State Regulation, Economic Reform and Worker Rights

The Contingent Effects of China's Labour Contract Law

Bibliographic Data

ID3985506
AuthorsTu Lan (0000-0001-8918-3023, University of North Carolina at Chapel Hill), John Pickles (0000-0002-6736-2183, University of North Carolina at Chapel Hill), Shengjun Zhu (0000-0002-1033-4384, University of North Carolina at Chapel Hill)
Year2015
Volume45
Issue2
Pages266-293
Publication date2015-04-03
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Contemporary Asia (JOURNAL)
Journal identifiersISSN: 0047-2336 • E-ISSN: 1752-7554
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/00472336.2014.940592
OpenAlexW1997840601
LanguageEN
Citations received16
References cited26

In 2007/2008 the Labour Contract Law was introduced and enacted in China. Responses to the law have varied enormously. For many, it represented a major change in the conditions under which workers and employers can enter into contracts and, as a result, it has been seen as an important step in empowering workers to shape their conditions of work. For others, the law lacked teeth and was not implemented. In practice, the law has had different effects within and among different types of firms depending on their ownership structure, product mix, market orientation, size and geographical location. The differences are particularly clear among private sector firms and between and among private and public sector enterprises. This article outlines the conditions and terms of the 1995 Labour Law and how the 2008 Labour Contract Law changes these, particularly for global buyers sourcing from China and for workers and enterprises in China. In particular, it assesses the differential impacts of the new law on permanent and temporary workers in state-owned and private enterprises, and between private- and public-sector employees, with an emphasis in the latter case on the liberalisation, not enhanced protection, of workers' rights.Key Words: ApparelChinaglobal sourcingLabour Contract Lawprivate- and public-sector workers AcknowledgementsThe research on which this article is based was supported by the Capturing the Gains Research Network, funded through the University of Manchester by the UK Department for International Development (DFID) and by a Doctoral Dissertation Research Improvement Award from the US National Science Foundation Award Number BCS: GSS 1130214. The authors are grateful to Frederick Mayer, Doug Miller, Adrian Smith and several anonymous reviewers for their comments and suggestions.Notes1 By the mid-1990s, the delocalisation of European and US clothing manufacture had revitalised the industry throughout the region around stitch-up, Cut-and-Make (CM), and Cut-Make-and-Trim (CMT) contract manufacturing, structured largely by international buyers and manufacturers. As a result, the industry re-emerged quickly, but largely under the radar of the state authorities. These remained weak and the institutions of the state continued to be under-funded and under-incentivised (see Pickles et al. Citation2006).2 For documentation of abuses in Bulgarian supply chains see Bettina Musiolek and others' (Citation2004) account of the "Conditions in the Savina Factory." For discussion of the consequences of state socialist institutions on post-socialist working conditions, see Pickles and Smith (Citation2010).3 In dating China's Labour Law and Labour Contract Law legal scholars writing on the laws often use 1994 and 2007 respectively, the dates the laws were promulgated (see Biddulph et al. Citation2012; Cooney et al. Citation2007, Citation2013; Qian et al. Citation2013). Labour organisers and activists often prefer to use the years the laws were actually enacted, in both cases on January 1, the year following promulgation –1995 and 2008. Because our focus is on the direct and indirect effects of the laws' implementation, we elect to use the years of enactment, 1995 and 2008.4 The new LCL (NPC Citation2007) passed on June 29, 2007, at the 28th session of the Standing Committee of the 10th NPC and was enacted on January 1, 2008, complementing the 1994 LL. The LL was passed on July 5, 1994 during the 8th session of the Standing Committee of the 8th NPC, taking effect on January 1, 1995. Hereafter, the first LL will be referred as the 1995 LL, the second one as the 2008 LCL, indicating the years in which they were enacted.5 Specifically, Chapter 8 – "Appendix of the Labour Contract Law" requires that public units and units which follow the public employment system must follow the requirements of the LCL unless there is any other explicit law or administrative regulation already in place (Clause 96). Although the 1995 LL Clause 2 states: "governments, public institutions, social organisations shall follow the law with labourers who have established the relationship of labour contract," it does not include those who do not sign the contract with these employers, while in the 2008 LCL, so long as there is "the labour relationship," the law applies. Moreover, government employees are still outside the provision of LCL even in the 2008 LCL, and this is why controversies emerged during the reform of public institutions which we will discuss later (Guo Citation2008).6 Even if they did appeal, there were no clear mechanisms for authorities to arbitrate. Under Clause 32, if the employer used force, violence or intimidation, or if the employer failed to pay wages or provide working conditions based on the contract, the employee did have the right to terminate his or her labour contract at any time during the probationary period. But the labour market has long been a buyer's market and because many workers feared losing their jobs during the reforms few exercised this right.7 The LCL has many provisions, among them it seeks to protect workers from other abuses, it sets up minimum wage requirements and it specifies the conditions under which early termination penalties are to be levied on employers. For example, wages during the probationary period cannot be paid at levels below the minimum enterprise wage, at less than 80% of the formal wage in the labour contract, or below the minimum wage of the local standard (Clause 20). Also, if the probationary period is unlawfully terminated, the employer has to pay the worker compensation of an amount based on the full amount of the contracted wage and the time of the illegal probationary period completed (Clause 83).8 The annual number of labour arbitrations accepted by the Ministry of Human Resource and Social Security can be found on: http://www.labournet.com.cn/ldzy/ckzl/ckzl2a.asp9 For more details about different relocation strategies, see Zhu and Pickles (Citation2014).10 Tsai and Tien (Citation2010) found that while labour intensive sectors, such as textile and clothing, are particularly sensitive to such labour cost increases, more technology-oriented industries did not experience the same large effects.11 Danwei is the dominant and very distinct form of social and spatial governmentality in pre-reform China, and in many ways there are still vestiges of it in contemporary Chinese society. For a detailed genealogy of danwei, see Bray (Citation2005).12 The history of such a binary labour system in SOEs and public institutions dates back to the Maoist era (Wu Citation2004).13 By disbanding the danweis, the state tried to improve the profitability and efficiency of its SOEs and public institutions.14 Based on various author interviews conducted in 2008, 2009 and 2012

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