The Power of Rage

By LIU YUNYUN

The Power of Rage

By LIU YUNYUN

Chinese workers get better wages, hastening the end of a cheap-labor era

Since July 5, workers at two textile companies in Xianyang, Shaanxi Province have been on strike asking for a 140-yuan ($21) monthly salary increase. The strikes are in the process of being resolved.

A slew of strikes followed electronic manufacturer Foxconn Technology Group’s dramatic salary hike for its Shenzhen workers in early June. After a string of employee suicides earlier this year and accusations the company was maintaining sweatshop-like conditions, Foxconn alleviated the problem by giving workers’ wages a boost—a 122-percent boost.

Later in June, workers in automobile parts manufacturer Denso Corp.’s Guangdong plant left their facilities idle for several days until they received a 800-yuan ($117) raise.

And workers striking at a Honda Motor Co. plant in early July even went so far as to hire a lawyer to help them with paycheck negotiations.

News of strike spreads quickly, and already workers at other companies are considering the strike option to improve their working conditions and bene fi ts.

But managers see the salary increases differently—higher wages are a growing pain for industrial structure upgrading. And the rise of labor costs will eventually trickle down to the price of fi nished manufactured products.

Some cautioned about the possibility of inflation. But higher wages and salaries among China’s 230 million migrant workers could help China reduce its reliance on exports and investment for economic growth since higher wages can provide for a consumption boom and boost GDP, said Lu Ming, professor of economics at Fudan University.

Better pay

China is known for its cheap labor and exports. But few know the inexpensive products they have enjoyed are made by Chinese workers who earn less than $1 an hour.

Young workers in south China involved in recent strikes for better pay and conditions resent the term “cheap labor” and their demonstrations prove today’s workforce will not accept what their forebears endured in the past.

After China adopted the reform and opening up policy in 1978, overseas-invested or controlled factories sprouted up along the southern coastal areas, attracting hundreds of millions of rural laborers.

The first generation of migrant workers put up with long hours in poor working conditions since working in factories paid better than working in the crop fi elds of their hometowns.Many of those workers were completely uneducated or had only attended elementary school.

However, the younger generation of migrant workers who were born in the 1980s or early 1990s are less willing to tolerate harsh working conditions for low pay. Some workers hold college degrees, and most have at least a high school education. They demand higher pay and good working condition.

And governments are answering workers’appeals. Starting on July 1, Beijing Municipal Government increased the minimum monthly salary from 800 yuan ($117) to 960 yuan($142), and Central China’s Henan Province,the nation’s most populous province with almost 100 million residents, raised its minimum monthly wage by 33 percent to 600 yuan ($88).Many provinces have since followed suit.

In spite of the widely reported pay raises across the country, many workers complained of wage decreases.

In an interview with CCTV, China’s central television network, Tian Dan, salary manager of Neo-Neon Holdings Ltd., admitted the company had raised the basic salary for its workers but had cut overtime work, payment of which was previously the bulk of the workers’ wages.

Labor crunch

Cities around the Pearl River Delta in south China were the first to be opened to foreign capital three decades ago. To date, the region is home to one of the world’s densest clusters of export-oriented industrial estates.

In the wake of the global financial crisis,many migrant workers returned home from the coastal areas to fi nd that landing a job in nearby factories wasn’t too dif fi cult. When the coastal machines buzzed again, managers were caught off guard: The workers were unwilling to return.

“We raised salary not because of the Foxconn incident, but because we needed skilled workers, and increasing salaries is the only way to attract them,” said Yang Jin,Human Resources Director at Forward Shoes Co. Ltd. in Dongguan, Guangdong Province.

Tian Dan also said the competition for skilled workers is intense, and better payment is the most ef fi cient and convenient way to attract skilled workers.

Earlier this year, Zhejiang Province said it had 383 jobs for every 100 registered job hunters, while Guangdong Province, the manufacturing powerhouse of the country,said its factories were short of about 900,000 workers in February.

Foxconn’s salary hike for its Shenzhen workers has caused a domino effect among manufacturers across the country

Many had feared the wage increase will drive away foreign investors, or jack up the prices of manufactured goods, which would eventually lead to consumer price in fl ation.

“Honestly, this round of wage increases will not influence foreign-invested companies. The scale and range of the wage increases is too miniscule for those deeppocketed foreign manufacturing tycoons,”said Zhong Dajun, Director of the Beijing Dajun Economic Observation and Research Center, a private Beijing-based institution.

Zhong said the reports and rumors about foreign business leaving China due to salary increases are groundless, and were played up by certain interest groups who do not want to spend extra money on payments and want to maximize their pro fi t.

Learning to adjust

Salary increases may affect factories’pro fi ts, especially for low-end manufacturers who earn only a $1 pro fi t selling 100 pairs of socks.

The rising labor costs could force companies to upgrade their technology and move up the value chain.

Lin Jiang, a professor on Dongguan economics at the Guangzhou-based Sun Yat-sen University, conducted a survey in Dongguan,a manufacturing center in Guangdong.His research results showed companies in Dongguan are able to endure a 3-5 percent salary increase on average and 10 percent would be the maximum they could bear.

Lin said under such circumstances, the only way out for manufacturers would be to apply new technology and reduce their reliance on workers.

Tian said Neo-Neon Holdings Ltd. has been automating its facilities to reduce the use of labor. The company once hired 15,000 workers, but the number has been reduced to around 10,000.

The Chinese Government has said on many occasions China should upgrade its economic and industrial structure. Lin suggested the government offer tax breaks for small and medium-sized companies and give them time to upgrade.

“The reports and rumors about foreign business leaving China due to salary increase are groundless, and were played up by certain interest groups who do not want to spend extra money on payments and want to maximize their profit.”

—Zhong Dajun, Director of the Beijing Dajun Economic Observation and Research Center

Wage comparison

Compared with wages in the United States, Chinese labor is much cheaper and Chinese workers earn next to nothing.

According to U.S. job search website Indeed.com, the average annual salary for U.S. autoworkers was $48,000—$70 an hour plus bene fi ts—as of February 2010.

But their Chinese counterparts aren’t so fortunate. A survey conducted byChina Business Newsin May this year showed the average annual salary of Chinese autoworkers was between 10,000 yuan ($1,460)-70,000 yuan ($10,250).

That means Chinese autoworkers must work standard hours and overtime for a whole year to get one-month’s salary of American autoworkers.

“What matters to wages is not headlines or government regulations but the balance between supply and demand for labor,”says Derek Scissors, research fellow at The Heritage Foundation, in an interview withBeijing Review.

Originally, the Chinese Academy of Social Sciences predicted labor supply growth to stabilize in 2008. If supply growth is already weakening, that would genuinely push wages up, but it seems too soon for that,said Scissors.

China will be the world’s biggest manufacturing base for at least two more decades,unless global trade collapses, he said.

BETTER PAY:A Foxconn recruiter talks to prospective employees about its new plant in central China’s Henan Province.Employees will receive a monthly salary of at least 1,200 yuan ($176)for the first three months, followed by a raise to at least 2,000 yuan($294) after being formally recruited,both much higher than Henan’s new minimum monthly wage of 600 yuan ($88)