Unemployment in China
Your Corporate Social responsibility Partner
Numerous international media outlets have been reporting on the significant rise of unemployment in China, especially the mingong- migrant workers- find themselves after the Chinese New Year holidays laid off and without any job prospects . This makes it seem the unemployment surge was tied to the timing of the holidays. But we at WethicA are not convinced by this explanation; the situation is symptomatic of a much deeper phenomenon. Actually the rapid rate of factories closing pre-date these last few weeks, but were already obvious from a few months ago. Even from last summer, we had begun to catch wind of cases in the Guangdong area of unjustifiable closing practices without paying workers.
Why did factories close specifically during Chinese New year? Either they were already in trouble before the new year holiday and seeing no reason to stay open, they closed down (all the more so as wages are usually paid to workers prior to the holidays), or there was no trouble before Chinese new year and factories should re-open.
However, the trend is real with many migrant workers leaving the coastal areas before the holiday. A recent Wall Street Journal article stated 62, 400 factories closed in Guangdong province in 2008. In line with the article, this year we have seen large number of factories diversifying their products in an attempt to stay afloat. In addition, factories have started to move from the coastal areas such as Guangdong and Shanghai to inner provinces, citing lower wages as the main incentive. Although the trend started before the crisis, the added impact of the crisis spiked the number of factory closings and led to massive lay-offs. The government, both on the national and local levels, encouraged low value-added industries to move out of these coastal areas.
One point is not every closed factory with the ability to re-open will do so in China and some will select Cambodia, Vietnam or other less expensive (and less compliant) countries. As much of the capital from these factories comes from foreign sources (including Hong Kong), it could easily be reinvested outside of China. This relocation of production facilities massively affects migrant workers as well as sustainable supply chains. It is these aspects and consequences we want to emphasize here.
Workers have no job security and are subjected to factory volatility. Desperate to find and keep jobs, workers will willingly accept substandard working conditions they would have refused otherwise. The lack of any social or job security worsens their plight, and whatever level of social consciousness and action implemented by factories will no doubt cease to be a priority. Managing suppliers now will require close monitoring of new factories to ensure social compliance levels.
The move of factories to different countries will take with the management practices implemented by the buyers already installed in China. Safety level of factories in these countries will most likely improve whereas the overtime hours will worsen.
Some positive social aspects can come out of this crisis with genuine opportunities to get suppliers involved in social compliance requirements. As orders decrease, Chinese factories will find it difficult to gain new customers. In such a climate, factories will need to secure the loyalty of existing customers by implementing the corrective actions found on social audits.
Such tumultuous times can yield key opportunities to improve in overall working conditions that must not be passed up. This will be an interesting year of the Ox for all as we continue on our mission.
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Release date: 2009-02-11
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