Chinese Strike Put Virtuous Circle in Motion: Better Conditions for Chines Workers Are Good for the United States, Too

by Ann Paisley

This article was published by the Center for American Progress.

Labor unrest and strikes are spreading through China as newly emboldened workers press for higher wages and better working conditions, forcing employers to face the reality of a smaller and more empowered working-class community. The shift stems from China’s one-child policy, which was introduced in the late 1970s and is starting to narrow the pool of available, young, migrant workers in China’s cities.

This shift could help improve working and living conditions in an economy that has been largely built on inexpensive labor. And, together with other reforms, it could also slow China’s export industry and increase China’s domestic consumption in the long term. This could prove beneficial to the United States, and U.S. policymakers should encourage this transition, since a wealthier middle class in China is capable of importing more goods and services from U.S. companies, potentially boosting our nation’s exports and economic wellbeing.

Some trace the recent surge in labor unrest to Foxconn’s factory in Shenzhen, where there have been 12 suicide attempts—10 of which were successful—since January 2010. The string of suicides shed light on harsh working conditions and stirred up accusations that the Taiwanese company was running a sweatshop in Shenzhen. One of the suicide victimsworked 11-hour overnight shifts for seven days in a row, acquiring 286 hours in just one month, 112 of which were in overtime, yet only earned the equivalent of $1-an-hour. Foxconn consequently offered employees a 30 percent pay increase, which set the tone for pay raises throughout China’s factories.

Honda increased wages after the Japanese automaker suffered from strikes in early June at its car parts factory in Guangdong and key-production factories in southeastern China, where employees walked out. Strikes also reached Toyota’s biggest assembly plant in China, causing production to halt as workers and managers discussed pay raises in mid-June.Labor unrest also spread to a Taiwanese rubber factory in Shanghai, a Japanese industrial sewing machine plant in Xian, and a Taiwanese sporting goods factory in Jiangxi province.

Labor unrest is nothing new for China, but this recent bout of strikes has shown a bolder and more educated Chinese labor population. The current Chinese working population grew up with considerably more wealth than the previous generation, making them much less willing to work for low wages in sweatshop-style factories. Workers are also more informed of their rights, better organized to fight for those rights, and more willing to speak out in a country infamous for crushing all types of social unrest. China expert Mary Gallagher at the University of Michigan notes that there is “much more awareness among workers in China” and “a sense among workers that there is a law in place that is protective of workers, and they have the right to go use those laws."

The Chinese Communist Party, the sole political party in China, has been more responsive to this recent bout of strikes, even allowing some media coverage. Chinese Premier Wen Jiabao also called on local government officials earlier this month to improve the working and living conditions of Chinese migrant workers, who he said greatly contributed to China’s economic modernization and success. And the Chinese government announced plans totransform its labor-abundant economy into a talent-intensive work force, showing the CCP’s awareness of China’s shifting labor dynamic.

China’s rapid economic development of the past 30 years has been largely based off cheap labor, and as that labor pool shrinks, China will likely lose some of its competitive edge in labor-intensive industries. China may be approaching a so-called Lewis Turning Point, which occurs when a developing economy experiences a labor shortage allowing workers to demand higher wages and better working conditions. This could help create a better-off working class capable of increasing imports and domestic consumption in China. This process has already begun, with domestic consumption replacing investment as the biggest driver of economic growth in 2008.

A stable and growing Chinese middle class will help feed the U.S. economy. The U.S. government should support labor rights to help move this process along and create a “virtuous circle” of economic improvement where China’s gains generate demand for American goods and services, which in turn help stimulate our economy and increase our standard of living as the global standard of living increases with it.

And there are potential diplomatic gains for the United States, as well. A wealthier China could allow greater access to education and make citizens more likely to demand transparency and accountability from the government. And a “materially better-off, more educated, and cosmopolitan populace” in China is also more likely to favor diplomacy with the United States, according to Asian Affairs Specialist Kerry Dumbaugh of the Congressional Research Service.

The timing of the Lewis Turning Point in China remains unclear, but workers in China are undeniably gaining higher wages, and the Chinese government is showing a greater interest in migrant labor conditions. China will remain strong in the export industry—even with a decrease in competitiveness. Yet a better-off working class and greater domestic spending will also fuel economic growth in the country in the coming years. This altered economic dynamic in China could help the U.S. economically and politically.

Anne Paisley is an intern at the Center for American Progress.