millions were in the streets demanding immigration reform and amnesty for the undocumented. Instead a Pew Research poll released last week shows that, “just over half of all Hispanic adults in the US worry that they, a family member or a close friend could be deported…..”    And, “nearly two-thirds say the failure of Congress to enact an immigration reform bill has made life more difficult for all Latinos.”

Labor Goes to Bali--II

At the outset of the nuclear era, Albert Einstein said, “The unleashed power of the atom has changed everything save our modes of thinking and we thus drift toward unparalleled catastrophe.”  The same could be said today regarding global warming.  Fortunately, we’re getting some glimmerings of a change in the modes of thinking both in the labor movement and elsewhere.

It’s hardly surprising that government, business, and labor all are reacting to global warming in terms of their long-established assumptions and policies.  Changing the way we think will be hard – and success is far from inevitable.  But the devastating scientific reports that preceded the UN negotiations for a new climate change treaty that just opened in Bali are doing a lot to concentrate the mind. 

Recognition of the need for drastic change is coming from some unexpected quarters.  When the environmental office of Britain’s Prince Charles hastily asked top world business leaders to sign the“Bali Communiqué” demanding that government leaders take “strong, early action on climate change,” the results were unprecedented.  Officials from more than 150 companies with nearly $4 trillion in market capitalization signed on in the first three weeks.  They included officials from Shell UK, GE International, Coca-Cola, DuPont, United Technologies, Rolls Royce, Nestle, Unilever, British Airways, and Volkswagen.  Besides companies based in the US, the EU, and Australia, the Communiqué was signed by such Chinese companies as Shanghai Electric, Zhufeng Technology, and Suntech.   

A Call to Action

China’s new Labor Contract Law will become effective on January 1, 2008. At that time companies will be required to provide a written contract to each employee and to provide a handbook of company policies and procedures developed in consultation with worker representatives.

The new law gives new rights to employees and imposes new responsibilities on employers. There is evidence that some companies are taking evasive action to avoid complying with both the letter and the spirit of the law. This has provoked a great deal of controversy in China.

Last year, as the new law was being drafted, foreign corporations and their business associations took strong exception to some of its provisions. As a result changes were made in later drafts to address corporate concerns. Following passage, foreign corporations and their business associations pledged to support the law and abide by its provisions.

Given the public controversy in China over corporate compliance with the new law, it is time for trade unions, worker rights advocates, and political figures around the world to insist that foreign companies and their suppliers prove compliance with the new law and respect for their employees’ rights under the new law. They should demand that foreign corporations take the following 3 steps to prove compliance:

1. Make public the templates of the contracts that they are offering to their employees.
2. Make public copies of company policies and procedures handbooks with a description of how they were written.
3. Make public any instructions that they have issued to their suppliers and the measures that they plan to take to insure compliance by their suppliers.

Foreign companies and their business associations regularly insist that they are law abiding and committed to promoting strong labor rights and legal standards in China. By making key documents public they can demonstrate that commitment, on paper at least.

The time to act is now in the run-up to the Labor Contract Law’s implementation date on January 1, 2008. How the new labor law is implemented in China should be of concern to everyone who supports labor rights and adherence to the rule of law. Trade unions around the world should demand compliance and transparency from the companies that employ their members, from companies which they hope to organize, and from companies in the industries in which they are active. Non-Governmental Organziations working on labor and human rights issues should demand compliance from the companies and industries that they target. And governments in countries around the world should take steps to insure that multinational companies headquartered in their jurisdictions comply fully with both the letter and spirit of China’s Labor Contract Law.

Are US and EU Corporations Complicit in Evading China’s New Labor Law?

Evidence is mounting that they are. In a recent post we reported that some firms in China are firing workers in the run-up to the implementation of China’s new labor contract law which grants more rights to workers. Now it appears the problems are widespread and that foreign corporations--including Walmart--may be complicit.

