Tuesday, 16 August 2016

China development model & Foxconn exploits workers

The suicides by employees at Taiwanese company Foxconn’s plant in China are only the tip of the iceberg when it comes to the negative social effects generated by the Chinese development model are a lack of human rights, high levels of exploitation and few social welfare benefits. China has been called the world’s factory. It sits at the end of almost every production chain in the world. The shiny exterior of the Chinese model is supported by hundreds of millions of workers laboring under the pressures of streamlined production and cost cutting. Many of these workers are not registered as permanent residents in the cities where they are employed and therefore do not enjoy the benefits granted to city residents.

The many foreign companies and the local Chinese export industry are exploiting this national brand with the support of the Chinese national government, which is seeking to strengthen and enrich itself by increasing its income. China has set a modern working hour policy, but the minimum wage is very low. The legal weekly working hours in China are less than 40 hours, and monthly overtime is limited to 36 hours. This superficially advanced work hour policy is used as a skillful cover for the exploitation. The official minimum salary regulations are very rigid, and the adjustment never keeps up with inflation. Someone on the minimum wage working only regular hours will have a very low income. Although illegal, it is very common to work more than 100 hours of overtime per month. Taking Foxconn as an example, an ordinary worker only earns 950 yuan (US$139) per month. However, if they work 98 hours of overtime — 66 hours on weekdays and 32 hours on weekends — they can earn about 1,840 yuan. Under this wage system, there is a 1:1 ratio between salary and overtime pay. The monthly GDP per capita in Shenzhen, where the Foxconn plant is located, is 6,637 yuan and the average nominal professional salary is 3,233 yuan per month. Life for a worker would be very difficult if he or she didn’t work overtime.

Chinese workers really like to work over time and that they would be unhappy if there was no extra work to be done. This is the situation at Foxconn. Chinese workers would ask the capitalist for overtime work. They would even flatter their line managers or team managers for the opportunity. Because the minimum wage is so low, companies request employees to work overtime to boost productivity. For the same reason, employees are forced to do overtime, resulting in employees doing too much overtime.

Another factor is social insurance. Guangdong provincial authorities offer outsiders very meager social welfare benefits. Enterprises are requested to sign a legal work contract with employees. According to Chinese labor legislation, companies must sign contracts with their employees, and once such a work contract is signed, the employee must be given social insurance coverage. However, the Guangdong authorities are not strict in this regard. Shenzhen divides its social insurance into two categories. About 2 million residents registered in Shenzhen are given “city workers’ social security,” while over 10 million non-­registered residents are either “ghost workers” receiving no coverage, or outsiders covered by “general social security for non-resident workers.” There are big differences in the premiums and benefits between the two. Similar dual systems are used in Shanghai and other big cities. In other words, China’s residence system saves capitalists around the world from spending a lot of money on social benefits.

The social insurance issue illustrates the Chinese model’s biggest problem — the dual system that differentiates between urban and rural areas and does not extend residency status to out-of-town workers. It’s easy to see why this system cannot be changed. Once residency rights are deregulated, who would pay for the cities’ increased social welfare expenditure for the workers? The national government does not want to foot the bill and local governments only care about the interests of their own city and residents.

Some may say that Foxconn is a victim because it offers good benefits, pays high salaries and has people lining up to work for them, but why has misfortune struck this “exemplary high-tech company?” Let us not forget that it is an industrial behemoth sitting at the end of the global production chain. It imprisons and alienates workers and compels them to work overtime in an inhumane enclosed park where they loose sight of the purpose of their work. Foxconn slashes prices to win orders, but who should take responsibility for the resulting problems? Who designed the system? We should be looking to the foreign manufacturing companies of the packaging industry, the multinational capitalists that earn huge profits and the Chinese government that only cares about increasing its wealth and strength.

Read also China's Growth Model Flaws

Read also China's Ten Grave Problems

Read also Life of taxi driver in China

My View:
China has 150 million industrial workers and out of which 120 million (80%) are internal migrant workers who are not covered by any benefits, rights or welfare measures. These workers are compelled to work about 90 hours a week and are paid wages* just sufficient for living in dormitory like accommodation (typically 6 workers sharing a single room). China's growth and prosperity is attributable to exploitation of these workers, destruction of ecological assets and unbridled pollution levels. Ultimate prosperity of a nation will have large middle class as its corner stone. China's prosperity depending on lower class exploitation is unsustainable and sooner or later bubble is bound to burst. 

*Typically, a worker in China earns about half of nation's per capita income for his 100 hour weekly working without any access to benefits, rights & welfare.

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