Chinese Industry Weighs Labor Issues

Government announces program to raise minimum wage.

BEIJING — Chinese manufacturing looks set to become even more complex and costly in the coming years.

This story first appeared in the February 11, 2013 issue of WWD.  Subscribe Today.

Electronics giant Foxconn, the country’s largest private employer, said this week it will allow workers to vote on representation in their labor unions, a development that could have broader implications for the country’s manufacturing industry and labor force. Just a few days later, China’s central government unveiled broad plans to raise urban minimum wages nationwide significantly by 2015, varying in amount by city but averaging about 13 percent across the board, according to an employment plan unveiled Wednesday by the State Council. The minimum wage increases are aimed at bridging a growing labor shortage by encouraging more rural workers to fill jobs in cities.

“Every year there are 25 million urban residents needing jobs and there are still significant amounts of excess rural labor needing to find jobs,” the blueprint stated.

Foxconn said it will allow factory workers to elect their own union representatives, a fundamental step in increasing the voice of employees in labor unions here. Labor activists and others characterized the development as a sign of progress.

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Workers in China who belong to unions are represented by ones controlled by the government, allowing for little to no power in independent worker voices. The country’s labor union structure and lack of open collective bargaining have come under immense criticism in recent years, especially as labor unrest and strikes have increased across China amid stagnant wages and rising inflation.

Labor activists have pointed to collective bargaining as a simple remedy to ongoing strikes and unrest, while the government has stayed mostly firm on managing unions. Workers, particularly those in factory jobs where laws and regulations are routinely flouted, have also become better informed about their own rights over the past five to 10 years, especially after passage of the national labor contract law in 2008, according to labor experts.

Liu Kaiming, director of a research organization in Shenzhen that studies rights and laws concerning China’s migrant workers, said Foxconn’s decision is groundbreaking in some aspects but not surprising and most likely part of a larger trend that will develop. The textile and apparel industries are apt to feel pressure to follow suit, particularly if the outcome is favorable to workers.

“In my eyes, this trend has been ongoing for about 10 years,” said Liu. “It is not appropriate to say that some other companies may follow Foxconn’s suit. I think we can say that Foxconn is following the trend in the past decade.”

In recent years, Foxconn has become a symbol of things wrong with China’s manufacturing center. Foxconn, which makes electronics for nearly every major brand in the world, including Apple, has taken public steps to improve its image on labor issues, which could create a precedent for other, smaller manufacturers. The Taiwan-headquartered company employs about 1.5 million people in China.

The company, which has shifted its production model over the past few years and created several large manufacturing bases in China rather than just its massive citylike complex outside Shenzhen, made international headlines after a dozen of its workers committed suicide in a high-profile cluster in 2010. Labor-rights groups blamed working conditions, particularly the fact that young, disenfranchised workers felt they had no voice in the structure of their work and long overtime hours.

Independent labor unions remain banned by the Chinese government, so the field is not apt to change suddenly for manufacturers. But labor groups warn that factory bosses across all sectors, including garment and textile makers, should keep open communications with their employees to avoid escalating problems. Still, it’s too soon to say if Foxconn’s decision will lead to a sudden shift in how other companies handle union relations.

Guo Weiqing, a labor expert at Guangzhou’s Sun Yat-sen University, said the Foxconn decision sends a signal to other manufacturers.

“Foxconn is a world-famous company with many workers and can serve as a good example of this election for other companies and industries,” said Guo. “If this is a bottom-up election that can involve many workers, I think this is a good way to motivate workers in the manufacturing industry, not only for private companies but also foreign companies.”

Guo said textile companies typically are lower-level manufacturing operations that don’t have the same organized structures or labor unions as massive, high-profile firms like Foxconn have. Still, the Foxconn vote is a message to producers in general that Chinese factory workers have begun to stand up for their rights and want a bigger say in the workplace.

Kaiming said he recalls a similar situation dating back more than a decade in which a Chinese shoe factory gave its workers voting rights. Ultimately, the workers lost their vote in the absence of other structural changes, he explained.

“One year later, the labor union was totally useless due to the overall environment,” Liu said. “The whole political system and company management does not allow a bigger role for labor unions.”