Straight Out of Dickens: Labor Strife in China

You might think it was the early phase of the Industrial Revolution in Great Britain if you visited South China these days.

Guangdong Province is the manufacturing heartland of China, and its factories supply a lot of what we Americans find at Wal-Mart and many other retail stores, especially toys.

But things are getting tough in China, by many standards tougher than we have it here in the U.S.

First, under pressure from Wal-Mart and other large-scale buyers, China officially raised the minimum wage, but that didn’t stop Wal-Mart from simultaneously demanding lower costs. Profits, at least for the toymakers, sank immediately.

Then came higher fuel costs and now the recession in the U.S., and factory after factory in Guangdong began shutting down; factory hands were let go en masse, many of them migrant workers whose families back home in distant provinces depend on them for monthly cash infusions–and bare survival.

Since the beginning of 2008, some 3,600 toy factories have gone under, leaving hundreds of thousands without work, yet China still publishes an official unemployment rate of 4 percent.

Now, the workers are fighting back–literally. Dongguan, the city where the toy manufacturers are concentrated, has witnessed several episodes of laid-off workers’ occupying and trashing the factories after they’re closed. Riot police have been called in. Scenes have gotten ugly. Tensions are understandably high, as is anxiety for the future.

But since the owners of the factories often disappear into the hinterlands after closing shop, local authorities are usually powerless to collect back wages, let alone enforce severance packages. In some cases, the government–hoping to keep face–has itself coughed up the workers’ earnings.

As it stands, Chinese factory workers toil up to 80 or more hours a week (when times are good) for the princely sum of 770 yuan a month, about $118. Overtime is almost never paid.

In the States, we just witnessed the employee occupation in Chicago of Republic Windows and Doors, which was abruptly shuttered after Bank of America closed its line of credit to the firm.

The laid-off workers demanded 60 days’ wages and benefits under the WARN (Worker Adjustment and Retraining Notification) Act since that law requires firms to give 60 days’ advance warning of mass layouts (unless there is an unforeseen emergency, a gray area).

Just last night I heard that BofA was going to advance Republic a $1.2-million loan to remunerate the fired employees.

So, the employees won, evidently, but I have one question:

How is Republic going to repay BofA if it’s no longer operating the factory?

(I just learned, but I don’t know if it’s accurate, that the sum is actually $1.75 million and that it will go into a fund with money from both JPMorgan Chase and Bank of America. This would seem to indicate that it’s not a loan, but a publilc relations tactic to counter consumer and public ill will toward the banks.)


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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