Labor Law in China: in the context of China’s cultural traditions

1. Introduction

Labor relations in the People’s Republic of China has been determined by the government since the Communist Party (CCP) came to power, but traditional cultural-ideology has aided the CCP to promote its policies without much reaction from its subjects.  Chinese political traditions, the role of the emperors, and Confucian teachings have all been influential factors in the maintenance of power by the CCP albeit with an apparent disregard for labor standards. While the working class was seen as the foundation of the party, the labor policies and unequal treatment in urban and rural areas failed to show a real concern of the government towards the labor force during the Mao era (1949-1976).[1] The communist elite claimed to protect the working class from capitalist exploitation by representing the best interest of the masses, but at the same time, the urban and rural workers lost their right to form independent labor unions, and the right to freely speak against the government, continuing to be undermined and exploited until today.[2]

2. Datong and Confucian Influence in China’s Legal Culture

The concept of Datong (or Grand Harmony) is recognized as a Confucian principle where the community and the needs of the groups are prioritized over the individuals– and selflessness creates the harmonious society that Confucius prophesized and Mao Zedong aimed at forming.  Individualism was therefore seen, during Mao’s time, as an insult and a weakness. The concept of Datong can be perceived in today’s Chinese society through the shaping of laws, the labor regulations, and the attitudes of the Chinese people towards the government and its institutions.

Confucius (551-479 B.C.) was a philosopher, traveler and advisor to warlords during the warring states period of China; his teachings involve human nature, cosmology, rules of conduct and principles governing social relationships.[3] By the end of the last dynasty (Qing 1644-1912), Confucianism featured a conservative ideology where the goal was to retain the most basic lifestyle and form of governance without aiming for reforms. Other main characteristics of Confucianism at the end of the Qing dynasty included a hierarchical societal structure and the rule by law. An organized hierarchical structure then, was determined by hereditary social classes (peasants, clerks, warriors, priests etc.), and the rule by law – consisting of the usage of rules to govern the subjects in protection of the status quo. [4]

Additionally, Confucian tradition proclaimed that every person should know his or her role in society, be it within the family, work or country. The lower class (students, sons, workers) must show loyalty and respect to the higher class (teachers, parents, managers); and the higher class must reciprocate with empathy and acts of assistance and benevolence.[5]

In 1925, Guo Moro, a left-wing writer, published a popular short story about the link of Marxism and Confucianism declaring that when the “Grand Harmony was pursued; a public and common spirit ruled all … and chose men of talent and ability to cultivate harmony… possessions were used but not hoarded for selfish reasons. Work was encouraged, but not for selfish advantage.”[6] Likewise, the communist government under Mao gained popular support by fostering the same beliefs and linking Mao’s ideas with Confucian thought.  The labor regulations under Mao were administered and maintained through work units that provided for the workers’ welfare, where labor was tightly regulated and social benefits were universal, linking socialist China with Confucian Datong.

Today, Confucianism is being revived as the state ideology in order to fill a moral vacuum in Chinese souls. [7] By reviving these traditional teachings, the communist party also attempts to legitimize itself and strengthen the values and capacities of its constituency.[8] President Hu Jintao noted in February 2005 that “Confucius said, ‘Harmony is something to be cherished’”, and that China should promote such values as honesty and unity as well as forge a closer relationship between the government and the people.[9] Daniel Bell argues that the Marxist policies that received the best reception in Chinese society during Mao’s government were those policies closest to Confucianism, and those policies that failed to take hold, did so due to a conflict with Confucianism.[10]

During Mao’s era, the work unit’s welfare system and its Confucian roots allowed for a social contract to take place between the government and the workers.  While workers did their job, the state provided for their welfare – labor movements were rare because the regime fully provided broad guarantees of full and secured employment, state-controlled and heavily subsidized prices for essential goods, fully socialized human service, and egalitarian wage policies.[11] If Mao was near to achieving the Confucian Datong, he did so by dominating a highly hierarchical one-party regime, with clear social-class lines, while also assuring labor peace by providing welfare conditions acceptable to both the government and the workers. In order to gain stability, and join international standards, the passage and elaboration of laws and an improved legal system has shown the central’s government intention search of Datong. As experienced during the Mao era, it can be highly predicted that current Chinese society will be receptive to laws rooted in Confucianism.

Further Confucian principles rooted in China’s society include the belief that political change comes about via people’s moral transformation; demands should be directed to one self, before being directed to others; rulers should be morally upright and workers a model for others; and everyone has the individual duty to care for and respect one’s elders (filial piety).[12] Although Confucian teachings were criticized during the Cultural Revolution, his thoughts remain in place, and bonded with society’s everyday life.

3. Deregulation of Labor and the Entrance to a Market Economy: Effect on Employment

The transition to a market economy brought the need to distant government policies from the campaigns lead by Mao to new regulations that better addressed the issues of the population during the years following the reforms. Additionally, the drive for foreign investment and the assurance of the protection of those investments also created the demand to revive legal institutions that abide by international standards. Hal Blanchard points out that the Chinese government’s search for a new legitimacy under both traditional socialist ideology and Western legal thought has engendered a fledgling legal system that ostensibly reigns supreme over all political parties and institutions.[13] This section will describe the legal institutions used, and the policies in place to regulate labor relations before and after the reforms, as well as the role of the constitution and the National People’s Congress in the law making process.

a. Labor Relations under Mao Zedong (1949-1976)

The CCP came to power on October 1st, 1949. Since then, under Mao’s leadership, labor relations were based on Socialist Principles attempting to create an egalitarian society with universal lifelong jobs that included comprehensive welfare packages.  To achieve the control of the labor force, communes where established in the rural areas and work units in the urban cities.[14] These state owned enterprises (SOE) were exclusively managed by the CCP based on the socialist principles of collectivism and equality. [15]

The social contract that controlled labor relations during Mao’s reign is also described as “tacit agreements”, where implied promises based on moral principles between the state and the workers governed the labor-state relations.[16] These implied promises of work for welfare, controlled the role of the workers and the government (as the provider and caretaker of society).  Workers in SOE received a comprehensive welfare package that included lifelong employment, housing, pensions and childcare. [17] These welfare packages also varied among the SOEs, their level of production and hierarchy compared with other urban SOEs and the rural communes.

