Will the new law protect workers?
Updated: 2008-01-28 09:27
Anyone who has been in touch with members of the business community recently has likely heard a lot of talk about the new Labor Contract Law, which took effect at the beginning of this year.
To be sure, among entrepreneurs and corporate executives, no one is saying China does not need a law to protect workers.
Now we have a much tighter law, with clauses that will virtually prohibit the firing of employees who have worked for a company for at least a decade before their retirement. But if the law proves to be unworkable in practice, lawmakers will have to do a lot of additional, costly work on it.
An even worse outcome would be if people started competing to come up with ways to somehow tiptoe around those rules they think too difficult to follow. If that happened, the law would be of no use whatsoever.
At a recent dinner meeting with some of my former colleagues in business, I heard someone say, half jokingly perhaps, that one way to evade the legal responsibilities that may come along with the 10-year employment clause would be for a company to have a "planned liquidation" every decade.
Or, as someone else suggested, a company may at some point turn itself into a partnership or a small joint stock venture, keeping just one or two workers with key skills and then hiring additional people on a temporary basis.
There must be thousands of people out there who are thinking about ways to limit the new law's effect. And they may not be just private entrepreneurs. The people who compared notes with me the other day are long-time corporate employees themselves.
Some of them had returned from graduate schools in the West in the early 2000s and joined Chinese technology startups, many of which did not last long enough to see the new version of the labor law.
While other men and women joined the flood of millions of people leaving their hometowns in favor of Beijing, Shanghai and the southern Pearl River Delta, where they found work with various companies. Even these seemingly lucky people have had many difficult moments while looking for and negotiating suitable jobs. They never dreamed about the kind of luxury offered by the new law.
Thanks primarily to the bold reform policies that have been carried out, these people have weathered many ups and downs in their careers and have all worked their way up to responsible corporate positions in their middle age. The best protection for their jobs has been of the macro-kind - that is, the general moment of the country's economic development.
But if, under a new labor law, however well-intended and intricately structured it may be, companies and their executives feel bothered by rules they perceive to be excessive and are even not sure whether they should go on with their hiring plans, then the whole thing could backfire.
Indeed, the government should do its best. To protect every worker is a good thing. But freedom of migration, medical and retirement insurance and education and training are more effective at helping workers than direct interference in employment contracts.
Some companies have been criticized by the Chinese-language press for overreacting to the new labor contract law, such as by sacking employees en masse. Such steps are indeed silly, but these companies should not have been led to behave that way in the first place.
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