AFTER WEEKS of labour unrest in China, which have seen a suicide crisis at the world’s biggest electronic components manufacturer Foxconn and strikes at Honda’s factory, employers have responded with double-digit percentage pay rises to try and quell the danger of spreading instability.
While the pay hikes will help put a lid on some potentially disastrous incidents and risky events in previous days, they also show how China is moving up the value chain and away from being the ultra-low-cost environment it has been for years now.
China’s renminbi currency is very strong against currencies such as the euro so it is harder for foreign firms in Europe to make big margins in China, always a draw to the country. There is growing pressure on the big manufacturing companies, both from the central government in Beijing and from headquarters outside, to treat workers well, in line with improving global standards.
This means that prices will rise and that manufacturers will start looking elsewhere, notably to Vietnam and India. China though still has a superb infrastructure and a work ethic that means it consistently reinvents itself.
Rising living standards and individual dignity mean that companies must find ways to treat workers well even under conditions of intense global competition.
While one would expect the foreign firms to start manufacturing for the booming domestic market, gaining access to this market is not always easy.
All of this is happening as Irish and other European manufacturers are under greater pressure than ever to keep costs down in the face of ongoing recession.
Honda, Japan’s second-biggest carmaker, said it would raise wages by 24 per cent at a parts factory after a strike at the plant shut down its local car production.
Foxconn, which makes electronics for industry giants such as Apple, Dell and Hewlett-Packard at its huge plant in Shenzhen and employs 800,000 people in China, has seen 10 people commit suicide in recent weeks. It has increased wages by 20 per cent to help stave off any further damage to its already reeling reputation.
Wang Yang, head of the Communist Party in the booming province of Guangdong, home to a huge chunk of Chinese output, urged the company to adopt a “better, more humane working environment” for its mostly young workers. “The 80s and 90s generation workers need more care and respect and need to be motivated to work with enthusiasm,” said Mr Wang.
Given that strikes are illegal in China and any labour organising can only take place under the All China Federation of Trade Unions, which is linked to and beholden to the Communist Party, there is a suggestion of some government complicity in the Honda incident.
China’s labour contract law, which took effect in early 2008, gave Chinese workers unprecedented protection, although it has not been widely enforced around the country and most workers are unaware of its existence.
However, aware or not of the rules, expectations among this generation, who have never known the hardship of the 1960s and 1970s, are extremely high, as they are used to annual double-digit percent economic growth.
One employer told of how he introduced 15 per cent pay increases for his staff and they were still unhappy.