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1 Translated by China Labor News Translations How Bosses and Workers Can Become One Big Happy Family : a report on an inquiry into the introduction of collective wage consultation in Wenling City, Zhejiang Chinese Labor and Social Security News 25 January High wages attract an influx of migrant workers to a small town Five years ago, Pan Donghua, a peasant from Hubei left Guandong where she had worked for 10 years and moved to Xinhe town, Wenling City in Zhejiang Province. Three years ago, Miss Gou of Century Fashions Ltd came from outside Zhejiang to work in Wenling. Last year, a young woman from Hunan, Jiang Xiaoyun, also moved from Dongguan in Guangdong to Xinhe. She told our journalist: When I worked in Dongguang, I was earning 600 RMB a month. When work became busy, my earnings rose to 800 RMB. In the last couple of years, it went as high as 1,000 RMB. However, I was earning 1,800 RMB for a similar type of work and workload the very first month I arrived in Wenling. Several workers at Wenling spoke frankly to our journalist about their reason for choosing to work here. Since 2003, there had been a widespread labor shortage along the coastal economic development zone, yet an increasing number of workers flocked to Wenling. They were drawn to Wenling by the prospect of higher wages than those being offered by other areas. Some people might be puzzled by this: why is the privately-run economy so well developed in Wenling, a county-level town without a railway connection and where transport links are poor, and yet, workers can earn higher wages than those in the more developed big and medium sized cities? 1 Translated from Chinese. Original article available at: 1

2 When quizzed about this, the Vice Chief of Wenling s Labor and Social Security Department explained: Wenling s knitwear, water pump and ball bearing industries enjoy stable labor relations, and their higher wage level is a result of the collective wage consultation mechanism established in 2003 in the knitwear industry. Workers and bosses are able to have face to face negotiation on pay rates on equal terms. It is said that since the establishment of collective wage consultation in 2003 in the woolen knitwear industry, Wenling has introduced collective wage consultation between trade unions and seven other industries where conditions were favorable, including the knitwear, water pump and ball bearing industries. These agreements covered more than 600 enterprises with over 30,000 workers. At the same time, 14 trade-wide unions were set up, encompassing over 800 enterprises with more than 50,000 workers. This stabilized labor relations and transformed the unregulated competition for workers amongst the industries. Industrial conflicts drove wage negotiations In fact, just five years ago there were serious industrial conflicts in Xinhe. The Wenling knitwear industry started up and was concentrated in Changyu town before it became part of Xinhe. Gradually this area developed from domestic workshops in the eighties into the most important woolen textile production centre in China. By 2001, 116 knitwear enterprises lined the one-kilometer long main road in Changyu, employing 12,000 workers. Every year, the looms clattered incessantly from August till December, producing over 10 billion RMB worth of knitwear. With rapid economic development in many areas after the turn of the century, labor shortage problems began to surface. As the production and sale of knitwear is highly seasonal, its workers were very mobile. There was also an absence of a unified and regulated standard piece rate (standard rate). Whenever production reached a peak season, enterprises would poach skilled workers from each other by offering high wages. This unregulated competition enticed workers to hop frequently between enterprises. Some enterprises even resorted to keeping wages in arrears or withholding a bond to stop workers from moving. Workers tempted by higher wages elsewhere would either demand a rise from their employers or decide to jump ship. They would then call on the help of government agencies to demand unpaid wages from their previous employers. Factories were troubled by not being able to produce at full capacity and workers complained about the reduction in their income. Having to deal with frequent complaints from workers posed a constant headache for the government. Between 2001 and 2002 there were persistent complaints in Wenling about the issue of wages. Lin Canyun, the chief of Labor and Social Security Department in Xinhe explained: in 2002 there were up to 35 cases of collective complaints with ten or more complainants, involving over a thousand workers. There were a 2

