The push for private labor unions raises questions
Original Source: Global Times (China)
Zhao Lianguo threw a cigarette to each of his nine laborers and said it was time for a 10-minute break.
Next week, after they move about 20 trees from a long narrow plot of land bordering a construction site to the neighboring backyard of a row of residential buildings, Zhao and his squad of migrant workers will leave Beijing for home to harvest their wheat crops.
Sitting and squatting beneath the dense shade of a willow, the men fired up their cigarettes. No one talked, however. They were worried about their delayed pay before buying train tickets for home.
"My wife called and told me that the wheat has to be harvested in seven days, but we still don't have our pay for April," said Zhao, 46, who is from Shangqin village, Zhenyuan county, Gansu Province.
Previously, the company routinely held their salaries in arrears for one month. But recently the delays have lasted for two months, said the men.
Pushing for private unions
"Newspapers said that the government is encouraging rural migrant workers to set up their own labor unions to fight for their own interests. Is this something we can try?" Zhao asked his men.
What Zhao and his men were talking about was an urgent circular issued last Friday by the All China Federation of Trade Unions. It said all trade unions under governments at different levels must spare no effort in instituting labor unions in private companies. The trade unions are expected to enroll all employees, including rural migrant workers.
"Trade unions must push for a collective bargaining … to establish a mechanism for fixing a reasonable level of employees' pay, ensuring the normal pay-out of workers' salaries and realizing an anticipatable growth of pay to workers, especially to those working at the forefronts (in companies and factories)," the circular said.
"It seems that the government is on our side this time, and so it's worth a try," said Zhao.
The circular is the latest step of a spate of talks and moves by the central and local governments over the past two months aimed at increasing incomes and welfare of manufacturing workers and other low-income groups.
The final result would be an overall increase in the labor costs, which analysts said might mean the nation is giving up, voluntarily or not, one of its most powerful competitive edges in the world economy and shifting toward an efficiency-based growth mode. But China may not be fully prepared for the possible pitfalls.
Changing the formula
Surging exports and huge government-induced investments, plus a seemingly endless supply of cheap labor and slack environment protection have been China's formula for its glittering 9.7 percent annual economic growth over the past 30 years.
But the global financial crisis in late 2008 suddenly changed the whole story.
Looming inflation and dwindling exports forced China to turn to its countrymen for more consumer power. But many people either found their wallets emptied by rocketing housing prices or just tightened their purse strings for future expenditures on their children's education, family medical care and pension plans.
When the central government hoped to squeeze further growth spurts from exports by holding its currency from appreciating too fast and offering more subsidies to the exporters, it also found that the country's cheap labor – its trump card – had become not as cheap as before.
Economists said China has arrived at its "Lewis turning point," a period in development when an economy shifts from a labor surplus to a labor shortage and wages start to rise faster, and now it will have to turn to increased efficiency and productivity for further growth.
"We are now paid 50 yuan ($7) a day, but we think 60 yuan ($8.80) is a fair level for us," Zhao told his men. "An ordinary brick-layer at my hometown can already earn 60 yuan for a day's work."
In 2004, when he first came to Beijing for some odd jobs, Zhao said he could only expect 25 yuan ($3.65) a day.
"The (Lewis) turning point is coming. And the increasing labor shortage and the rising workers' pay will eventually push China to recast its industrial structure," said Cai Fang, head of the Institute of Population and Labor Economics with the Chinese Academy of Social Sciences.
Beijing responding
Cai said the size of China's labor supply will peak at 2015 and after that, China's labor force between the ages of 16 to 64 will start to decline.
The central government is hearing the alarm and promising to raise workers' incomes, which usually make up less than 10 percent of a typical Chinese firm's operating cost, compared with about 50 per-cent in developed countries.
"Workers' incomes have been held at a relatively small portion of the (wealth) distribution and have resulted in an overly wide income difference among social groups … which, if allowed to continue, will become a grave problem endangering the economic growth and social stability," said Chinese Premier Wen Jiabao in his signed article carried in Qiushi, or Seeking Truth, the flagship magazine of China's Communist Party.
The rare success last week of 1,900 workers at a Honda Motor Co plant in Guangdong Province who struck for two weeks and won a 35 percent pay raise last Friday is a telling event signaling the central government has changed its stance on the issue of workers' welfares, analysts said.
"We might not be able to say that the government is orchestrating or aiding the workers' action, but Beijing has at least actively responded to the workers' demand in the course of the events," said Guotai Junan Securities economist Wang Hu.
Over the past three decades, extremely few, if any, Chinese workers have succeeded in their confrontations with management because the central and local governments were eager to woo foreign investment.
Positive message
The All China Federation of Trade Unions' circular was issued right after the Honda labor settlement. It also highlighted the necessity of organizing labor unions in foreign-funded enterprises and those funded by Hong Kong, Macao and Taiwan investors.
The timing also sent out a positive message to laborers across China. "If they can make it, why can't we?" Zhao's men asked in chorus.
Analysts have also warned that the shift to efficiency-based economic growth by boosting labor costs and pressing companies to extend their profit margins with more technical innovations may be wishful thinking, or taking the country into unmarked waters.
"The history of world trade unions show that for the initial period of loosening control of laborers' incomes and benefits, there will also most probably be an eruption of strikes and other serious labor-management conflicts," said Li Lilin, a labor issue expert with Renmin University of China.
Rising labor costs will also likely boost, for a short time, inflation and increase the jobless rate, although China might not lose its current status as a world manufacturing hub because of its huge manufacturing capacity, excellent logistics system and complete industrial chains, said Wang at Guotai Junan.
The grimmest challenge is whether the workers fight for their benefits can be put under control without spilling over to spark social turmoil.
"Beijing needs to reshape the government-backed trade unions so that they can really represent workers interests," said Li.
This is also what Zhao and his men are mulling over.
"Can the government trade unions be trusted if we have to ask them to get our overdue pay for us?" asked Zhao.