Labor relations under Mao were consistent with the Confucian world view, where the strict structure of society engineered labor relations based on the benevolence of the government as a benign provider of welfare.[18] The work units expected the workers to invest great effort and time on their labor for the common good, and the workers should expect nothing but benevolence from their communities and ruler.

Chinese ideological principles were also reinforced by cultural tradition, as explained by the Rule by Law concept.  Jacques deLisle compares the relation of democratic and authoritarian laws to clarify the relation between a government and its subjects. According to deLisle, unlike more democratic western systems where the law is [mostly] used to limit the power of the governments and protect the citizens (Rule of Law), in China laws have been described to be used by the government to control, and harmonize its society (Rule by Law). [19] In theory, while in western societies “no-one” is above the law, in China the emperor, or the Party-State is the law – and regulations are used to foster the ruler’s policies across the nation.  The tight control and acceptance of the population over this institutional role has allowed the party to remain in power since 1949.

The building of a legal framework similar to the western system is an example of China’s eventual formation of a rule of law government. Without compromising the stability of the party, laws may eventually impose meaningful restraints on individual members of the ruling elite, to build a government of laws, where the law is supreme and everyone is equal before the law. A thirst for global status and national stability has promoted the continued improvement of the legal system, and the Confucian principles have guided Chinese society over the last decades of increased wellbeing. In regards to the labor regulations, the transition to a market economy has made the government loosen the control of the labor force, while also providing for the legal structure to promote the wellbeing of the working population.

Work is guaranteed in the PRC’s constitution as the right and duty of every individual, and the state has the duty to create jobs, and protect the workers.[20] Although work is constitutionally assured, this right is a double edge sword for the labor force, and management of enterprises alike. Under the socialist system, the paternalistic state held a monopoly in the control and management of labor: workers could not refuse a government assignment, the SOEs could not refuse to employ a worker, and workers would gain wages based on a points system.[21] Due to the government’s role in the regulation of labor until late 1986, there was no free labor market to determine wages and no contracts to build individualized working agreements.[22]

By the late 1970’s, Mao’s labor regime was paralyzed by overstaffing, lack of incentives, stifled creativity, low activism, and diminished enthusiasm, all leading to very low productivity levels.[23] During the post-Mao era, the work units were deemed the reason for China’s economic backwardness and poverty levels. The emerging leaders then began to sponsor reforms aimed at the improvement of the Chinese economy and the living conditions of the population.[24] Nonetheless, economic performance was further worsened by the increasing urban unemployment rates, and incapability of the government to employ 100% of the labor available.[25] Other policies that affected unemployment included the return of students to urban areas after having been sent to the countryside for re-education, policies forcing enterprises to hire not-needed workers (five people doing the work of three), and policies allowing sons to take on the jobs of their parents when retired. [26]

The system fostered during Mao’s time in power provided the basis for a universal welfare system that undermined the stability of the productivity and affected the living standards of an impoverished nation. Regardless of the failures, the reformist sectors within the Communist party did not push for changes until Mao’s death, and these reforms only took form in the mid 1980’s and early 1990’s.

b. Post-Mao: Policy Making and the Evolution of Labor Law (1976-2008)

Hu Qiaomu, the Communist Party’s media and propaganda chief, promulgated a policy shift in the early 80’s that the pursuit of Datong had to be delayed to an unforeseeable future, and replaced with xiaokang.Xiaokang, a term borrowed from ancient Chinese, indicates a mere relative social stability and wealth in which an imperfect hierarchy and unequal distribution of wealth had to be tolerated.[27] Since Mao’s death, reforms began taking shape to re-organize society and the law emerged as an assurance of rights and duties of the government and the general population.

Through the 1980’s and 1990’s new policies emerged in order to stabilize the economy and promote growth through the modification of the socialist regime. The reforms affecting the labor force took place with the purpose of building a well-developed labor market and achieving an effective allocation of labor resources by shifting from government control to market regulation.[28] Between 1979 and 1994, more than 160 labor regulations and rules were issued, ranging from matters involving wages, social insurance, labor protection, democratic management of workers, and settlement of disputes to hygiene and work safety.[29] The labor system experienced great transformation through the 1980’s and the policies allowed for ample flexibility to accommodate the changing needs of the labor force and productive sectors.

One of the first regulations enacted included the 1980 “three in one” policy issued by the Ministry of Labor and Personnel, which reduced the level of state control in labor management by recognizing that the government was unable to provide jobs for everyone in urban areas.[30] As such, the policy allowed and encouraged unemployed individuals to join labor bureaus, voluntary organizations, or to be self-employed.[31] The State Council then issued the 1986 Contract Employment Regulations. These policies authorized employers to hire employees under fixed-term contracts, instead of having workers assigned by the government (later amended in 1992).[32] The regulations also allowed for multiple systems of employment, dismissal of staff, and unemployment insurance.[33] In 1992, the Trade Union Law was passed (later amended in 2001). In 1993, the Company Law was passed to transform the SOEs into modern corporations, by allowing the disentanglement of the work units, privatizing its parts and depriving them of the welfare assurances.[34] The Company law allowed for the improvement of the failing government ran enterprises by the hands of private individuals. [35] The Regulations on the Handling of Enterprise Labor Disputes were then issued in 1993.

