Unionization Of Chinese Workers And Better Enforcement Of Labour Laws

Chinese workers are breaking the glass ceiling of labor conditions. While production quality is rising, China is loosing its image of cheap outsourcing destination and greedy industrialists are now seriously contemplating the relocation of their factories in order to preserve margins.

2010, Unionised revolution in the People’s Republic of China.

While they are taken for granted in most Western countries, minimum wage, occupational safety and health, workload reduction and crackdown on abusive discharge are a set of privileges that millions of Chinese workers could only wish for. The escalation of suicides at Foxconn, an original equipment manufacturer that supplies US-based companies like Apple, seems to have set fire to the powders. China’s workforce is now heading for a unionised revolution.

Headquartered in Taiwan, Foxconn Technology Group belongs to the Hon Hai Precision Group, a conglomerate publicly traded on the Taiwanese stock exchange. Inflammatory articles in the Western press have focused on the partnership that ties Foxconn to Apple Inc., but the truth is that the supplier works for other established companies such as Amazon, Cisco, Dell, Hewlett-Packard, Intel, Microsoft, Motorola, Nintendo and Sony.

Through a cold-blooded reading of statistics of lives involved, some journalists have attempted to demonstrate that the suicide rate at Foxconn is lower than the national rate, suggesting that Foxconn employees enjoy a better treatment than in the rest of the country, where there has been a successful suicide attempt every two minutes throughout the year 2008.

This line of reasoning spreads the last ten Foxconn suicides throughout the year, while they took place in the last five months. If we stick to cold-blooded arithmetics, 24 suicide attempts per year for the 800,000 employees would give 1 per 100,000 and compares to Kuweit, which sadly ranks 90th in a morbid suicide ranking. China comes 27th, while France comes a the 18th position.

The cynics have a point: even with the repression at Foxconn, the suicide rate is lower than in France, a country that has one of the most annoying efficient unionised systems. We can thus continue to buy from Foxconn and sleep soundly.

What we need to remember about Foxconn is that the group is representative of an unbridled and under regulated industry, despite some form of regulation. Despite the arrest of 24 journalists, censorship of the Internet and monitoring of information, nothing seems to prevent the workers from using the Internet to joint forces. Honda workers went on strike, and local forums are overflowing with discussion threads looking for solution against this oversight by the People’s party.

With a population of 1.3 billion, China has 348 million Internet users, which corresponds to half of the European population (fromPortugal to the Ural). Amongst those internet users, 61.5% are younger than 29 years, 12.1% have pursued higher education and 42.5% earn less than USD 146 per month. An official minimum wage still has to be taken lightly since living expense are not the same everywhere. But if we compare the purchasing power parity with a country like France, one fifth or 6,600 against 32,800; a hundred and forty-six dollar is still less than one tenth of the French minimum wage. This salary thus represents less than half of a minimum wage.

Honda made concessions by raising salaries by 24 to 32%, but Foxconn eventually agreed to double salaries after benefits. If Foxconn employees are entitled to this, then there’s no reason why the rest of the working class shouldn’t be. This is a checkmate for industrialists, who now have to raise the standard if they want to prevent workers from leaving the ship. We can thus expect a massive unionised revolution that will spread like an oil stain across China by the end of the year.

This increase in wages will directly impact the cost of products exported from China, and the consumerist Westerner will reluctantly agree to pay more for the same product. The contractor won’t agree to reduce his margin, and the factory’s owner will only be left with the option of relocating his factory to an area not yet affected by this inconvenient unionisation, somewhere between Russia and India. This game of musical chair can keep on for quite a while: there are whole continents left unexplored, such as South America and last but not least: Africa.

What consequences for the watchmaking industry?

A lot of given are going to change.

When it comes to the contractors (the brands), this will create new end-consumers in China. The doubled purchasing power will increase the middle class, adding hundreds of millions of prospective customers to the already growing upper class.

On the flip side we’ll see less and less cheap Chinese products, and the level of quality will keep rising to reflect wages. Chinese watches will cost slightly less than their Swiss counterparts. Obviously it will leave less margin to the aces of Swissness, who got used to juggle with outsourcing 49% of the added value of their watch.

Outsourcing might one day lead to Swiss Made watches with components manufactured in Tchad or Sierra Leone, which rank amongst the poorest countries the time of writing. That day, we’ll finally be able to sleep sound, knowing that the game of outsourcing has run out of musical chairs.

Image credit Yu Zhenli, Landsberger collection. Reproduced under Fair Use.