University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

LECTURE ASIAN MARKET ECONOMIES (AMEs): CHINA AND INDIA

Professor Russell Lansbury Work & Organisational Studies

WORK 6018–International Industrial Relations, SUMMER School, 2010

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

PART 1: CHINA

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Context of Chinese Industrial Relations (IR) Population over 1.3 billion, 58% of whom are in employment. Uneven rate of economic development between urban and rural areas.

Women have relatively high participation rate: 38% of full-time urban workers. Long-term government policy has promoted low wages and full-time employment. Social security is rudimentary and is confined mainly to urban areas.1

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Impact of GFC on China (so far)

In 2008, 20 million jobs were officially lost – mostly by rural migrants. GFC plus product safety concerns resulted in closure of 4,000 toy factories in 2008. Discussion is now focused on the desirability of relaxing recent labour laws in order to reduce pressure on employers. Implications for declining economic growth for rising unemployment, economic hardship and social unrest.

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University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Chinese Economy“China’s economy is like a fully loaded truck traveling at high speed on a super highway, powered largely by capital investment and strong exports. Imagine how precarious it would be if the truck needs to decelerate quickly because of the economic slowdown, but also has to make a sudden turn from being highly dependent on exports to reliance on domestic consumption … and the consequent unemployment and social instability that may follow”. Dr Ligang Song, Australian National University3

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Phases of Labour Market Development in China

Post 1949 to late 1970s: highly restricted labour mobility through the hukou system: individuals registered with local authorities. 1980s to early 2000s: gradual easing of restrictions led to mass migration from rural to urban areas. Many employers in SOEs laid-off (27 million between 19982002). Post 2007: re-regulation of the labour market to provide greater employment protection for workers outside the state sector.4

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Changing Labour Laws and Regulations

Continuing reforms of labour laws since 1980s, including the landmark new labour law of China (1995). Three major employment relations laws took effect from 1 January 2008:1. 2. 3.

Labour contract law Employment promotion law Labour dispute mediation and arbitration law

Main objective of these laws is to achieve a more efficient and equitable labour market.

But enforcement of these laws remains problematic.5

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

China Labour Law Reforms “The new law strengthens protections for workers across its booming economy, rejecting pleas from foreign investors that the measure would reduce China’s appeal as a low-wage, business-friendly industrial base … It will require employers to provide written contracts to their workers, restrict the use of temporary workers and make it harder to lay-off employees … But it will fall short of improving working conditions

unless it is enforced more rigorously than existing laws”.

New York Times, 30th June, 20076

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Characteristics of the Chinese Labour Laws

The central government provides the broad framework of laws and regulations. Local government devise their own regulations, based on the central government framework, to suit local conditions. Flexibility is required where there is significant economic disparity across regions. But decentralisation of interpretations and enforcement of labour laws means uneven application by local officials and authorities.7

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Problems of Labour Regulation in China

Limitations on freedom of association e.g. to form independent trade unions. Laws are targeted at the formal employment sector and not at workers in the informal sector. Employers tend to take advantage of regulatory loopholes and seek exceptions. Most labour laws are essentially administrative policy regulations that have limited authority and enforceability.

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University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Changing Role of the State

Legacy of state planned economy is embedded in the political and economic system. But decline of state sector employment from 78% (1978) to 23% (2006). Reduced state sector due to privatisation of SOEs, plant closures and down-sizing (Zhu Rongji reform plan of 1997). Encouragement of foreign investment enterprises (FIEs) since mid 1990s. Foreign investors from Taiwan, Hong Kong, Macau have been given greater autonomy including wholly-owned foreign enterprises.9

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Role of Employers in China

The China Enterprise Confederation is the sole recognised national employer body but plays a limited role in IR matters. But employers exercise considerable influence e.g. in ‘watering down’ the draft Labour Contract Law (2008). The state is still an important employer but is no longer dominant: only 22% of workers employed in SOEs in 2006 compared with 80% in 1976. Problems in private firms, FIEs and informal sector where many workers endure ‘sweat shop’ conditions and employment regulations are violated.