Following a period of experimentation with the hundreds of labor regulations, the working policies were then codified into the 1994 Labor Law, becoming the first comprehensive legislation that regulated labor relations.[36] In 2008, the 2007 Labor Contact Law became effective complementing the 1994 Law and developing the legislation in additional aspects.  The adaptation of the failing socialist system through the enactment of labor legislation has permitted the government to gain a better global status in regards to written laws and legal principles without compromising the stability of the party. The government remains in the quest for Datong, allowing for modifications of the system while adopting international legal standards of laws and institutions. Although the central government is allowing the provinces to be more independent, and individuals to work independently from the state, the Confucian principles of social hierarchy and harmonious society remain in place.

c. Policy Making and Constitutional Protection of Laborers

According to Kinglun Ngok, Laws in china are the codified form of successful policies. The 1994 labor law became the first codified legal framework for labor policy. Before then, China had enactments and promulgations to regulate labor relations without an established code.[37] China’s Laws can be classified in five groups: 1) the Constitution of the PRC, 2) national laws adopted by the National People’s Congress and its Standing Committee, 3) administrative regulations issued by the State Council, 4) local decrees issued by Local People’s Congresses and 5) administrative and local rules issued by an administrative agency under the State Council or local governments.[38]

Chinese constitutional history dates back to 1908, and the promulgation of the Principles of the Constitution as well as the enactments of twelve additional constitutional documents during the Qing Dynasty.[39] Since then, the PRC has written and adopted multiple amendments to its constitutions. Stanley Lubman has described the PRC Constitution as more of a guide to the CCP’s ideological agenda at a particular moment in time than a document codifying fundamental rights.[40] In 1949, when the PRC came into power, the party governed the nation under the common program designed during the Chinese People’s Political Consultative Conference. The common program became the basis for the constitutional drafts.  At that early stage, the common program included provisions concerning regulation of labor. Article 32 for example, addressed that:

“… an eight to ten-hour day should in general be enforced […] the people’s governments shall fix minimum wages according to the conditions prevailing in various localities and trades  […] juvenile and women workers shall be safeguarded. Inspection of industries and mines shall be carried out in order to improve their safety devices and sanitary facilities.”[41]

Subsequently, the 1954 Constitutional draft was modeled after the 1936 Soviet Constitution, integrating class struggle and socialist ideas to the Chinese reality. After adopting some changes, the second draft of the constitution was adopted in 1975.[42] The 1978 Constitution was drafted as an attempt to counteract anarchy and bloodshed by proclaiming the “people’s democratic dictatorship”, where the people was described to be governing the country and represented by the CCP.[43] The 1982 Constitution lays the institutional foundation for economic modernization, de-emphasizes class struggle, clarifying citizens’ fundamental rights and duties, and stressing the importance of socialist law to regulate political behavior.[44]

According to Hal Blanchard, rights in China, as listed in the constitution, refer to the authority of the state to deny individual liberties rather than the authority of individuals to challenge the state.[45] Blanchard also critiques the constitution as a laundry list of rights, without institutional foundation. [46] He notes that the CCP praises constitutional principles in theory, but ignores them in practice.[47] Additionally, the constitution remains subordinate to the CCP, and the party retains great control over the appointments of key legislators who interpret the constitution.[48] Because the CCP decisions are rarely criticized, the power of the constitution is very limited and it remains only as a symbol to legitimize the CCP.[49]

In spite of the criticism and lack of an effective role of the constitution, then Vice-President Hu Jintao described the Constitution in 2002 as the “general charter for governing the country,” the “legal basis for maintaining national unity, ethnic solidarity [and] economic development,” and the “legal guarantee for the CCP in exercising power and rejuvenating the country.”[50]

In fact, the Chinese constitutions never governed the country.  Under Mao, the CCP policy alone governed the state, when President Jiang Zemin said in 1996 that China should be ruled by law, he qualified it with a reference to maintaining the power of the CCP, and not to the role of the constitution.[51] When analyzing the labor law and the process through which it came into being, it is also key to analyze the role of the party versus the role of the National People’s Congress (NPC).

Under the PRC Constitution, both the NPC and its Standing Committee (SC) have the authority to pass legislation.  But considering that the CCP makes all final decisions, critics of the system label the NPC as “the rubber-stamp parliament” that only creates a facade legitimizing the control of the party.[52]

Hillary Josephs described that over the last decades the role of the party has shifted from direct manipulation and micro-management to agenda setting and handpicking personnel appointments in key areas of the government.[53] Whereas once the legislative process was dominated by the State Council, the highest executive organ of government chaired by Mao Zedong, the NPC and its support services now generate an increasing amount of legislation.[54] The Commission of Legislative Affairs (CLA) is pivotal in the drafting process within the NPC, as the leading organism in controversial legislation.

The three thousand delegates of the unicameral NPC meet once a year, and the legislation they enact includes laws related to criminal offenses, civil affairs, and state organs, among others.[55] These members are chosen by the provinces or units they represent. The 150 members of the SC meet throughout the year and the body is authorized to enact “specific” legislation when the NPC is not in session. The SC members are chosen by the NPC.[56]

The delimitation of law making authority between the NPC and SC is not clear.[57] Over the last 12 years; the laws handled by the NPC include a revised Criminal Law, a revised Criminal Procedure Law, an Economic Contract Law, and a Property Law.  The 1994 Labor Law was passed by the SC, which according to Hillary Josephs, leads one to believe that the law is of secondary importance.[58]

Hal Blanchard assumes that China has made some progress in specifically enumerating legislative powers, but that “the use of broad administrative discretion in interpreting law, as facilitated by the vague language of Chinese legislation, reinforces the underlying tendency to apply laws like the policies they were meant to replace”.[59]

The 1982 Constitution provides workers with an assurance that their work is guaranteed, and that the government has the obligation to provide for their wellbeing, as described in Articles 42 and 43:

Article 42. Citizens of the People’s Republic of China have the right as well as the duty to work. Using various channels, the state creates conditions for employment, strengthens labour protection, improves working conditions and, on the basis of expanded production, increases remuneration for work and social benefits. Work is the glorious duty of every able-bodied citizen. All working people in state enterprises and in urban and rural economic collectives should perform their tasks with an attitude consonant with their status as masters of the country. The state promotes socialist labour emulation, and commends and rewards model and advanced workers. The state encourages citizens to take part in voluntary labour. The state provides necessary vocational training to citizens before they are employed.

