Contracts Replacing China’s Lifetime Jobs : New Workers Are Affected; Unemployment Insurance Planned

At first, Xu Quanxiu’s father and mother didn’t want her to take the job that she was offered at Qingdao’s No. 10 Cotton Mill.

“They felt I would be something like a seasonal worker,” recalls Xu, a modest woman with a soft voice who, like most 22-year-olds in China, still lives with her parents. “Now, they see the income and bonuses I’ve been getting, and they feel happier.”

The job Xu took two years ago was part of an experiment radically different from the system under which Chinese workers have operated for decades.

Five-Year Term

Instead of being assigned to the textile factory for life, Xu was hired under a five-year contract. When the five years are up, she can move to another job. But if she doesn’t work hard enough, or if hard times come to the factory, she can be fired or laid off.

On the other side of this port city, Zhang Tianli, 23, said he hopes that he, too, can some day work under a contract.

Zhang is studying with materials from a television correspondence school and dreams of becoming a lawyer. But he was assigned to a job as a postal clerk six years ago and is not sure that he can ever get permission to leave it.

“It is very difficult to change jobs here,” he said.

Gambling on Young People

The Chinese regime is gambling that there are enough young people in China like Xu and Zhang to overcome resistance to one of its most important reforms to date, an overhaul of the country’s rigid employment system.

Beginning today, the experiment under which Xu was hired in Qingdao will become a matter of national policy. All new factory workers in China will be hired under labor contracts of fixed duration rather than assigned permanent, lifetime jobs by the state.

At the same time, China will institute a nationwide unemployment insurance and pension system under which the government, rather than individual state enterprises, will begin to take responsibility for providing benefits for workers who lose their jobs and for paying pensions to those who retire.

Gradual, Not Dramatic

The change will be gradual, not dramatic.

Some Chinese workers, such as Xu and others in Qingdao, have been working under labor contracts for a couple of years. Meanwhile, the 67 million workers who have been assigned to lifetime jobs by the state are being allowed to keep them. And China’s version of white-collar employees--cadres, office workers and professionals--are not being included yet.

Despite these qualifications, the reforms that start today amount to one of the most significant changes yet in China’s economic system. They represent the first serious effort by the reform-minded leadership to whittle down the extraordinary power of the danwei, or work unit.

Fundamental Element

The danwei is one of the most fundamental elements of Chinese society. Once a worker is assigned to a danwei, it is the danwei that is generally responsible not only for paying his wages but for providing him with housing and a pension when he retires.

Large work units maintain their own hospitals for workers and schools for workers’ children.

Also, many of them guarantee to workers that when their children grow up, they, too, can have jobs in the same danwei. This guarantee binds a Chinese worker’s family to the same danwei from generation to generation in a pattern analogous to the way that peasant families were tied to the land in feudal societies.

A worker without any affiliation to a work unit is a social outcast, China’s version of an untouchable. As a result, factory managers almost never let workers go, even though they have had the theoretical right to do so under extraordinary circumstances.

Work or Leave

“It was very difficult under the old system to expel a worker because he would be jobless for the rest of his life,” said Peng Zuoyi, manager of the Qingdao Second Foodstuffs Factory.

Now, Peng said, under the new contract system, “if any workers are lazy, we can say to them, ‘You will go.’ If they work hard, the contract will be extended. If not, they will be terminated.”

Chinese economists insist that firings will not happen too often. While the new system is aimed at opening the way for a labor market and for greater job mobility, they say, it is also designed to increase productivity and efficiency by getting people simply to work harder on the job.

‘Workers Were Not Afraid’

“There will not be large-scale firings; that’s not our policy,” Song Tingming, an economist working for China’s State Council, told reporters recently. “The mere fact that a factory has the right to fire workers makes a difference. In the past, they really had no right at all, and so workers were not afraid of discipline.”

Workers who are fired or laid off will collect unemployment insurance of between 60% and 75% of their wages for a year. Those with five years’ experience will get 50% of their wages for an additional year. Chinese enterprises will contribute 1% of their payrolls to the unemployment insurance fund.

