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Does China Have a Jobs Problem?

A ChinaFile Conversation

In a surprise Sunday tweet, U.S. President Donald Trump said he supported helping the phone-maker ZTE, a Chinese tech giant which has been one of the hardest hit from U.S.-China trade tensions. “Too many jobs in China lost,” he wrote. Though Trump speaks often about bringing jobs back to America, he’s shown little concern for any labor issues in China. What sorts of labor issues does China face? And how might U.S.-China trade tensions exacerbate them? —The Editors

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Donald Trump claims to be concerned that “too many jobs in China [have been] lost” because of the sanctions imposed on telecoms giant ZTE. For the vast majority of Chinese workers, however, the number of jobs lost or the number of jobs created is not the main issue. Finding a job in China is generally not a problem, but finding a decent job very much is.

Low pay, poor working conditions, and a lack of job security is the reality for most workers in China today. The most recent government survey of migrant workers, who make up more than one third of the workforce, puts their average salary at 3,485 renminbi (about U.S.$550) per month, very far from a living wage even in a small or medium-sized city.

In order to earn barely a living wage, many employees have to work long hours under extreme pressure and in hazardous conditions. In response, workers are taking a stand and getting organized. At the end of April, tower crane operators organized a nationwide strike demanding higher pay and shorter working hours. They complained of having to work 12-hour shifts each day in a highly stressful environment for just 5,000 renminbi a month.

Nor did the crane operators have proper employment contracts or benefits like pensions or health insurance, a condition shared by tens of millions of other workers in China’s informal labor market. Most of the new job growth in China over the last few years has been in a huge range of new service industries, from food-delivery workers to computer engineers and media creatives, who are usually hired as independent contractors rather than formal employees and therefore denied the employee benefits and protections prescribed by China’s labor laws.

Many workers have to deal with an even more basic problem: just getting paid. So far this year, 538 of the 650 strikes and worker protests recorded on China Labour Bulletin’s Strike Map have been related to the non-payment of wages. Wage arrears have been a serious problem in China’s construction industry and manufacturing for decades, but they are becoming commonplace in the service sector as well. China is to trying to foster innovation and an entrepreneurial spirit, but many innovations are just not sustainable and when new start-up companies fail, their employees are left out of a job and out of pocket.

Another important labor relations issue to note is the widespread and systematic discrimination faced by women in the workplace. Higher-paying managerial positions are routinely reserved for men because they are widely assumed to have fewer family commitments than women. Women also have to deal with sexual harassment in the workplace and risk getting fired if they become pregnant.

All of these issues are a world away from the high-profile trade negotiations currently underway between China and the United States. It is possible, of course, that a trade war will hurt China’s workers. But in reality, it will only exacerbate the numerous labor relations issues that already exist.

In the era of the “New Normal,” China is facing considerable challenges on the labor front. Two main problems come to mind. On the one hand, labor costs have increased, making China’s labor-intensive industries vulnerable to competition from other developing countries. This is a structural problem of capitalism that the Chinese authorities have struggled with since at least the 2008 implementation of the Labor Contract Law. China is attempting to tackle it not only through ambitious plans of technological upgrade, but also by discussing new amendments to the existing labor legislation in order to make the labor market more “flexible.” Meanwhile, Chinese workers in the Pearl River Delta have been facing a wave of industrial relocations to China’s interior and to other countries that have seriously imperiled the livelihood of many of them, as several companies have been known to just leave without paying proper compensation to their employees, nor their social security contributions. On the other hand, there are fundamental changes in the Chinese workforce. Since at least 2003, some areas in China have faced periodical labor shortages. The government’s goal of developing the interior provinces and distributing urbanization evenly across regional cities has resulted in fewer incentives for workers to migrate to faraway areas. This has had the unforeseen consequence of disrupting the labor market in traditional manufacturing regions, which are having difficulty adapting to the curtailed labor supply. Also, the Chinese workforce is aging, posing a formidable challenge for the newly established social security nets. It is not a coincidence that older workers have been behind many of the recent Chinese strikes.

Still, the roots of Chinese labor woes go deeper than that. Since the mid-1990s, the Chinese authorities have implemented a wide array of labor laws and regulations. This legislative body is impressive in many respects, but it is marred by a fundamental imbalance between individual and collective rights. While individual rights are codified and relatively well protected, laws systematically undermine collective rights. For instance, China’s workers still do not enjoy the right to establish their own independent trade unions, as only one union—a mass organization under the thumb of the Communist Party—is allowed to exist in the whole country. Also, they do not have the right to strike—although wildcat strikes are relatively common—and the practice of collective bargaining is drowned in the formalism of “collective negotiations” that assume a fundamental identity of interests between employers and employees. Some local labor NGOs have recently attempted to go beyond this atomized view of labor rights by training workers on how to elect their own representatives to bargain collectively with their employers, but under Xi Jinping these attempts have been thwarted. If tensions between China and the U.S. worsen and the Chinese economy takes a turn for the worse, the Party, obsessed with social stability, will likely further increase its efforts to bring labor NGOs and other collective expressions of Chinese labor to heel. And Chinese workers will end up paying the price.