Article 43. Working people in the People’s Republic of China have the right to rest. The state expands facilities for rest and recuperation of working people, and prescribes working hours and vacations for workers and staff.

These constitutional assurances of the 1982 constitution remain similar to those assurances of the common program of 1942 and likewise, the 1994 Labor Law has adopted the same principles in its articles. Although the role of the labor force has changed, and the market economy has created new classes within the Chinese society, the carrying of labor conscious instruments through the legal institutions is evidence of the influence of Confucian thought. The Labor Law is an example, of Confucian-influenced legislation that describes the roles of laborers, managers and the state as a regulator to assure the wellbeing of workers in a quest for a harmonious society.

4. The Labor Code

a. 1994 Labor Law

The Labor Law of 1994 is the compilation of fifteen years of administrative regulations and governmental ordinances, including the ones listed above. The compilation and editing of these labor regulations is organized into 13 sections and contains a total of 107 articles. The law begins with a statement of ruling principles (Chapter 1) and then addresses specific subjects (contracts, wages, and social insurance etc.). Hillary Josephs mentions that the law took relatively long to be finalized due to the complex and sizable body of administrative regulations that needed to be codified – a recent compendium of the regulations is nearly 3000 pages long.[60]

Previous to the 1994 Law, regulations and rights of workers were differentiated depending on the forms of business organization, type of work (blue-collar or white-collar), and ownership of the enterprise (State or foreign).  At least in principle, the 1994 law unified various schemes reinforcing the authority of government agencies in requiring the banishing of discriminatory practices and standardizing working conditions across all sectors of labor. [61]

According to Article 1 of Chapter 1 of the labor law, the purpose of the legislation is to protect the legitimate rights and interests of laborers, readjust labor relationship, establish and safeguard the labor system suiting the socialist market economy, and promote economic development and social progress.  Article 3 then outlines the general provisions protected by the law, mentioning that “laborers have the right to be employed on an equal basis, choose occupations, obtain remunerations for labor, take rests, have holidays and leaves, receive labor safety and sanitation protection, get training in professional skills, enjoy social insurance and welfare treatment, and submit applications for settlement of labor disputes, and other labor rights stipulated by law”.[62]

The Labor Law reflects no real change in the government’s posture toward labor unions.[63] Article 7 provides for independent union organization, collective bargaining, and the right to strike over wages and fringe benefits.[64] Nevertheless, Hillary Josephs relates that the CCP may perceive independent union activity as a bigger threat to the status quo and the current direction of economic development than tabloid journalism or religious observance.[65] For that reason, independent unionization activists are detained for questioning, sentenced to confinement, or denied reentry after leaving the country.[66]

Chapter 2 provides for general obligations of the national and regional governments to create employment by promoting economic and social development, encouraging entrepreneurship, and creating employment agencies.[67] Article 12, provides that “laborers shall not be discriminated against in employment due to their nationality, race, sex, or religious belief”.  In regards to gender discrimination, Article 13 reads that women shall enjoy the right of employment equal to that of men. In the recruitment of staff and workers, women may not be refused employment because of their sex and recruitment standards may not be raised for women, except for posts and jobs whose nature has been determined unsuitable for women by the State. Some of the jobs unsuitable for women include mining, jobs involving extremely high or low temperatures, as well as jobs involving heavy lifting.  At present, women are particularly subject to discriminatory hiring practices, unfair dismissal, demotions, and wage cuts.[68] Enterprises also avoid hiring women due to extra costs, including paid maternity leave. [69]

The most extensive section of the Labor Law relates to employment contracts (Chapter 3), and its provisions track most of the regulations since 1986.  Chapter 3 outlines the requirements of a written contract for all employment relationships, describes the basic terms of an employment contract, and the termination procedures.[70] The central government has made a commitment to ensure contracts are voluntary and based on equality, and propagate them throughout the economy, without differentiating the type of enterprise.[71]

The reports about sweatshop abuses publicized in the early 1990’s also provided for public awareness and policy change in regards to the protections of working conditions.  Chapter 4 of the Labor Law describes the regulations of working hours, rests (at least one day off a week and national holidays)[72], and leaves.  Although Article 36 provides for an eight hour work day, and a forty-four hour work week, the Factories in the Special Economic Zones, often foreign owned, were known during the 1990’s for employing temporary workers from rural areas, and demanding regular and compulsory over time work.[73] In recent years, labor shortages in the Special Economic Zones show that employees do have informal networks and will mobilize to areas of work where remuneration and working conditions are better.[74]

Chapter 5 provides for distribution of wages based on equal pay for equal work.[75] The wages section also prescribes a guaranteed minimum wage according to the area of work and provincial location.[76] These wages are then monitored by the central government. Chapter 6 provides for labor safety and sanitation, describing employer’s obligation to provide labor safety and sanitation according to State rules and standards.[77]