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University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Role of Unions in China

All China Federation of Trade Unions (ACFTU) sole recognised union body, historical ties to the Chinese Communist Party in 1920s. ACFTU branch unions responsible for relationships with employers at the enterprise level. Trade union law (1950) sets out rules and responsibilities of unions – effectively a ‘transmission belt’ from the Party to the workers. But on 30% of private firms have a union presence but unions are largely absent from the informal sector in which most rural migrant workers are employed.11

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Issues Confronting Chinese Trade Unions

Unions experienced a decline in members during the early to mid 2000s during SOE restructuring and down-sizing. Attempts by ACFTU to gain greater power and autonomy have been suppressed by the Party – as have autonomous workers’ unions. Publicity given to ACFTU organised the US com

pany Walmart in 2006 despite opposition by the company. Also at Hyundai’s Beijing plant. Widespread unofficial strikes by ‘unofficial unions’ are a challenge to both the ACFTU and the government.12

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Labour Disputes in China

Official statistics reveal an increased number of disputes from 48K cases in 1996 to 317K cases in 2006 (vastly un-estimated).

Disputes over pay and social insurance account for over half of the annual disputes.Labour disputes appear to be increasingly confrontational and antagonistic.

The labour law of China (1995) established new systems for mediation, arbitration and litigation.A collective dispute requires at least 3 employees to have the same reason to undertake industrial action. Recent data reveals that 52% of disputes were settled by mediation and 42% by arbitration.13

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Employment Agencies

Significant growth in recent years at the lower end of the labour market.

The Employment Agency Regulation (1995) stipulates that employment agencies must be non-profit making if established by local authorities, but most growth is in private agencies.Agencies are supported to assist workers with information, training, job placement, wage setting etc. But many criticised for their roles as labour market brokers, lack of follow-up or quality assurance, inadequate information and training. Many employers have taken advantage of flexibility in labour laws to dismiss workers and rehire them on temporary contracts via agencies – despite the new Labour Contract Law (2008).14

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Labour Market Flexibility

The use of informal employment (e.g. temporary, seasonal, casual, hourly paid work) has long existed but has expanded recently.

Chinese government officially recognised the existence of ‘flexible’ (rather than informal) employment in 1996.Displaced SOE workers and rural migrant workers comprise the majority of informal workers – approximately 150 million in urban areas. Informal workers have no employment contract, can be hired and fired at will, are subject to mistreatment and have no job security. Government has tended to ignore informal workers in order to provide jobs and reduce unemployment. But the problems are increasing.15

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Working Hours

The market economy, with the trend to official average working hours have increased to 47 hours per week.

But official survey reveal 47% of rural migrant workers work more than 48 hours per week – often 60 hours or more.Many FIE sweatshops avoid overtime payments and legal sanctions.

While many workers (especially rural migrants) are willing to work long hours without overtime pay, there are also high levels of labour turnover as well as accidents and health problems.Work-life balance issues are emerging as concerns – especially for professional and managerial workers in fast growing sectors.16

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

Conclusions

China’s IR is now diverging across different

forms of ownership, industrial sectors and different groups of workers.

The role of the state continues to be crucial in shaping IR although the intended effect of IR laws are not always achieved.Unions retain a welfare role in the public sector but have little credibility among private sector workers where their impact is weak. Many traditional characteristics of Chinese culture: benevolent paternalism, collectivism and harmony – are difficult to maintain in a more competitive market economy.

But opening up the global influences may lead to a more pluralistic approach to IR issues.17

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

PART 2: INDIA

University of Sydney_WORK6018_International Industrial Relations_2010 Semester Summer

The Broad Context of Indian Industrial Relations (IR)

India is a large, multi-party democracy with a highly diverse population in terms of ethnicity, language and religion. Many of India’s institutions are based on its history as a British colony unit 1947. The majority of the workforce is rural and in the informal sector of the economy. The ‘Hindu rate of growth’ of around 3.5% per annum persisted from 1947-1980s. Economic growth averaged 6% in the past decade and India experienced an economic renaissance.1