Organized Labor in China and the Impact on Multinational Corporations

Organized Labor in China and the Impact on Multinational Corporations

Abstract

The Peoples Republic of China (PRC) history of human rights and social economic suppression has been under scrutiny for decades. According to Mills (2013), "PRC has one of the fasted growing economies, and the largest recipient of foreign direct investment in the world. Multinational Corporations (MNC's) move production to China to take advantage of tax incentives cheap labor and high productivity rates" (iccr.org). These advantages gives MNC's the competitive advantages that ultimately only works in the favor of foreign corporations. The ability to pay workers per year what they would have to pay workers per month in the United States increases profits, but decreases social and economic development. Organizations ethical values such as this, has left a questionable discrepancy that could no longer be ignored by the PRC organized labor unions. In this study the following questions will be addressed:

1. How did the New Labor Contract Law drafted by the ACFTU empower the Chinese labor workforce?

2. What changes were required for Multinational Corporations to develop a long-term competitive advantage?

3. What is the role of The China's Government in the labor workforce?

Key words: ACFTU, Corporate Social Responsibilities, Labor Contract Law, Competitive advantage.

Organized Labor in China and the Impact on Multinational Corporations

The Chinese Labor Workforce

According to Wang, Appelbaum, Degiuli, & Lichtenstein (2009). China's Labor Contract Laws were put in to place in 1949 to protect the interests of workers. Studies conducted reveal that the Chinese Government played a major role in the disregard of those laws and created an economic and social downturn for the labor workforce (p. 2). The disregard of labor laws has allowed Multinational Corporations (MNC's) to have the control of determining the provisions and situation of the China labor workforce. This allowed MNC's to achieve profit and competative advantage. The Labor Contract Laws (LCL) introduced in 1994 by The All-China Federation of Trade Unions (ACFTU) has increasingly moved MNC's to redesign their decision-making strategies and labor relations policies according to the implemented regulations, social and economic demands.

According to Dersesky (2011), the Chinese government has passed a new law that will grant power to labor nions, in spite of protest by foreign companies with factories there. The order was in response to a sharp rise in labor tenson and protest about poor working conditions and industrial accidents. The All-China Federation of Trade Unions claimed that foreign employers often forced workers to work overtime, pay no heed to labor-safty regulations, and deliberately find fault with the workers as an excuse to ct their wages or fine them. (p. 371)

The purpose of the ACFTU and the Chinese government is to improved the labor relatons, social interest and economic development.

Labor Relations In China

According to the official website of the ACFTU (2003), The basic duty of the Chinese trade unions is to protect the legitimate rights and Interests of workers and staff members. In the course of developing the socialist market economy, the Chinese trade unions, in accordance with the regulations of the State's Labor law and other relevant laws, actively safeguard workers' political rights, their right to work and their material and cultural interests; participate in coordinating labor relations and regulating social contradictions and make efforts to promote the economic development and a long-term social stability of the country. (acftu.org)

The History of the ACFTU

According to the official website of the All-China Federation Trade Union, the first National Labor Congress was held 1922, one year after China establishment the Communist. Established by chinese workers ans staff members voluntarily, The All-China Federation of Trade Unions (ACFTU) was founded on May 1, 1925. The National Congress of Trade unions assembles once every five years. The ACFTU currently consist of 31 federations of trade unions and 10 national industrial unions.

The ACFTU (2003) provides details of the trade unions major social functions as

the following: (1) to protect the legitimate interests and democratic rights of the workers and staff members, (2) to mobilize and organize the workers and staff members to take part in the construction and reform and accomplish the tasks in the economic and social development, (3) to represent and organize the workers and staff members to take part in the administration of the State and social affairs and to participate in the democratic management of enterprises, (4) to educate the workers and staff members to constantly improve their ideological and moral qualities and raise their scientific and cultural levels.

The New Labor Contract Law

The ACFTU primary task was to provde protection for workers as they moved forward to a more socialist modernization country. In 1994, trade unions drafted what would be the new labor contract law.

According to the offical websit of the ACFTU: By the order of the President of the People's Republic of China No.28: The Labour Law of the People's Republic of China, adopted at the Eighth Meeting of the Standing Committee of the Eighth National People's Congress of the People's Republic of China on July 5, 1994, is hereby promulgated and shall enter into force as of Janaury 1, 1995.

Jiang Zemin

President of the People's Republic of China

July 5, 1994

After several revisions of the original draft, the Labor Contract Law was officially enacted on June 29, 2007 and became effective on January 1, 2008.

According to the studies of Taylor (2011), The 1994 Labor Law lists:

* Choice of employment.

* Labor compensation.

* Rest periods.

* Holiday entitlement.