Chapter 7 stipulates the general protections for women and workers between 16 and 18 years of age. Some of these protections include: no mining work for women[78], general protection for women during pregnancy, menstrual periods, after labor and during breast feeding periods, also guaranteeing no less than 90 days of maternity leave.[79] In regards to juvenile workers, the Chapter prescribes that juveniles should not work under wells at mines, in poisonous or harmful environments, and that the employer has to provide for regular physical examinations.[80] Chapter 8 describes the obligations of the State and the employers in providing for professional training at all levels of work.[81]

Chapter 9 describes the social insurance and welfare system.  According to Article 70, “the State shall promote the development of the cause of social insurance”. Article 72 says that “employers and laborers shall participate in social insurance in accordance with law and pay social insurance costs”. Under Article 73, laborers are entitled to welfare benefits and insurance coverage in case of health treatment, retirement; suffering from diseases or injuries; becoming disabled during work, suffering from occupational diseases; becoming jobless; giving births, and the dependants would receive benefits in case the laborer passes away. According to Article 76, “the State shall promote the development of the social welfare cause” and the employer shall create conditions to improve collective welfare and treatment.

Chapter 10 describes Labor Disputes. Under Article 77, for disputes “between the employer and laborers, the parties concerned can apply for mediation or arbitration, bringing the case to courts, or settle them through consultation”. These disputes are to be settled according to the principle of justice, fairness, and promptness, to protect the interests of the parties.[82] Article 79 describes the general procedures for disputes: parties involved can apply to the labor dispute mediation committee of their unit, if it cannot be settled one of the parties may ask for arbitration, before the labor dispute arbitration committee, if there are objections any party can appeal to the people’s court.

According to Hillary Josephs, the labor reforms of 1986-87 that dismantled the socialist work units, provided for a rise in the number of employment related disputes processed by tribunals and courts.[83] In addition to termination of permanent workers of state enterprises, claims involving wages, benefits, and occupational safety and health in both collective and private enterprises became actionable following the 1993 Labor Disputes reform.[84] Official statistics show that the number of labor disputes increased from 19,098 in 1994 to 226,000 in 2003, and the workers involved increased from 77,794 to 800,000 during the same period.[85] Labor related cases began to be recorded in 1992, and Hillary Josephs affirms that the aggrieved employees who resort to the dispute resolution process tend to be favored by the courts, and that the courts do protect the individual workers against arbitrary actions of the employers.[86]

Chapter 11, titled Supervision and Inspection, describes the State duties to ensure compliance by the employers of the laws prescribed in the legislation. Article 85 specifies that the labor administrative departments are supervised by provincial governments, and Article 88 highlights the duty of trade unions at various levels to “safeguard the legitimate rights and interests of laborers, and supervise the employer in its observance of labor laws and regulations”.

The duties of the state, employers and employees are outlined in Chapter 12: Legal Responsibilities. Under Article 89, the employer’s regulations shall comply with state regulations.  Criminal responsibility shall fall upon employers who fail to provide for sanitary and safe labor conditions, and for those who force laborers to work against regulations.[87] Some of the sentences prescribed by the law against employers include: fines and revocation of licenses for hiring laborers under 16 years of age[88]; custody for 15 days, fines or warnings if the employer used violence, threats, humiliation, corporal punishment, beatings or illegal deprivation of personal freedoms to the employees.[89] Although some provisions of Chapter 12 describe criminal liabilities for employers who break the law, civil liability is generally emphasized for breach of contract instead of administrative sanctions – endowing state enterprises with legal personality independent from the government.[90] Kinglun Ngok points out that the relatively lenient provisions plus weak inspection by the government allows employers to ignore the Law.[91]

The 1994 Law concludes with supplementary provisions in Chapter 13. Hillary Josephs affirmed in 1995, that uniform and thorough implementation of the code was unlikely due to China’s size, population, inadequate infrastructure, low levels of development and established socialist institutions.[92] Fourteen years later, the Labor Contract Law was enacted and will aim at filling in some of the blanks left by the 1994 Law.  Before reviewing the 2008 Law, the next section will describe the situation of the labor force in the decade predating the new 2008 Law.

b. Impact of the Evolving Labor Regulations

China’s labor force has shifted successfully from government control to be regulated by the market’s supply and demand. Consequently, the free movement of labor between professions, industries, and regions has increased.[93] In spite of the advances, unawareness of new labor regulations and the need for contracts inhibited the 1994 labor law from being effectively followed.

Whereas existing and profitable SOEs complied with the Labor Law, collective, private and foreign-invested enterprises failed to satisfy it. According to the research conducted by sociologists Wang and Zhao across some of the main cities of China, less than half of the workers employed at non-state enterprises signed contracts, and their working hours exceed the limits of the labor law.[94] Wang and Zhao’s research is helpful to understand the general situation of the labor force in 1998, and the reasons behind the formulation of a new labor law at the turn of the century.

Wang and Zhao’s survey showed that following reforms of the 1980’s and early 1990’s, the annual employment growth rate in the collective sector began declining in 1992, and in the state sector began declining in 1994, while the growth of the employment in the non-state sectors increased since 1990.[95] This indicates a positive response to the privatization of the unsuccessful SOEs, but also represents a declining number of employees protected by the labor law, because the private enterprises had minimal oversight by the government as their businesses started to be established.

In addition to the growth of the private sector, chances for labor mobility were also improved. Wang and Zhao’s research on labor mobility clarified that in the 1970s, workers would change jobs on average once in every 15-20 years, in the 1980s the amount was reduced to once in 10 years, and in the 90s it became once in 5 years average. [96] Additionally, out of their 7,300 surveyed households, 30 percent of the interviewees had never changed their jobs by 1998 – a figure similar to Yokohama, Japan in 1970 (34.9); but more than twice the percentage of individuals that never changed their jobs in Detroit by 1970 (13.9).[97]

Because social welfare was maintained by the SOEs, the reorganization of the labor force into a labor market left the working class without the traditional social security blanket. In the SOEs Employees were protected from unemployment by being provided life-long jobs across different sectors of production. But the creation of the market and increase of unemployment created a welfare gap not evaluated before.