3 further 18 cases of collective complaints in 2003 which the Wenling Labor and Social Security Department found very difficult to resolve. The enterprises claimed that the wage level was already very high and that they would make a loss if it went any higher; workers claimed that the wages paid by the enterprises were inadequately regulated. However, even the Labor and Social Security Department was unable to arbitrate on what constituted a fair wage. The knitwear industry was in such a difficult situation that it initially turned to self-help and self-regulation. Pan Donghua, who now works at Tangula company, reminisced: when she first arrived at Changyu in 2002, factory owners had already agreed on a maximum wage rate of 3,500 RMB per month. Wang Xinfa of the Xinhe Woolen Knitwear Association admitted to our journalist that the Association was set up in 2002 with the expressed intention of drawing up agreements on standard wage rates so that enterprises could avoid the rivalry for workers which drove up the going rate. However, for the next two years, the Association was not successful in setting a unified wage rate in practice. At the beginning of 2003, the Wenling Labor and Social Security Department undertook a survey on the issue of pay within the woolen knitwear industry. The survey showed that wage rates were formulated based either on sales volume, profit margin, minimum living needs of the workers, seasonal labor requirements, or on what other enterprises were offering. However, none of the factories based it on sociey s average labor time. Li Yuyou pointed out that, the lack of transparency in standard wage rates is the root cause of conflict between labor and capital. A remedy was promptly prescribed once the cause of the problem was identified. The Labor and Social Security Department asked the Knitwear Association to break down the production of knitwear into five types of production tasks with 59 kinds processes, and set an average wage rate for each. At the same time, the Association was asked to send representatives to Jiangsu and other areas in the province Tongxiang, Jiaojiang and Linhai to carry out research on wage rates in similar industries and formulate a preliminary standard rate. At the same time, the town s Labor & Social Security Department consulted the trade union and audited the proposed rates to ascertain that they were within the provision of the law using local society s average work hours to determine various relevant standards using as a refernce the daily rate of 50 RMB for peasant-workers in the city who are stone, wood or water craftsman. After deducting the cost to the craftsman for providing the tools of his trade and his transport cost, the pay for an 8 hour day worked out to be 32 RMB. For work on a horizontal knitting machine in plain stitches and simple casting off, the production rate was set at 3.79 pieces for 8 hour s work, therefore the piece rate works out at RMB. Rounded up, the minimum piece rate can then be set at 8.50 RMB. Li Yuyou said: The standard wage rate was determined by the trades associations and represented the views of the enterprise bosses. At the moment, it is not certain that the 3

4 representatives of the workers will give its approval. Workers and bosses negotiate pay rates on equal terms face to face While the associations which represented the views of the bosses formulated standard trade-wide wage rates, Xinhe trade unions selected worker representatives and canvassed the views of workers from different enterprises in preparation for face to face wage negotiation with the bosses. Not many knitwear enterprises in Xinhe had trade union representation, since most of them were basically small-scale domestic workshops. The town trade union had elected representatives only from several larger enterprises. Pan Donghua was one of them and attended the meeting. Her boss gave her a temporary title, Factory Union Chair. As she saw it, even though most of the representatives were nominated by their bosses, most spoke their minds as it was a matter that involved everyone s interest. 13 June 2003 was a memorable day. Earnest talks on knitwear industries wage rates were held in Xinhe. 13 workers representatives and eight enterprise bosses sat down and discussed standardizing wage rates. Also present were officers from the county Labor and Social Security Department and the trade union. The main issue of these earnest talks was a standardized wage scale. Fun Anbao, the chair of Xinhe town trade union reported on the harmonious and warm atmosphere in the meeting. The workers representatives were then tasked with consulting their fellow workers in their factories and put forward, anonymously, what they considered an appropriate rate. The town trade union then collated and averaged out these figures and presented them to the industry association. Wang Xinfa, chair of the Knitwear Association reported: There was a significant gap between the workers and the bosses standpoint. For certain processes, there was a discrepancy of one RMB per piece. The bosses reacted quite strongly to this, and were of the opinion that high valued products might be able to bear this cost but not low value products. The bosses put up a stiff resistance and many wanted to abandon the talks. But as they were already too far along the road to back down, the Labor and Social Security Department and trade union leaders invited town government leaders to use their influence and managed to get the bosses to agree to continue with the talks, albeit reluctantly. After six times of up-and-down consultation on these proposals and amendments by each party with its members, worker and business representatives finally came to a trade-wide and mutually recognized agreement on a minimum wage standard, taking into account national labor laws and related regulations, as well as actual local practices. On the afternoon of 8 August 2003, Fu Anbao and Wang Xinfa, representing workers and enterprises respectively, signed the agreement, Protocol on collective wage consultation (standard rates) for workers in the knitwear industry applicable to the second half of The agreement laid out clearly 4

