New day dawns for labor rights in Pearl River Delta

In the face of changing demographics, new rules are on the horizon to empower factory workers in disputes with employers in Guangdong

For factory owners in Guangdong province, China's manufacturing hub, the latest attempt by authorities to address labor rights is nothing new. Since the Labor Contract Law took effect in 2008, giving workers a say in collective bargaining has been building. This time, however, it looks quite real.

"Workers already have a lot of welfare. I don't understand why Guangdong province has to implement the new labor regulation. This is very unfair to us manufacturers," said Edward Tsui Ping-kwong, vice-president of the Chinese Manufacturers' Association of Hong Kong. Tsui's company, Shing Hing Industrial Ltd, produces a spectrum of screws, and targets automobile and aviation industries as major customers.

The labor regulation he referred to is the Guangdong Province Collective Contract Ordinance. Its latest draft was presented to provincial lawmakers - the Guangdong People's Congress Standing Committee - in mid-April. On April 23, the committee decided to carry out a second review by the end of May.

The ordinance, expected to go through the local legislature this year, highlights collective bargaining rules empowering factory workers in negotiations over payment, holidays, extra insurance, training, layoff plans and other key issues. The draft indicates that when a proposal is agreed to by more than one-third of the staff, the labor union would be responsible for initiating negotiations with the company. Negotiations and relevant preparations should be counted as working hours and paid to labor representatives.

While both parties can initiate negotiations, both also should respond to each other within 20 days. Companies are not allowed to fire workers who stage strikes because employers failed to meet the deadline or refuse to talk for no reason.

On April 14, many workers at Yue Yuen Industrial (Holdings) Ltd factories, a Taiwanese shoemaker operated by Pou Chen Group, put down their pliers and glue, and raised banners and placards after learning that the company had failed to fully pay their social benefits for as long as a decade.

The factories make sports shoes for more than 20 international brands, including Nike, Adidas, Reebok and Timberland. On April 21, another 2,000 workers at the company's factory in Jiangxi province in eastern China echoed their peers in the south.

After local authorities intervened, most of the workers had returned to the assembly line by April 25, but not before the shoemaker reported a loss of $58 million.

Earlier this year, 1,000 workers at an IBM Corp factory in Shenzhen, Guangdong, demonstrated for higher pay when the factory was about to be handed over to Lenovo Group Ltd, a Chinese PC producer. Half of the workers reportedly walked out after IBM sacked 20 demonstrators.

Regarding the new labor regulation, Tsui of the manufacturers association said concern has spread among Hong Kong manufacturers that endless negotiations and sabotage may be their lot.

"If it's rising labor costs or the appreciation of the yuan, we can offset those influences by adjusting operations," Tsui said. "However, the impact of the new rule will be profound, because it will interrupt decision-making. As employers, we could lose the helm of our firms to labor unions. We could end up with orders and workers, and yet fail to deliver. What's more, in the face of massive demonstrations, the government always sacrifices manufacturers' interests to ease tension.

"The new regulation, if it takes effect, will hit our confidence hard in Guangdong," Tsui said. "It may be the last straw for the factories already dragged down by heavy debt burdens and spoil the appetite for further investment."

He added that "two-thirds of factories in Dongguan have left - either shut down or moved. The situation in Shenzhen is even worse. I'm afraid that when the new rules take off, more will be on their way."

Paying as much as 11,000 yuan ($1,770) a month to his engineers, Tsui said the continuous training of technicians and renewal of machinery are key to making value-added goods. "However, the more modernized our factories are, the fewer workers there will be. It is going to be easier for them to get together against management."

No matter how dubious manufacturers are about the new regulation, the aging population in China has become an inconvenient truth. The era of cheap and endless labor is reaching its end.

According to the National Bureau of Statistics, by the end of 2013, the working-age population - from 16 to 59 years old - was 919.54 million, or 67.6 percent of the population. That's 2.44 million less than at the end of 2012, or a decline of 0.27 percent year-on-year. The country started see its labor force wane in 2012, when the working population experienced a shrinkage of 3.45 million compared with 2011.

"This is only the beginning of a long-term trend," said Ma Jiantang, director of the bureau. "The working-age population in China will decline gradually but steadily every year until 2030."

With more bargaining chips on their side, workers are becoming more outspoken.

"There have been more and more strikes in recent years because we lack a channel for both sides to sit down and address problems reasonably. It's necessary to have relevant rules as soon as possible because we can't expect the authorities to take care of every demonstration staged by factory workers," said Huang Qiaoyan, a lecturer at the School of Law of Sun Yat-Sen University.

"Wise employers would back the ordinance because rules mean order," Huang added. "Even when negotiation bears no fruit, the issue can be disclosed for public judgment. Otherwise, the weaker side - usually labor - gains the most sympathy."

Huang said that most of the employers she has met misunderstand the new ordinance. "Especially Hong Kong businessmen - they are used to the top-down management style. They miss the 1980s and '90s, when workers were so poor they were easily satisfied with little pay."

"Manufacturers are complaining only because they have been in the country for so long they are spoiled by the old rules," said Dickson Ho, principal economist of the Hong Kong Trade Development Council.

"Labor rights protection has seen consensus everywhere else in the region. Even low-cost production bases such as Cambodia and Myanmar have signed agreements with the International Labour Organization, because the developed world doesn't want to buy sweatshop products. Hong Kong employers need to catch up."

Huang indicated that Guangdong's collective contract ordinance is in line with the requirements of the ILO. "It's fair on both sides. Any country that applies democratic management has such rules. There's nothing excessive."

"Times have changed," she said. "A new generation of migrant workers knows better about their rights and demands more. The employers' attitude is critical in settling disputes with workers. People will certainly vote with their feet against those who are immersed in the memory of the old days."