The government began re-employment and re-training policies to solve the employment problems. These policies have and may continue to fail because even after retraining, the job opportunities are unsuitable for many and these jobs also lack the social security benefits that the older workers enjoyed.[98] In order to promote the strengthening of the labor force, it is imperative to create a national social security and pension system that provides for a better and sustainable welfare system across the various regions.

Another impact of the new policies is the growing disparity of wealth between the rich and poor, and the growing levels of urban poverty.  In cities, laid-off, unemployed and migrant workers account for a major part of the urban poor, and they live in low standard accommodations including streets, work-sheds and overcrowded apartments.[99] Without a stronger social security system or safety net, the situation might worsen. The fact that there is no social security that effectively addresses the needs of the poor is proven by the numbers of individuals that search for support in their social networks. The Wang and Zhao survey showed that 55-70% of unemployed individuals depend on the income of other family members, 5-11% depends on family savings, and 5% rely on pensions in addition to family support.[100]

Jacques deLisle accuses Hu Jintao of populism, based on the fact that recent public addresses aim at findingDatong by providing for the victimized classes of the economic liberalization.[101] DeLisle argues that the protection of migrants, dispossessed peasants, burdened farmers, laid-off workers and coal miners has no democratic basis, nor any constitutional support; because helping these classes is not “an institutionalized response to popular preferences”, but rather, “it is a discretionary authoritarian decision to represent popular interest”.[102] In essence, while President Hu’s administration tries to protect the impoverished sectors of society using the CCP’s power, and promises such protection through public announcements, foreign critiques will remain obsessed with clear cut and transparent democracy, regardless of the cost.

Independently of the democratic or populist nature of the CCP’s quest for Datong, the institutionalization of safety nets is necessary to stabilize the growing unemployment and flow of workforce and manage growing poverty levels. At bureaucratic speed the Chinese government is managing to institutionalize the labor market and address the needs of its changing population. The interconnected problems facing the labor force include the limitations for labor mobility, the lack of standardized implementation of the Labor Law, and the lack of a national social security system.[103]

c. 2008 Labor Contract Law: Key Sections

Workplace justice cannot be achieved only by enacting laws, but the development of the labor code is an essential ingredient to the process.[104] A first draft of the 2008 Law, containing 65 articles, was released for public comment by the SC in March 2006. After two other drafts, the final version containing 98 articles was passed by nearly unanimous vote of the members of the SC in June 2007. The law took effect January 1, 2008.

The enactment of these laws still reflects the constant quest for Datong and a harmonious society. Article 1 states that the Law is “enacted […] in order to improve the labor contract system, specify the rights and obligations of both parties to the labor contracts, protect the legitimate rights and interests of the workers and construct and develop a harmonious and steady employment relationship”.[105]

Hillary Josephs describes the 2008 Law as an effort to elaborate upon, not replace particular sections of the 1994 law.[106] The new legislation adds to the 1994 Labor Law the results of public feedback, clarifies existing provisions, responds to changing circumstances, and codifies rules developed by the executive and judicial branches of government.[107] The eight chapters of the new law aim at regulating and codifying the employment contracts. Chapter I, outlines general rules, Chapter II, relates to the conclusion of labor contracts, Chapter III describes the performance and alteration mechanisms of the contracts, Chapter IV relates to cancellation and termination, Chapter V relates to special rules, Chapter VI, relates to supervision and inspection, Chapter VII legal liabilities and Chapter VIII supplementary rules.

Following the enactment of the 1994 Labor Law, courts and administrative bodies interpreted the new regulations according to the rising needs of the labor force. The 2008 Law integrated these interpretations into new articles of the legislation. Article 30 for example, is the codification of a 2006 judicial interpretation allowing workers to sue directly in court to recover unpaid wages as a civil action for debt, without having to go through the labor arbitration process.[108] Article 47 is a codification of a 1994 ministry regulation, describing the basic measure of severance pay as one month’s wages for every year worked. [109]

In order to diminish the likelihood of employer abuses, such as extended probationary periods, successive short-term contracts, and hiring of “temporary” employees through labor dispatching agencies, the legislature added new articles. Article 14 introduces a new category of employment and penalizes the failure to sign a contract within a year of employment by deeming such a contract to be oral of indefinite duration.[110] Article 19 imposes that probationary employment should not exceed six months, and Article 58 imposes a minimum of two years on employment with labor dispatching agencies, which should also pay at least minimum wage if the employee is not on assignment.[111]

Under the new law, Part-time workers receive fewer protections than full-time employees (Articles. 68-72). No written contract is required if the individual is paid on an hourly basis and works on average four hours per day, or twenty-four hours per week. [112] Part time workers may be dismissed without notice or severance. [113] The lack of protections for the par-timers provides greater chances for students and housewives to find jobs, but increases the likelihood of abuses towards part-timers and decreases the possibilities for full-timers to find jobs.[114]

Article 23 allows for employment contracts to require protection of trade secrets through the usage of a post-employment covenant not to compete. Ministry regulations and court decisions had already approved such non-competition agreements as long as the temporal length and geographic scope was reasonable.[115] Article 24 provides that non-competition agreements are limited to high level managerial and technical personnel and may not exceed two years.

The development of the 2008 Labor law, and actual follow-up by the government to implement it will likely strengthen the Chinese system in the long term. The following section will address the present issues that need to be addressed by the government, which the laws apparently fail to undertake in the short term.