The reform of the labor system has created a host of new problems, ideological and practical, for China’s leadership.

Hard-pressed Marxist theoreticians are being required to work overtime again in order to justify the changes. In traditional Marxist theory, capitalist nations have labor markets and exploit the “surplus value of labor.” In socialist countries, by contrast, labor is not a commodity for which there can be a market.

Justifying a Labor Market

Now, Chinese ideologists are maintaining that so long as industries are owned by the state rather than a private sector, a labor market is permissible.

“What we said in the past, that the socialist labor force was not a commodity, was related to a socialist society without a commodity (market) economy, as predicted by Marx and Engels,” a commentator wrote in the Guangming Daily last week. “At present, we are still in a system with a commodity economy. . . . Therefore, this remark is no longer applicable.”

The practical problems raised by the new system are no less daunting. Permanent assignment to a work unit has been one of the bedrocks of urban life in China for so long that once job mobility is permitted, entirely new organizations and social systems are required to support it.

Questions on Housing

Take housing, for example. If workers are permitted to move from one job to another, will they at the same time move with their families from the factory dormitory of their old employer to the dormitory of their new employer?

“There is no problem for our contract workers because they are quite young, so they all live at home with their parents,” said Li Qijing, manager of Qingdao’s No. 10 Cotton Mill.

Eventually, Li said, the mill will build some new housing to accommodate its contract workers. Nevertheless, he continued, “if they leave the job, they give up the housing.”

At the Qingdao Second Foodstuffs Factory, which produces bread, noodles and peanuts, factory manager Peng voiced another worry about the new system: If workers are allowed to switch jobs, he may find it harder to keep his best-trained workers.

‘Factory Could Go Bankrupt’

“Over the long run, some problems may crop up,” Peng said. “For example, if skilled technicians are not satisfied with the factory, they can leave. If the factory mismanages everything and the workers are dissatisfied, the factory could go bankrupt.”

Qingdao Mayor Guo Songnian told reporters last week that he does not think the new system will cause any great upheaval. He said that over the last two years, 80,000 workers--a tenth of the city’s work force--have begun working under labor contracts. Of these, only 700 have quit or been fired.

But the mayor acknowledged that there have been some problems with the system in Qingdao. The most important one is that older workers have sought to preserve the right to get jobs for their children in the factories where they work.

“Workers are most concerned about whether their sons and daughters will have a job,” said Song, the economist for the State Council, which is China’s version of a presidential cabinet.

Opposition in Workplaces

Although the regime has sought to portray the switch to the labor contracts as smooth and harmonious, Chinese sources say there has been considerable opposition in the factories.

“There is a lot of resistance,” an official in Peking said. Older workers apparently fear that the reforms for new workers are merely the first step and that those who already have lifetime job security may eventually lose it.

There have been some hints in the Chinese press that this is indeed the case. The official China Daily said two weeks ago that the new rules are merely “a starting point.”

“Many things are yet to be accomplished--reform of the employment of the existing work force, that of professionals, and a probably more complicated process, that of government employees and officials,” the paper said.

Strikes, Slowdowns

In recent weeks, provincial newspapers have reported problems with strikes or work slowdowns in at least two cities. And early this month, the National People’s Congress suddenly and unexpectedly postponed action on a bankruptcy proposal that had been meant to accompany the new labor rules.

The group’s Standing Committee had been asked to approve a new law permitting state-owned factories that lose large amounts of money to be declared bankrupt. As with the labor reforms, the goal of the bankruptcy legislation was to persuade factories and their workers to increase efficiency, productivity and output.

At the last moment, after Chinese propaganda organs were already proclaiming approval of the bill, the measure was declared premature and was temporarily shelved.

Acceptance by Young Workers

Chinese officials are hoping that for now, at least, young workers entering the labor force--that is, those who never had lifetime job security--will accept the changes in the factories. In Qingdao, that appears to be the case.

“The old-timers have their old system, and we have our new policy,” Pang Xiumei, 22, a young contract worker at the No. 10 Cotton Mill, told reporters.