China's Proposed Labor Laws: Foreign Policy With No Focus
A quasi-interesting discussion going on over at the Foreign Policy in Focus site regarding China's proposed labor laws, entitled, "Debate on Labor in China." The discussion is between the US-China Business Council, which knows whereof it speaks, and Foreign Policy in Focus (which describes itself as "a think tank without walls"), which does not.
Foreign Policy in Focus (FPIF) started the fracas by falsely claiming AmCham opposes China's proposed new labor laws. AmCham responded by pointing out that it opposes only certain of the proposed changes. FPIF responded to that by stating it stands by its story, proving it will not let facts get in the way.
FPIF then goes on to "analyze" the proposed changes to China's labor laws and AmCham's objections. I found FPIF's reasoning so sophomoric and jejune (please note that this is the first time either of these words have been used on this blog, but they are warranted here) that after reading its views on just two of the issues, I simply could not continue.
Here are the two:
1. "Non-compete Agreements and the Freedom to Change Jobs
Non-compete agreements are a regressive feature of U.S. and other western systems that have crept into the Chinese economy. They are especially common in high skilled jobs. They prevent workers from changing jobs easily if they have access to proprietary knowledge as determined by an employer. For a developing economy like China, knowledge transfer is essential. For a developing economy like China, knowledge transfer is essential."
Let's examine this first one, point by point.
- Non competes impinge on the freedom to take a new job, they do not, as the title implies, prohibit taking on a new job.
- "Non competes are a regressive feature of U.S. and other Western systems that have crept into the Chinese economy." Oh yea, when it comes to labor rights, I always think of the U.S. and other Western systems as being so far behind non-Western countries like Bangladesh, Saudi Arabia, and Yemen. Western countries use non competes so as to encourage innovation and employment, both of which appear to be anathema to FPIF.
- "They prevent workers from changing jobs easily if they have access to proprietary knowledge as determined by an employer." I am not aware of any country that gives the employer full authority to unilaterally determine what constitutes proprietary knowledge. In the United States, courts generally will enforce non compete agreements only if they are reasonable in duration and geographic scope, and only if they are in fact necessary to protect the employer. Courts particularly disfavor them when they involve anyone other than higher level employees. For instance, I have never seen such an agreement with a factory worker, nor have I ever seen or heard of a case involving such an agreement.
- "For a developing economy like China, knowledge transfer is essential." So rival companies should just be free to steal it?
2. Limited Probationary Periods
"Currently corporations can set probationary periods unilaterally, often for an entire year, keeping people in a highly precarious employment status. This is a major problem for workers since it leaves them with little or no protections. The new law sets standard probationary periods of from one to six months depending on the type of job. The USCBC argues against limiting the probationary period from one to six months because it "[will make] it more difficult for employees and employers to properly evaluate the work relationship." Instead, it should therefore be left to the sole discretion of employers to set probationary periods for all employees�including the most unskilled�for up to six months."
All AmCham is asking is for employers to be able to determine for themselves whether to have a probationary period of up to six months. I will note that probationary periods are of less import in the United States because it is typically so easy to fire someone here because employment is "at will." Firing in China is already very difficult and is primed to become more so. If employers are limited to a one month probationary period for their employees, I am quite certain they will become more reluctant to hire. France is a great example of that. Or, as the Indian Economy Blog so succinctly puts it, "Hard to Fire is Hard to Hire."
In addition to being "a think tank without walls," FPIF appears to be without brains as well.
Comments (10)
Read through and enter the discussion by using the form at the endRomain Guerel (French working in Beijing) - February 13, 2007 2:17 AM
Well, Dan thank you to mention France on this! France is probably the hardest country among developed countries to fire/ hire people. Nobody is surprised in or out of France to see the country has currently an employment rate of 9% and an average of 11% for the past 30 years. My friend, Loic Lemeur, famous French blogger and managing director of Typepad for Europe did a post a few months ago: "Is France more communist than China?" What do you think Dan?
China Law Blog - February 13, 2007 8:23 AM
Mr. Guerel --
Don't get me started on France. Okay, too late.
My biggest beef with France is that it prefers to have high unemployment and high wages/massive taxes/short work week to giving opportunity to its disaffected youth.
Without a doubt, France is more socialist than China.
nanheyangrouchuan - February 13, 2007 8:51 PM
I'm going to change tack and defend China's labor policies (don't swallow your dumpling whole).
I have indeed witnessed an unnamed telco go after low and mid level employees who ditched for better pay and conditions at competitors. None of those cases made it to court, but the prospective former employees were all sufficiently shaken by having to defend themselves against corporate juggernauts.
China is rightfully defending its workers at foreign companies. Besides the hype of 1 billion customers, MNCs came to China for 1. Really low wages (even when compared to other underdeveloped asian countries). 2. Not just skilled workers, obedient workers. 3. Labor laws? 4. Overtime pay? 5. Too much overtime?
No wonder MNCs love to crow about the "pure capitalism" of China. They've been flogging their workers for decades and we won't even discuss the nature of sexual harrassment in China. They've got it coming and rightly so. I really got tired of hearing expat managers brag about their white collar work camp while coping cheap feel-ups on their better looking female employees. No wonder so many expats are looking for the downfall of the West, if China hits turbulence and they have to leave, the management techniques they've developed in China will bring about big money class action litigation and severe personal bodily injury in their home countries.