5. Current Problems Implementing the Right to Work: China’s Quest for Labor Datong

a. Labor Unions

China’s only labor union was established in 1925, and today remains the sole provider of labor representation in China.  The All China Federation of Trade Unions (ACFTU) operates under the direct control of the Chinese Communist Party and can be characterized as a quasi-governmental organization without an independent voice, which often prioritizes the party’s policies before the worker’s rights.[116] Hillary Josephs highlights that even nonviolent efforts to establish independent trade unions are ruthlessly and systematically repressed.[117]

Cai Yongshun relates that until the 1950’s the communist party eagerly supported the labor unions to protest the capitalist and private business owners.[118] But once nationalization took place, and the communist took power, the role of the union was left secondary and submissive to the policies of the party. This subordination was determined by the purging of two union leaders who attempted to establish an independent trade union.[119] Nonetheless, compared with enterprises without the influence of a union, the ACFTU has achieved positive effects in the protection of rights and interests of employees, while the union is also chartered to aid the management in production goals.[120]

According to ACFTU, the membership amounted to 169.94 million, and the membership rate was 73.6% of the working force nationwide by 2007 (migrant workers account for 24.1%).[121] The high membership rate is due to the nature of mandatory unionization in the SOEs, and an aggressive quest for membership that includes the migrant workers – who are also protected by the union. The membership is definitely high compared with the U.S. average of 12.1% of unionization, but the mandatory unionization might be the reason for the scale. [122] the ACFTU statistics might also be inflated, and failing to reduce the membership numbers due to increasing amount of private enterprises. According Wang and Zhao’s survey, the union members are mostly concentrated in the state owned enterprises, and the membership rates to not include employees at collective and private companies.[123]

Following the reforms, the CCP lost influence in the daily business of enterprises and independent management gained more control.[124] The status of managers was legalized in the enterprise law of 1988, and the influence of independent management grew throughout the 1990’s.[125] As the party lost power to private management, the union also lost power, and the party officers across the SOEs became disposable and relegated to second level tasks (preparing for hygiene inspections or enforcing family planning policies).[126] In response to popular criticism of the role of the union cadres and chairmen, a union leader said that the unions cannot function independently and that the appointments are made by the party and management which make it impossible for the union leaders to represent fairly the employees when the party and the management disagree with the position.[127] The ACFTU aims at increasing its membership and increase its presence in the private sector, and the CCP will likely aid further expansion of the ACFTU as long as the overall interests of the party are not compromised.

Another form of worker’s representation is the workers council, which was re-instituted in 1981 with the right to participate in almost all enterprise decisions, but lacking a final say in important matters.[128] Unlike the union leaders, which are appointed by the CCP, workers elect the council leaders and these often gain a conflicting position with management.[129] Workers councils are closer to the workers than the unions, and its leaders are known to risk their jobs due to over-involvement and participation in worker’s representation.[130] Oftentimes an inactive council or union leader is more welcomed by the management and likely to remain in his job position than a labor leader that advocates, and demands too much from the management. The institutionalization of the labor dispute settlement mechanisms should eventually deter unfair labor practices or at least provide for a remedy expos-facto. Unfortunately, the 2008 law only reiterates the same provisions of the 1994 Labor Law and the Trade Union Law without expanding the protection or empowering further the ACFTU vis-à-vis management.[131]

Although the labor unions were used to get into power, once in power the party has undermined the unions and the workers by the adoption of new economic reforms. These reforms diminished the status of workers in society, and management gained greater autonomy at the workers’ expense. The problems of the labor force keep emerging, and the government has responded with the labor laws in order to institutionalize a better system, and better governance. The harmonious society remains a farther goal than once expected and the lack of labor unions has affected the working class in pursuing labor Datong.

b. Unemployment

The unemployed are officially defined as “people who are registered as permanent residents in the urban areas engaged in non-agricultural activities, aged within the range of working age (16-50 males, 16-45 females), capable of labor, unemployed but desirous to be employed and have been registered at the local employment service agencies to apply for a job”.[132] The Labor Law addressed unemployment as a real and present phenomenon that had previously been ignored for almost three decades.[133]

The main factors affecting unemployment in China include the size of the population (1,338,612,968 and growing)[134], the laid-off employees due to market liberalization and the surplus of rural workers – which creates the massive amount of domestic migrant workers.

Although the jobless in the countryside are not included in the definition of the unemployed, these farmers also migrate to the urban areas in search for jobs and official statistics do not count these domestic migrant workers.[135] Various statistical analyses were made to calculate the amount of rural workers without a job with varying results.  A reasonable figure in the year 2000 was about 50% of the rural population, which amounted to around 150 million surplus workers in the late 1990s.[136]

The Chinese government has focused unemployment policies and social benefit systems in the urban areas to address the needs of urban unemployment and laid-off workers – while partially ignoring the migrant population.  According to Chak Kwan Chan, the migrant-rural workers were not benefited by unemployment programs mainly because the government viewed them as unregistered residents in the urban area; they had seasonal work available in their hometowns; and the possibility to return to agriculture was always available.[137] The migrant workers, 230 million at the end of 2008, remain outside the law today.[138] Lacking legal rights in the 1994 law, or the 2008 law, the needs of Migrant workers have been recently addressed by the ACFTU. The fact that China’s trade union is taking steps to protect the migrant workers shows a general concern of the population, but also shows the inactivity of the central government and the legislature to promote the wellbeing of the migrant population. The ACFTU has decided to allocate a percentage of its poverty elimination fund to aid on the reemployment efforts of migrant workers, and aiding on daily subsistence.[139]

