Despite what we hear about ‘sweatshops,’ manufacturing workers in China cost their employers more than their American cousins, but they offset the burden of high benefits with high productivity.
Net salaries look low compared to ours, but factories pay thirteen percent of wages into a fund for employees’ home deposits and a further thirty percent for retirement, medical, unemployment, maternity, and occupational injury funds–and employees match those contributions one hundred percent.
Friends With Benefits
Workers with fewer than ten years of cumulative work experience are entitled to three months’ sick leave on sixty to one-hundred percent of salary, depending on seniority, and Beijing expects employers to treat them well:
“Entrepreneurs–especially state-owned entrepreneurs–should play a leading role in serving society as conscious models of political, economic, and social responsibility, and so serve the Party, the country, and the people”.
In 2019, provincial Trial Spots began monitoring employer compliance, and The Wall Street Journal reported that everyone’s salary has doubled every decade for forty years, “In 2012 alone, the average wage rose by 14 percent. Western corporations such as Crystal Group, which produces clothes for Abercrombie & Fitch and Gap, have pulled out because of rising labor costs”.
Yet The New York Times found widespread complaints of labor shortages, “Many companies now find themselves struggling to hire enough workers and, for the scarce workers they do find, pay has more than quintupled in the last decade”.
The Labor Contract Law’s ‘termination for cause’ clause forces employers to publish detailed regulations, keep careful records, and negotiate with unions, because they can only terminate employees–with severance pay–if they remain incompetent after training or reassignment.
Strikes are rare, explains union leader An Jianhua, “China has a huge population, so striking doesn’t help much. There are plenty of laborers ready replace workers”. Instead, the All-China Federation of Trade Unions, ACTFU, whose three hundred million members outnumber the rest of the world’s unions combined, resolves labor disputes through consultation, arbitration, and legislation. If all else fails, the threat of legal action usually brings employers into line: unions rarely lose in front of communist judges.
Base wages, which rise with seniority, come with annual bonuses plus a thirteenth monthly payment at New Year. Workers covet overtime because labor laws stipulate that, after forty-four hours of work, they receive one-hundred-fifty percent of base salary, two hundred percent on Saturday afternoon and Sunday, and three hundred percent on national holidays.
Employers can hire on contract only twice (e.g., two six-month agreements), after which hires automatically become permanent employees. Tenure, based on cumulative experience with all previous employers, allows job-switchers keep their seniority and accumulated vacation time: five days annually for the first nine years, ten for the next nine years, and fifteen days thereafter. Factory workers are generally young, happy, and carefree, gossiping, flirting, listening to music, and–except in large corporations–wearing what they please.
Accelerating inland growth has triggered labor shortages in coastal cities, forcing employers to automate, raise productivity, and move up the value chain–just as Beijing intended. In 2019, Mentech, a telecom manufacturer in coastal Dongguan, offered regular wages plus $1,100 guaranteed monthly overtime, air-conditioned dorms, free Wi-Fi, and birthday presents. Monthly manufacturing wages averaged $1800 PPP in 2019 and overtime, bonuses, company housing, and free meals allow workers to send money home.
A friend of mine, who hires workers in both countries, explained why Chinese productivity is so high:
At our US facility, our only requirement for assemblers is a high school degree, US citizenship, passing a drug and criminal background check, and a simple assembly test: looking at an assembly engineering drawing and then putting the components together.
While the vast majority of American applicants were unable to complete the assembly test, in China, they completed it in half the time, and 100% of applicants passed. Hiring for an assembler position in the US would require thirty interviews a day and produce twenty-nine rejections, not to mention all the HR hassles of assemblers walking off shift, excessive lateness, stealing from work, slow work speed, and poor attitudes. The position starts at $12 an hour in flyover country, which is pretty reasonable compared to other jobs that only require a GED and no prior work experience. It offers medical, dental, and annual raises with plenty of opportunities to move up in the company and earn an average Production Assembler salary, $33,029, if they stay beyond five years.
Similar positions in China pay the same wages as other positions there with only a high school degree and no work experience. Yet the applicant quality is much higher, and this also applies to the white-collar support professionals: schedulers, quality inspectors, equipment testers and calibrators, engineers, supply chain managers, account managers, sales. Their labor quality is simply higher. At the end of the day, high-end and middling manufacturing is not moving to either the US or Mexico, because average workers in flyover country cannot meet the demands of twenty-first-century manufacturing.
Barely two percent of Chinese pay taxes, and they like it that way: government consultations on income taxes attracted 130,000 submissions advocating the status quo. Yet despite low taxes, a powerful union, strong labor laws, sympathetic courts, and rising wages, China is no workers’ paradise. Only three quarters of workers report having union representation, paid annual leave, and paid days off. In 2019, ten years after they were promised a union, Walmart’s employees were still struggling to establish one. Foxconn, Apple’s Taiwan-owned assembler, allowed employees to unionize only after media exposed its practice of forcing employees to stand for illegal, twelve-hour shifts and local officials moved in to lend muscle to workers’ efforts.
Pensions Like Ours
Until recently, workers could only collect full pensions in their home provinces. Millions of migrant workers who contributed to urban retirement funds found their local governments had no money for them when they returned at the end of their working lives.
Despite pleas from cash-starved inland provinces, rich coastal provinces clung to multi-billion surpluses, so Beijing endowed a trillion-dollar National Pension Insurance Program and persuaded provinces to join. The People’s Daily drummed up support by appealing to national pride, “In developed countries like America–where the Gini index sometimes reaches 40% [it is currently 42%]–income disparities are eased through gradually increasing taxation on the wealthy and improving welfare systems to help the poor. China should learn from America’s experience”.
Pay Like Ours
Urban quality of life is already higher than America’s, inequality is lower, home ownership is fifty percent higher and incomes are on track to overtake ours by 2025. In the eyes of the world, when that happens, it will be Game Over.
I have heard that the ruler of a state or the head of a household does not worry that his people are poor, but that wealth is inequitably distributed;
Does not worry that his people are few in number, but that they are disharmonious.
Does not worry that his people are unstable, but that they are insecure.
For if wealth is equitably distributed, there is no poverty; if the people are harmonious, they are not few in number; if the people are secure, they are not unstable. Confucius, Analects.
Thanks, too bad more Americans won't b able to read this, Mike Liston