China union drives harder bargains
China’s government-backed trade union, long considered a paper tiger, is growing real fangs -- delighting worker advocates but making foreign executives sweat.
Dismissed for years as a Communist Party mouthpiece and organizer of holiday parties, the All-China Federation of Trade Unions has started playing hardball, pushing for tougher labor protections and launching an aggressive campaign to organize foreign companies that have benefited from the country’s large, low-cost labor pool.
The federation recently took on some of America’s biggest fast-food franchises, accusing McDonald’s Corp. and Yum Brands Inc., owner of KFC and Pizza Hut, of underpaying teenagers in their outlets in Guangdong province, where the union has been trying to set up branches. Provincial officials cleared the companies this week, but the dispute made big headlines and highlighted the union’s activism.
In December, Foxconn Technology Group, which makes iPods for Apple Inc., agreed to have its Shenzhen factory unionized after the union and other labor rights groups accused the Taiwan-based firm of exploiting workers. Also last year, the labor federation scored its biggest coup -- succeeding where America’s most powerful unions have failed -- by organizing the Chinese operation of Wal-Mart Stores Inc., known for its anti-union stance.
“We see real changes” in the union, said Brendan Smith, co-founder of Global Labor Strategies, which follows labor issues in China.
The transformation is part of a larger shift underway in China that could increase wages and improve working conditions but also could raise costs and undercut the nation’s appeal as a cheap, efficient manufacturing platform, labor experts say.
Constance Thomas, director of the Beijing/Mongolia office of the United Nations’ International Labor Organization, said it was too soon to know how hard the union, essentially an arm of the government, would push the foreign firms responsible for much of China’s export growth. But she said the union was moving in the right direction.
“We were pleased to see them take Wal-Mart on,” she said. “Now the question is what will they do once they get in?”
Although China’s explosive growth has raised millions of people out of poverty, fierce competition has led to cost cutting and widespread safety violations in industries such as mining, where thousands die each year. Labor disputes are on the rise.
Fearful of political instability, China’s government is taking steps to address those complaints by jailing corrupt executives, strengthening laws that govern the workplace and turning the union into a more aggressive worker advocate.
Skeptics say China’s sole government-sanctioned union, which has 134 million members, is simply trying to burnish its image and expand its sagging membership, which has shrunk with the privatization of the once-dominant state sector.
Under Chinese law, a company must allow the federation to set up shop if 25 employees vote to have a union. Once that happens, the company must pay the union 2% of its payroll. But many private companies, including some of the biggest foreign firms, have resisted the union’s advances and discouraged their employees from joining.
Foreign executives, accustomed to operating in what many regarded as the world’s largest union-free zone, are nervous. They are hiring labor consultants, reviewing their employment policies and organizing in-house worker councils in hopes of heading off a nasty confrontation.
“Multinational companies need to take this very, very seriously because it’s here to stay,” Jim Leininger, general manager of the Beijing office of consultant firm Watson Wyatt, said of the union’s new stance. “The Chinese trade unions are going to be increasingly active in multinational companies because they’re well known, they follow laws and they have a lot to lose.”
U.S. executives in China deny being anti-union or anti-worker, saying their firms provide wages and working conditions that are among the best in China.
U.S. business groups have opposed some of the proposed revisions to China’s labor laws, including increased protections for temporary workers and a provision that would have required employers to get union approval for work-rule changes. The government agreed to revise some of the most controversial provisions and is expected to revisit the issue.
Wal-Mart’s antipathy to unions is well-documented. The Bentonville, Ark.-based retailer has fought back efforts to organize its U.S. stores and closed a store in Canada after the workers there voted to unionize. However, Jonathan Dong, a spokesman for Wal-Mart China, denied reports that the company had rebuffed the Chinese union’s organizing efforts for several years.
“I don’t think Wal-Mart ever said, ‘We don’t want a union in China,’ ” Dong said.
The Wal-Mart executive said his company, which operates 73 stores and two distribution centers in China, was a “sought-after” employer and offered its 37,000 employees a “competitive” wage and benefit package, including perks such as free meals and in-store libraries.
Asked if the union’s presence had changed the working environment in Wal-Mart’s Chinese stores, he said, “We’re still in the learning stage.”
The federation, established in 1925, is controversial in the global labor movement. The International Labor Organization narrowly voted to admit it to the U.N. group in 2002, despite protests by the AFL-CIO and others that the state-backed union wasn’t a legitimate workers’ representative.
The close ties between the Communist Party and the Chinese union are trumpeted at the union’s sleek downtown Beijing headquarters. Photos of union leaders entertaining senior political leaders flash across a giant flat-screen TV in the lobby. Li Jianming of the union’s international liaison department said his organization’s chief mission was to “adhere to the socialist road of a trade union movement with Chinese characteristics.”
But Li also wanted to discuss other things his union was doing, such as its goal to increase its penetration of foreign firms from 60% to 70% by year-end and its efforts to persuade the government to pass a law mandating collective bargaining.
“We believe the collective-bargaining system is one of the most effective ways to protect workers’ right to work,” he said.
International labor officials in Beijing said concerns about China’s repression of an independent labor movement and other rights violations were valid. But they urged foreign union leaders to seek ways to “engage” the Chinese union and encourage the reforms that are underway.
By teaching workers their legal rights, such as the minimum wage and overtime pay, the union is having a positive effect on wages and working conditions in places like Guangdong, said Chang Hee Lee, an industrial relations expert in China.
In the past, union representatives were chosen by company management and signed off on wage contracts without consulting employees. But Lee recounted a recent visit to a small food-processing plant where the employees had persuaded the union to hold an election for a workers’ representative to negotiate on their behalf.
“This emboldens workers,” he said. “They say, ‘Yes, I have bargaining power.’ ”
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