The evolving government programs addressing the urban unemployed, for urban residents, include active efforts to support small and medium sized, labor intensive enterprises and industry; as well as investment in these sectors to promote economical growth.[140] The government also sponsors employment service networks across major cities and unemployment benefits for individuals actively looking for jobs – building a safety net known as the “three security lines”: protecting unemployed, laid-off, and retirees.[141] Re-employment centers and employment training is also available in major cities with various levels of effectiveness. The benefits of contract employment accrue only to the relatively small number of workers with “marketable” technical skills.[142] Workers with minimal experience or tradable skills enjoyed more advantages under the permanent employment system, because management was not alloed to lay them off. [143]

The population of unemployed and laid-off workers is similar: both groups consist of 2/3rds Females, aged mostly 36-45, with low levels of education (junior high school), and limited work experience. [144] Wang and Zhao survey of unemployed and laid off workers showed that only 16-22 % of laid-off workers were registered in re-employment centers, and that 15% was not registered because they were unaware of opportunity.[145] The percentage of unemployed workers that registered for re-employment was 23%, out of which nearly 2% received a SOE job assignment, although half of those decided to reject it.[146] The lack of resources, and demand for labor might be the reason to explain the low levels of offers extended to the unemployed, the amount of the labor offer is so overwhelming that the workers have the toughest side in the labor market in China. Employment training has also proven unsatisfactory, where only 6% of the surveyed laid-off workers and unemployed said they had experienced training.[147] Wider campaigns should be carried out to extent the existing programs to a wider population and assure awareness, which might be the main reason for the ineffectiveness of the current programs.

The unemployed in Wang and Zhao’s survey did not blame their status on the government or otherwise; their survey proved the influence of the Confucian principle that “demands should be directed to one self, before being directed to others”.  In their eyes, the unemployed believed that the first and only responsible for their status was their own fault. The interviewees said that their status was due to their low levels of education, poor technical skills, old age, and lack of favorable social connections; only 5% said that it was too difficult to find a job.[148] Only when asked, 42% agreed with the general remark that migrant workers “snatched the rice bowl” away from the unemployed and laid-off.[149] At first glance, the Confucian principle might explain a general tendency to blame their status in one self, before blaming the government or the migrant workers.  The migrant workers suffer more discrimination, and differential treatment from management, than from the unemployed.

In large part, the unemployment issue will be addressed by the growing number of private enterprises.  Jiang Zemin formally admitted capitalists to the CCP in November 2002 by identifying them as “builders of socialism with Chinese characteristics.”[150] According to the State Economic and Trade Commission, by 2002, private enterprises contributed 9.3% of the total industrial and commercial tax, comprised up to 60% of the GDP, and hired 70% of the workers who had been laid off through the restructuring of national enterprises. [151] It was officially estimated that between 1990 and 2003 the employed population increased by nearly 97 million and that in 2006 alone 12 million urban jobs were created.[152]

Rural-Urban Migration

Wang and Zhao’s survey disproved the belief that migrant workers are blind wanderers or “migratory birds” that moved to the city aimlessly, by proving that rural-urban mobility is geared to a clear destination and is well prepared.[153] In their survey, Wang and Zhao described that roughly, 45% of the migrants had relatives in their destination, 30% had acquaintances, 12% had friends and about 12% knew none. [154]

Among the interviewed in Beijing, 75% of migrants had work arrangements before arriving to the city, and 70% began working within a month of arrival. [155] The migrants in Beijing work for the most part in the construction and service industries, and are more likely to be hired (compared with laid-off workers and unemployed) because they are younger, and tolerant of poor living and working conditions.[156] Clearly violating the labor laws, in Beijing migrant males were paid 27% lower, and migrant females were paid 41% lower than local residents; additionally, both male and female migrants worked longer hours in harsher conditions.[157]

In addition to the worsening working conditions of parents and mothers, the children of migrant families are also discriminated against. The children are subject to higher fees to attend public schools in a district other than the one they are registered for, and after being enrolled 40-56% of the surveyed migrants reported further in-school discrimination.[158]

The interviewed workers mentioned that they did not see the living conditions, working hours, lack of social security or wages as bad, compared with the conditions in their home towns.[159] Only migrant workers who had spend over 10 years in the city, began to compare themselves with local residents.[160] Additionally, 50% of the rural migrants interviewed planned to stay in the city, 10% had decided to return to their hometowns and 40% was uncertain.[161] These surveys should educate the government officials in regards to the real mindset of the migrant workers in order to promote better public policies.

Wang and Zhao’s research exposed that the institutions in place in 1998 highly restricted the mobilization of the work force. The household registration system, personnel filing system and social security system created considerable obstacles for workers to be move to the areas where labor is demanded.[162] But the needs, of the unemployed, as evidenced by the numbers of migrant workers shows the necessity to create flexible institutions that allow for the free movement of people across the nation.

The urban governments need to be aware of the migrant’s current situation, and it is critical to evaluate and adopt public measures to improve and assure the protection of equal rights and decent living for the migrant workers (better infrastructure, working and living conditions and better wages).

6. Conclusion

The 1994 and 2008 Chinese labor laws have served as a codification of hundreds of policies enacted by the state to regulate labor relations. These laws have been highly influenced by Confucian principals and cultural traditions that strive for the wellbeing, instability and harmony of the Chinese society. The 1994 law had a greater impact in the public sector, while the 2008 law has yet to show evident results in both the private and public areas.

The Confucian influence in the legislative process has assured that both legislations advance the protection of workers’ rights as evidenced by a growing concern and awareness of these laws as well as the growing numbers of labor disputes.  The government has yet to expand a greater coverage and inspection mechanism to assure the effectiveness in these laws in the private sector.  The laws have also cleared China’s international image, showing to the world that, at least on paper for now, China is concerned with its labor force and their rights. Hopefully, the institutionalization and implementation of these laws will increase the wellbeing of the Chinese population for the years to come.