5 the minimum pay rate for each work process as well as a standard minimum of 27 RMB for 8 hours normal work, and a minimum monthly wage (including overtime pay) of 800 RMB. The agreement also clarified the monthly pay date and payment method. Both parties also agreed to meet once a year for collective wage consultation within the industry. In this way, the first industrial negotiated industry-wide standard wage agreement was made in Zhejiang. Government provides assistance to establish a tripartite mechanism for trade-wide collective wage consultation During the negotiation process for the Wenling knitwear industry s collective wage consultation, it could be said that the will of the workers was well reflected,but the company side displayed a definite reluctance on trade-wide standards. According to Li Yuyou, it was clear that when Xinhe Town knitwear industry signed the first trade-wide wage standard, the company bosses made a major concession. In order to ensure that this first consultation proceeded smoothly, the government had put in a lot of work that took on a persuasive and demonstrative effect. Although the agreement was signed, the bosses worries were not unreasonable: We signed a trade-wide wage standard, we must respect it; but these worker representatives were all appointed by the government and enterprises, will they be able to represent the aspirations of all the workers? If other workers do not respect the standard and continue to demand a wage increase what can be done? How to make the wage agreement better received and genuinely an equally binding force for both labor and capital has become the common call from bosses and the mass of workers. As a result, at the same time as pushing forward wage negotiations, the Wenling Labor and Social Security Department and the city trade union have begun establishing a Changyu Knitwear Industry Union. On 9 August 2003, the second day after the wage agreement was signed, the Changyu Knitwear Industry Union was founded. This was the first local trade-wide union for non-state companies since economic reform (gaige kaifang) began. The union committee was made up of nine people. Apart from the position of chair, which was concurrently held by the deputy chairperson of the town-level union, the other eight committee members were all production line workers selected from among the worker representatives involved in the wage consultation. Because industry conditions are different from year to year, the knitwear industry needs to re-negotiate the price of labor every year. Beginning in 2004, the Xinhe Town Knitwear Trade wide Union officially replaced the town-level union as the primary negotiator for workers. A labor relations tripartite coordination mechanism that genuinely consists of representation of the interests of the three parties was truly established. 5

6 Rolling out the Wenling trade-wide wage consultation model The signing of the wage agreement document led to the core problem of the contradiction between labor and capital wages reaching a reasonably good resolution. The labor rights and interests of the workers are guaranteed, the bosses have also broken through the difficulties of industrial disputes, and both sides have gradually transformed from having an adversarial relationship to a cooperative relationship, effectively improving the disorderly state of the competition within the industry over recruitment. An investigation of Xinhe town that year revealed that practically no enterprises went below the industry wage standard, and in fact the majority of enterprises increased wages by five to ten percent. According to a statistical comparison by the Wenling Federation of Trade Unions, from after the August 2003 wage consultation until the end of August 2004, the Changyu knitwear industry had only four industrial disputes, a decrease of 14 compared to the same period the previous year. The stability of the labor force has also attracted even more migrant workers into Wenling seeking employment. When this journalist conducted interviews in Wenling a few days ago, the head of the Xinhe Labor Protection Institute Lin Canyun explained the changes to labor-capital dispute cases over these few years. It can be seen from the data that after 2004 there have been only 3 to 5 dispute cases each year, and they have all been individual disputes, with no collective disputes. Vice Chief of Municipality Labor and Social Security Department Li Yuyou, who has been responsible for pushing this work forward, uses five sentences to summarize the effects of carrying out the system of collective wage consultation: guaranteeing workers wage levels and reducing labor-capital disputes; stabilizing the workforce and eliminating the phenomenon of high labor turnover. improving the social environment and retaining migrant workers; increasing productivity and promoting enterprise development, and; beginning face-to-face consultations, strengthening enterprise owners democratic consciousness and the consciousness of workers participatory management consciousness, thereby raising the management level of enterprises. The positive effects of the new collective wage consultation have led other industries to emulate the model. On 30 May 2005, the Wenling municipal party committee and municipal government, tried to roll out the model by circulating the Opinion on comprehensive efforts to popularize the implementation of trade-wide collective wage consultation, and through the leadership of the Wenling Municipal Labor and Social Security Department, along with employer associations and unions, began to implement this system in the water pump, bearing, injection moulding, footwear, millinery, and boat-building and repair industries. Zeguo town has more than 4,000 non-state enterprises and is where Wenling s bearing, water 6

7 pump, footwear, clothing and other industries are concentrated. It has 120,000 migrant workers, and while putting into place the industry collective wage consultation system they have effectively combined democratic consultation and has become known for its harmonious labor-capital relations. Since 2005 there have not been any disputes over collective wages. Lin Guifang, chair of the Zeguo county branch of All China Federation of Trade Unions told this journalist: Now Zeguo s enterprises, bosses and workers are like a family, with workers production activities greatly increased. At the same time as bosses reap the benefits, workers also obtain real benefits. Wage consultation has made Zeguo even more socially stable and harmonious. Since the knitwear industry implemented collective wage consultation in 2003, Wenling has already had a continuous stream of seven sufficiently well-established trade-wide unions, such as the knitwear, water pump and bearing industry unions that have begun collective wage consultation. At the same time, 14 industry unions have been established, covering more than 800 enterprises and more than 50,000 workers. The implementation of the collective wage consultation system has not only changed the disorderly state of these industries competition over recruitment and stabilized labor relations, but these kinds of active effects also strengthen the labor management of other enterprises throughout the city and contribute by playing an active and positive role in leading by example. Li Yuyou proudly told this journalist: Caring for and treating workers well has already become the consensus for good enterprise management among our Wenling enterprise bosses. 7

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