Strike reveals loopholes, rising labor cost crunch





Strike reveals loopholes,

rising labor cost crunch



By Shi Shouhe, Sun Xiaozheng, Ma Xiaocheng, Qiu Ming and Lai Yuchen



A massive worker strike over social benefits in south China’s Guangdong Province has exposed loopholes in the country’s social security scheme and the growing pressure on manufacturers to keep up with rising labor costs.

The strike at Yue Yuen Industrial (Holdings) Ltd., a footwear maker in Dongguan City, entered its third day on Wednesday of April 16, with thousands of workers shelving their tools and gathering at the factory compound.

About 600 workers from the plant first stormed onto the streets on April 5, blocking roads and demanding that social insurance and housing funds be fully paid.

After failed negotiations with management, more workers joined what became a massive strike on Monday and Tuesday.

As talks between workers and management went on and the local government intervened, the number of people on strike subsided and the crowd dispersed on Wednesday morning after talks with management representatives.

A senior company executive surnamed He told reporters that the company had initiated a cash award to encourage workers to return to their posts.

Yet the disputes over social benefits remain unsolved, ringing alarms for many other manufacturers in the economically booming southern Pearl River Delta region.





The workers claimed that the factory management had been tricking them by paying inadequate sums of money into the social insurance scheme each month. Additionally, a majority had received no housing funds, though they were supposed to be paid by the company.

A human resources executive who requested anonymity confirmed the matter, saying only about 1,000 workers of the plant’s 45,000 staff have been paid housing funds.

Although all workers are covered by the social insurance program, the sum paid by the company is lower than required in accordance with the law, the executive said.

He explained that the workers’ social insurance was paid based on the local average salary standard instead of their actual monthly income, which is much higher. That means workers will receive less from the social insurance program after they retire.

Experts say loopholes in the social insurance scheme have long been a hidden problem, and this practice is common among other manufacturers.

He Gaochao, a public affairs professor at Sun Yat-sen University, said it is a common phenomenon for many manufacturers, at least in the Pearl River Delta region, to pay as little in social security funds for their workers as possible.

However, with new awareness on the part of workers to safeguard their rights, manufacturers’ practices are now causing tensions, He said.





Xiao Shengfang, a lawyer with Guangdong-based Sino-Win Law Firm, said the strike also exposed the crunch faced by manufacturers as they battle the rising cost of labor.

As of April 1, at least seven provinces and municipalities, including Beijing, Shanghai and Tianjin, have lifted the minimum wage standard.

A survey conducted by Standard Chartered Bank among 375 manufacturers in the Pearl River Delta region in February and March showed that worker wages are expected to rise 9.2 percent this year, compared with an 8.4-percent rise registered in 2013.

Some manufacturers are considering relocating their businesses elsewhere, according to the survey. Thirteen percent of the surveyed manufacturers said they intended to move out of China to countries such as Cambodia, Thailand and Vietnam, where they can save up to 10 or 20 percent on costs.

Xiao said the strike at Yue Yuen also revealed that many manufacturers lack innovation in a market with intense competition and low profit margins. “They have to resort to cutting labor costs to gain,” Xiao said.

The strike in Dongguan sent shockwaves to exhibitors at the ongoing Canton Fair in Guangzhou.

Zeng Zhanhui, president of Guangdong Xinbao Electrical Appliances Holdings Ltd., said his company had felt the pain over labor expenses as worker wages increased at an average of 10 percent annually over the past three years.

“With rising wages, the company has to pay the workers’ social security funds, which we have no way to ignore,” Zeng said at the fair.

Zeng said his company, one of the country’s leading home appliance exporters, has been resorting to technical innovation and development of its own brands to expand profits and defuse the labor cost pressure.

“As we are also in a labor-intensive manufacturing industry, the key for our company is to launch innovative products to sustain our future development,” said Luo Wei, marketing manager of the company’s Espresso Coffee Machine Division.








NEW POST   updated on April 18, 2014


 South China footwear factory strike continues


By Lü Qiuping, Ma Xiaocheng and Qiu Ming


A massive strike over a social benefits dispute entered a fifth day on Friday of April 18 at a footwear factory in south China’s Guangdong Province.

Thousands of workers at Yue Yuen Industrial (Holdings) Ltd., a Dongguan-based footwear maker for major brands including Nike, Adidas and Timberland, began storming out of the main plant and walking along a nearby arterial road around 8:50 a.m.

Police have blocked some road section, and most of the workers have returned to the premises of the factory, where there is a staff of about 45,000.

Production at the plant remains halted.

The protests began on April 5, when a few hundred workers from the plant took to the streets demanding that their social insurance and housing funds be fully paid.

After failed negotiations with management, more workers have joined what has become a massive strike since Monday.

On Thursday, the factory management promised to catch up on all the social benefits in arrears, but the workers have remained skeptical and refused to return to work.

An anonymous worker who has worked in the factory for 22 years said his monthly wage was 4,400 yuan (707 U.S. dollars). Endowment insurance paid by the individual should be 8 percent, or around 350 yuan. But according to his salary slip, he only paid 144.8 yuan, which means the company also failed to pay the full amount of social security for him. The firm also failed to pay any housing fund for him.

According to the Chinese social insurance payment system, companies and individuals are supposed to pay their respective shares for employees’ social security and housing fund based on employees’ salary. A company could fake a lower salary of its workers to pay less than the standard amount of social insurance and housing fund.

Liang Bing, head of the Dongguan City Social Security Bureau, said if only the salary amount the company reported was higher than the stipulated minimum wage standard, authorities would not find out the amount was fake, leading to a certain amount of social security unpaid.

He said previously many workers turned a blind eye to it as they were reluctant to pay their own share. However, with new awareness on the part of workers to safeguard their rights, manufacturers’ practices are now causing tensions.

“Workers’ increasing awareness over social security has actually prompted us to improve our work on the social security system. It’s a good thing for us,” Liang said.

The factory management, however, believe the striking workers are planning something else, using the social security issue as an excuse.

“Although we announced to catch up on all social benefits in arrears, they seem not to care at all,” said a manager who asked not to be named. They have other demands, such as early retirement payment and re-election of the worker’s union, according to the manager.

“We have realized the problem. But so far, we have not found a proper way to communicate with the workers,” he said, adding that the strike was expected to continue.








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