What do a car manufacturer, an electronics factory and a fast food chain have in common? They’ve each recently succumbed to a new wave of worker pressure in China, raising wages and improving conditions in the face of industrial action. The actions of Honda, the much-talked about Foxconn, and even KFC could represent the start of something much bigger for Asia’s fast-developing giant.
What do a car manufacturer, an electronics factory and a fast food chain have in common? They’ve each recently succumbed to a new wave of worker pressure in China, raising wages and improving conditions in the face of industrial action. The actions of Honda, the much-talked about Foxconn, and even KFC could represent the start of something much bigger for Asia’s fast-developing giant.
It all began with a strike at several parts manufacturing plants for Japanese automaker Honda in southern China. The company faced rolling stoppages as workers demanded higher pay and improved conditions. While all was back to normal by June 21, as HRM went to press, local media have reported some significant concessions to the workers’ demands – including wage rises of between 24% and 34%.
Change has also been afoot at Foxconn, which was in the news for all the wrong reasons just a few months ago. A series of suicides among workers at its Shenzen factory put the spotlight on the company’s working conditions and employee welfare practices. Since then, Foxconn – which helps put together Apple products including its famous iPhone – has doubled the wages of its lowest-paid staff.
Well-regarded for its runaway success in China, Yum! Brands, owner of KFC and Pizza Hut franchises there, wasn’t prepared to wait for labour unrest to take hold in any of its 66 outlets. It has signed its first collective agreement with more than 2000 staff, stipulating a minimum monthly wage of 900 Yuan (US$132) and guaranteed annual salary increments of at least 5%. The negotiations were said to have been tough – stalling completely at one stage in the six month process – but both sides say they are “pleased” with the result.
Significant, and well-publicised, wage rises like these cannot stay isolated for long. While most unions and worker groups are fighting their way through China’s courts and civil mediation processes in the hope of similar results, strikes are still occurring with increasing frequency. Toyota is the latest company to be affected, with a strike shutting down one of its key suppliers in early June. That forced a stoppage of production at the company’s Tianjin assembly plant. The factory finally agreed to wage increases of 20% as well as bonus payments of 200 Yuan (US$29) per month for perfect attendance.
A big change; but for the better
Wage rises that push monthly salaries to just US$132 may still seem low, but if adapted economy-wide they will affect the overall competitiveness of China’s large-scale manufacturing industries. Already, some employers are considering relocation options to cheaper labour destinations including Vietnam, Myanmar, India and Bangladesh.
But perhaps their loss won’t be such a problem for fast-developing China. It is after all, a sign of economic development that workers push for a larger slice of the pie. The road to a higher-wage, higher skilled workforce will necessarily have some employers priced out of the equation. Increasing the pay of workers will certainly reduce retention, which gives employers more time and opportunity to enhance skills and also increases the return on that investment.
For its part, the central government has been keeping a watchful eye on events, particularly the strikes and walkouts. But it has yet to intervene forcefully on either side. Indeed, the aspirations for better working conditions appear to have guarded support in Beijing. Chinese Premier Wen Jiabao reported spoke with a group of migrant workers there recently, saying their labour was “a glorious thing” and that society should treat them as “family”.
The times ahead will require some tightrope walking between the goal of creating a more prosperous working class in China, and scaring away the businesses and investment that will help achieve it. For the moment though, things appear on track.