Donald Trump’s recently discovered concern for job losses in China is transparently disingenuous. After repeatedly asserting during his campaign that China is “raping” the U.S., followed by his Xi Jinping lovefest and praise for his abolishment of term limits, and finally the more recent announcement of wide-ranging tariffs, China policy under Trump has been incoherent at best, and has certainly never evinced concern for that country’s workers. With this background, his comment on reconsidering the proposed penalties on ZTE is nothing more than a bargaining tactic.

Nonetheless, China’s workers today do face a series of problems, most of which exist independently of trade tensions, but which could be worsened in the face of economic uncertainty.

For many years, China has been attempting to shift from a model of economic development based on low-wage manufacturing to one more oriented towards services and high value-added production. The share of employment in manufacturing has long since peaked, and increased government spending on automation and AI is only likely to increase pressure on low-skill workers. Regardless of the result of trade negotiations, many U.S. companies are likely to continue to diversify their sourcing away from China, which could increase unemployment. With millions of migrant workers in labor-intensive industries largely excluded from social protections including unemployment insurance, this structural shift presents a potentially major social problem.

While the service sector is growing and absorbing more workers, many of these new jobs are hardly ideal. Employment in food and beverage, child and elder care, construction, and platform-based industries (e.g. food and parcel delivery, taxi) has expanded, but wages are incredibly low, legal protections shaky to non-existent, and working conditions are generally poor and sometimes physically dangerous.

Most fundamentally, Chinese workers are denied fundamental collective rights such as freedom of association and the right to strike and bargaining collectively. Beijing has cracked down on the small number of independent labor NGOs, and the official All China Federation of Trade Unions remains an appendage of the state, unable to effectively advocate for workers.

The U.S. has never prioritized Chinese worker rights; neither Trump nor Obama and Bush mentioned the systematic exploitation and social exclusion of the country’s migrant workers, or the blanket denial of basic labor rights. And U.S. companies have benefited tremendously from this cheap and docile workforce.

Indeed, the president’s own family has profited from the exploitation of China’s workers. When major labor rights violations were discovered in factories producing for Ivanka Trump’s brand, Beijing responded by detaining the activists behind the report. (Neither Donald nor Ivanka Trump commented on the issue.)

Both Trump and Xi have confounded “national interest” with the interests of their respective nations’ workers. Negotiations over a trade deal have made this reality clear: at no point have labor rights, wages, or security of employment been raised. The best way to improve workers’ lot is to pay them more and allow them to self-organize. And that is something for which neither of these two autocratically-inclined heads of state has any sympathy.

“What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life,” Xi said in October. His words point to two important problems: inequality and rising expectations. China’s development has been unbalanced. While growth and development have been impressive overall, they have been accompanied by rapidly increasing inequality, and China is now one of the most unequal countries in East Asia.

People’s expectations are high because China has been growing rapidly for the last 30 years. Incomes are increasing and standards of living have improved tremendously since the 1980s. But the massive gains at the upper end have far outweighed the gains at the bottom.

Among Chinese workers, the dual problems of inequality and rising expectations are most severe in the gap between urban workers (those with permanent legal status as urban citizens) and rural migrant workers (Chinese rural citizens who work in cities but lack local citizen rights). China’s rapidly aging society and shrinking working population mean that young rural workers are in high demand. Over 150 million rural workers live in cities and work in labor-intensive manufacturing, in services like domestic work, restaurants, hair salons, and construction.

However, they are worse off than their urban counterparts. In issues like wage arrears, excessive overtime, and lack of social security benefits, migrant workers do far worse than urban residents.

Migrant workers do not enjoy the same protections and benefits as urban residents because local governments, tasked with the implementation and enforcement of China’s labor laws, are not held accountable for the migrants in their midst. When migrants are deemed superfluous or troublesome, as they were in Beijing last winter, they are simply thrown out of the cities.

China’s rural migrants are not immune to the force of rising expectations, however, especially as they realize their importance to China’s development. Strikes and protests happen daily. Demands have extended beyond basic problems like getting paid on time to long-term security issues, such as social insurance benefits and housing policies.

How does this relate to U.S.-China relations? The unbalanced nature of China’s development hurts American companies’ prospects in China. Consumption is lower than it should be because people must save at high rates in the anticipation of getting old or sick. And fewer people have the ability to consume services in sectors that U.S. companies excel in, such as financial services and health care.

The poor working conditions and relatively low wages of Chinese rural workers are additional irritants in the U.S.-China relationship. American workers believe that offshoring to China has happened unfairly due to weak enforcement of China’s own labor laws and collusion between Chinese local governments seeking investment and multinationals seeking the lowest wages possible.

Sustainable and balanced development in China, if it can be achieved, will be good for the United States. Better working conditions, higher wages, and more secure social welfare for Chinese workers, especially rural migrant workers, will, in turn, improve the buying power of Chinese consumers.