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The skewed story of China's cheap labour

Last updated on: June 4, 2010 15:25 IST

The skewed story of China's cheap labour

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K J M Varma in Beijing

A spate of suicides at Foxconn and a flash strike in China's Honda plants have brought the focus on worker unrest in China, raising a question mark on the 'cheap labour cheap goods' concept that catapulted Chinese exports and brought in large foreign investment.

Labour unrest -- regarded for over two decades as a non-issue by foreign investors because of tight controls wielded by the government -- suddenly flared up highlighting poor conditions the workers faced across the country.

Taiwanese electronics firm Foxconn, where 12 workers committed suicide, announced a 20 per cent raise for its eight lakh employees while Honda for the time-being managed to convince its employees to agree for a 24 per cent raise.

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Image: Shanghai by night.
Photographs: Reuters
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Meanwhile, the provincial governments in a bid to prevent the unrest from spreading announced increase in minimum wages.

Beijing municipal government announced a 20 per cent raise in minimum wage raising it from $117 to 141.

Before that, the industrially active provinces like Guangdong, Shandong, Ningxia and Hubei too announced increases in minimum wages and indications are that an income distribution reform is being considered by the government.

The increases understandably were attributed to raise in inflation and not the labour unrest.

"The nation-wide wage adjustment is aimed at helping to offset inflation and rising food, energy and housing costs. It's also hoped it will spur more domestic consumption among low-income groups," state-run CCTV said in its report.

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Image: Ma Zishan cries as he carries a portrait of his son Ma Xiangqian outside a Foxconn factory.
Photographs: Bobby Yip/Reuters
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While the labour troubles raised concerns among the Chinese and foreign investors as cheap Chinese labour was regarded as the main force for capturing overseas markets with cheap prices, they also highlighted a poor pay record in a country that swears by workers rights.

Studies published in the official media showed that while China's gross domestic product skyrocketed crossing the double digit, workers' wages dropped 22 years in a row in proportion to its national gross domestic product.

While wages' share was more than 56 per cent of the gross domestic product in 1983, it fell to 36 per cent in 2005.

A recent survey showed more than 23 per cent of workers have not got a wage increase in the past five years.

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Image: An employee counts yuan banknotes at a branch of the Industrial and Commercial Bank of China.
Photographs: Stringer/Reuters
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More than 75 per cent of those surveyed say the current income distribution system is unfair.

Earlier plans to amend the wage problem were thwarted by strong opposition from employers and inaction fuelled rising tensions, as evident by recent cases.

Workers took strike action at a Honda plant and a string of shocking suicides have taken place at Foxconn group.

All these are imperative for Chinese policymakers to pull out all the stops to increase workers' payment quickly, a CCTV report said.

Commenting on the growing income disparities, Su Hainan, director of the Labor and Wage Institute of the Chinese ministry of human resources and social security said a solution for income distribution reform is under discussion by the government and it is expected to come soon.

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Image: An employee displays US dollars at a counter.
Photographs: Kham/Reuters
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The current primary income distribution has many problems, as a minority of people, some enterprises and departments and industries receive unreasonable benefits through non-labour factors such as resources and market monopoly, administrative power and special identity, Su said, adding that funds for social welfare and public livelihood are also far from enough.

He suggested China should incorporate into its next Five-Year Plan for 2011-15 an 'income-doubling' plan, like the one adopted by Japan in 1960s.

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Image: A man uses a computer at an internet cafe in Beijing.
Photographs: Jason Lee/Reuters
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By 1967, Japan had doubled its national income and achieved an average annual growth rate of 7.2 per cent.

"China now is equipped with the required conditions to carry out a similar plan," Su said in People Daily.

"If average wages increase at a rate above 15 per cent year-on-year, we can achieve the goal of doubling national income in about five years," Su said.

 


Image: A PetroChina employee inspects oil valves at an oil storage in Suining, China.
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