In the interim period between the law's passage on June 29th, 2007 and its effective date on January 1, 2008 employers must bring personnel policies into compliance. Among its provisions, the new law requires a written contract for each employee; encourages open ended contracts rather than fixed term agreements; makes dismissals more difficult; automatically grants open-ended contracts to workers with 10 years of service; and requires that many company policies and procedures be negotiated with employee representatives.

Corporations are looking after their own interests: as 2008 nears, law firms and HR consultants are hard at work giving advice and holding seminars on how to best deal with the new law and HR staffs are drafting new contracts and policies. For workers it’s a different story. At a meeting here in the US last week a visiting Chinese scholar called the current situation “a-symmetrical”.  Citing the example of one firm that has laid off workers to avoid provisions of the new law he asked, “Who is looking out for the interests of the employees?”  Who indeed!   Against the power of the employers, workers have been left to their own devices.

Is the US Leading the Race to the Bottom?

(A postscript to our analysis of the GM strike.)

A few additional bits of information about the recent settlements at GM and Chrysler have come to light this week. They add to the sense that the agreements are mile markers in the race to the bottom.

GM announced on Monday that it would save up to two-thirds on labor costs for new hires under its new agreement with the UAW. About 16,000 non-assembly line jobs will be reclassified as second tier jobs and paid under a separate wage scale.  In addition, second tier workers will not be eligible for GM’s pension or for retirement health care. The current hourly rate of $78.21 for wages and benefits for second tier jobs will be adjusted downward to $25.66 per hour. Apparently, workers currently in second tier jobs will keep their current pay rate but will be encouraged to retire or take a buy-out.

Assembly line workers will continue to be paid at the existing rate, but only those now employed will receive the GM’s current benefit package; new hires will not be eligible for the pension of the retirement health care.

GM and the UAW are currently negotiating a buy-out deal for all hourly GM workers. Up to 75% of GM’s workers are eligible for retirement in the next 4 years leaving plenty of space for lower wage new hires. Along with savings resulting from the Veba trust agreed to under the contact, GM says it could lower its ‘structural costs” by more than 25% of total revenues.

Wall Street loves this. GM stock has been trading at 3 year highs, although it dipped a bit this week.

With the pattern set at GM, the union turned its attention to Chrysler where, following a six hour strike, a similar agreement was reached. But there has been dissention within the union. While the union leadership approved the pact, it was not a unanimous vote. At issue for some was the lack of job guarantees and a failure to move temporary workers to permanent status as was done in the GM deal. Some members of the bargaining committee are urging Chrysler’s 45,000 US workers to vote no on the agreement. But no matter what the outcome of the vote, in the end auto workers will be earning significantly less in the future than they do today.

These settlements represent versions of what’s been going on for most workers for years. The reality is that auto workers are playing “catch down” to the rest of the working class.  This economic decline is reflected in a new Pew Research Center Poll that shows that 48% of Americans now believe the country is divided between “the haves and the have-nots.” This compares to 26% who believed this in 1988. Asked which group they were in, 45% said they were in the “haves”, 34% in the “have-nots” and 21% in “neither or don’t know”. Compare this to 1988 when 59% or respondents said they were in the “haves” and only 17% in the “have-nots”.

The perception reflects the reality. The richest 1% of families have doubled their share of national income from 8% in 1980 to 16% in 2004, not counting capital gains. Meanwhile, in 2006, median household income was still 2.1% below 1999 levels.

There has been hope in the labor movement that agressive organizing will make janitors and other low wage service workers the auto workers of the 21st century, earning middle class wages with good benefits in decent jobs. So far there is scant evidence that this is happening. On the contrary, evidence is mounting that auto workers--even highly unionized auto workers--will become the janitors of the 21st century as their wages and benefits are cut.

Today no group of workers, no matter how well organized, is immune from the pressures of globalization. Going it alone simply won’t work, nor will a trade unionism that limits its struggle to the bargaining table. Only a revitalized labor movement that links the organized and the unorganized in a broad social and political movement for workplace and economic justice can protect and extend the gains that labor has made over the last century.

M.O.