You can dispute me with paper facts and what some managers in the US told you, but go to an expat bar and get some drink on with local expats and you may find yourself wanting to shower soon afterwards.
And it only makes chinese employees angrier when they hear about the conditions of equal level counterparts in the EU and North America.
The foreign chambers had it coming, the honeymoon is over.
China Law Blog - February 13, 2007 9:08 PM
nanheyangrouchuan --
Though it is way past dinner time here, even if I had been eating, there would have been no whole dumpling swallowing. I realize you are capable of more nuance than SOME of your posts might lead one to believe.
Now I am going to change tack here and agree with you completely (don't swallow YOUR dumpling whole).
1. China is right to defend its workers. Absolutely. But it should do so at least close to equally with respect to foreign and domestic companies. I will settle for less than total equality becuase I realize ease of enforcement is a legitimate issue.
2. MNCs do come to China fo low wages, obedient workers (though I might substitute the word productive for obedient), and weak safety and overtime standards.
Sexual harrassment is rampant in China to a degree very few Westerners can even fathom. Ex-pats engage in this as do Chinese and it is deplorable.
As for wanting a shower, you can definitely get that in China, but you can get that here too.
So you are right, but that still does not mean that the proposed labor laws make sense for anyone.
halfpat_rant - February 15, 2007 7:03 AM
The new labor laws on the whole are another step in the right direction that will bring added protection to local labor.
Part of the problem with the new law is that while it is meant to really protect the folks at the bottom by reducing abuse, it also makes it harder to fire those in the middle.
The laws are NOT directed at foreign companies. They are there for all to enjoy and find back doors through.
The reason why the foreign companies need to worry is that labor will go to the union as there is a belief that all foreigners are rich, but no one wil go to union for Chinese firm cause they figure there is no point.
Chinese play dirty with their own labor mores o than foreign MNCs do, but it is only the foreigners that are really afraid of the law here.
Of course, these are masive generalizations, but as someone who attended the AMCHAM meeting, I was interested to see that many of the 50-60 people in attendance were pretty mute on 90% of the changes.
There was only one person in the room who said they thought their company would leave if it was put in as per the second draft.. and I think that China is prepared to weight that one company against the 600 - 700 million laborers in China who the law will aim to protect.
Of course... law is law and enforcement is enforcement. right Dan?
Godfrey Firth - February 15, 2007 9:19 PM
Dan -
Good post, and very interesting. I am a regular reader of this blog.
I work for the organization which submitted the comments to the National People's Congress that Foreign Policy in Focus is taking issue with. Our organization, however, is the US-China Business Council, NOT the American Chamber of Commerce in either Beijing or Shanghai. We are a non-partisan, non-profit business association headquartered in Washington, DC, and represent some 250 US companies with investments or operations in China. We are, as you can see, quite active in providing constructive policy advocacy for our member companies with both the US and PRC governments.
While we do often cooperate with the American Chambers, we'd rather not be mis-identified as them, and I'd appreciate it if you could edit your post above to reflect that. Thanks very much, and, again, great blog.
(More info on the Council can be found at www.uschina.org)
Best,
-Godfrey
China Law Blog - February 17, 2007 6:09 PM
halfpat_rant --
I agree with you both that these laws are meant to apply to both domestic and foreign companies, but in practice will apply more to foreign companies. I find very interesting your comment that only one person at the meeting said his company would leave if these laws are enacted, and who knows if his company really would. I cannot think of even one of my firm's clients who I would predict would leave China if these laws are passed, but I can say it would likely affect the hiring decisions of many of them.
China Law Blog - February 17, 2007 6:15 PM
Mr. Firth --
Thanks for checking in, thanks for being a regular reader, and thanks for noting the needed correction, which correction I will make forthwith. Here's the weird thing: a friend of mine from AmCham-Beijing e-mailed me on the post and discussed it with me as though it were AmCham. I think AmCham's position is so close to yours nobody even noticed.
Katiedidn't - February 27, 2007 9:05 AM
Dan,
Why did you only mention those two arguments. I agree that there are holes in those two, but you didn't even mention the other five or so arguments FPIF makes that just so happen to be less swiss like. What about the whole not allowed to have an independent union, or the fact that a person working in a company for 13 years can get laid off before a guy working there 3 years? Those arguements have some ground and yet you only focus on the weak ones as if they were prey.
China Law Blog - February 27, 2007 11:01 PM
Katiedidn't --
Thanks for checking in.
I think it was because reasonable minds could differ with respect to the other arguments. I cited to the article and everyone is free to read it, but I do not think making five decent arguments means someone should be forgiven for making two arguments that are, as you say, full of holes. The article was completely knee jerk and one would expect better from a think tank.
I am always telling my kids that I do not care how they come down on nearly all issues (there are some I do care about, like racism, for which I am of the view there is only one right answer), but I want them to realize that most issues are far more complicated than most people make them out to be or they themselves might initially believe. I also want them to have good reasons for why they have come down a certain way on an issue and know why others view the issue differently. I also want them to know it's quite okay not to have an opinion on an issue because they feel they do not know enough about it.
I can say that if my 16 year old had written this article I would have chewed her out for a lack of any real thought or analysis. I get irritated by people who have pat answers for life's difficult questions. The labor law issues being discussed right now in China are incredibly complicated and real analysis (from all sides) is needed.