Technology Forecasters, Inc.
Global Consulting and Research for Outsourcing and the Environment
From time to time, we hear some version of the following story. Maybe you do, too.
With the best corporate social responsibility (CSR) intentions, an OEM tells its Chinese contract manufacturer to limit workers’ overtime to the amount prescribed under law. Then many of the workers quit and go to another manufacturer that doesn’t follow the law.
Electronics manufacturers and others face the dilemma of breaking the law to offer as much overtime as possible to workers, or complying and losing workers to employers who don’t play by the rule. Chinese labor law stipulates that workers cannot work more than 36 hours of overtime in a month, but does not enforce the rule, and workers want as much overtime as they can get.
We hear the stories, but rarely see any documentation of the problem. So shame on us for not noticing sooner: A study group from the Foreign Investment Advisory Service of the World Bank and Business for Social Responsibility, with financial support from various organizations, including the Electronics Industry Code of Conduct group, recently researched CSR, including the overtime problem, in Shenzhen’s electronics sector and published its finding last summer.
Entitled “Corporate Social Responsibility in China’s Information and Communications Technology (ICT) Sector,” the report examines CSR issues based on interviews with several EMS companies, including Celestica, Flextronics and Foxconn, and several OEMs, including Hewlett Packard, Motorola, Nokia, and Philips.
Here’s a sample of its findings, from section 2.2.7, “Complexity of the overtime issue:”
“Since employee retention is a major challenge in Shenzhen, factories are extremely concerned with losing workers due to insufficient overtime. Among the suppliers interviewed, turnover ranged from 3% to 20% per month. Many suppliers felt that workers demanded at least 60-80 hours of overtime per month, and that overtime only became unwelcome above 100 hours per month.”
No single electronics company can begin to resolve the gap between law and reality. The existing law may be too restrictive, but there is likely an appropriate level of overtime that all parties—the industry, the Chinese government, and the workers – could agree to if they were to negotiate, which the study group recommends.
CSR is important to electronics companies, so it is time for all parties to get together and iron out a resolution, one the Chinese government will enforce. The report recommends stiff fines for companies that break the law and incentives for those that abide by it.
What’s your experience with the Chinese overtime dilemma?
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Agree this is a dilemma but an easy one to resolve: PAY THE WORKERS a living wage then they will not have to work 100+ hours over-time/month. This would also begin to raise the standard of living and create new markets. People need money to buy things! And this is now a global issue….spread the wealth…it’s all connected.
You are looking in the wrong place, as is the EICC and CSR effort. The issue is not with compliance with the law or guideline or standard. Compliance is a relative veneer. The issue is the marginal propensity to get tired. After x number of hours all inputs of labor productivity curve downward. Like a cliff. Instead, boost the return on the human asset by harvesting their innovation and energy. Stay at the peak of the productivity and innovation curve - it produces much more than tired hands and heads. The peripheral result is a more talented resource base and an emerging market.
The fact that Chinese workers “quit and go to another manufacturer that doesn’t follow the law (overtime regulation)” does not appear to me as a “dilemma.” It is not a dilemma for workers. Workers can not earn enough wage with the amount of time prescribed under law, therefore they have to find a place to work overtime. Nor is it a dilemma for manufacturers–what they need to do is to raise the hourly wage. Manufacturers will surely get workers stay and do their job. Only when breaking law becomes a choice for manufacturers, it appears as a “dilemma”. What a “dilemma!”
From these comments posted above, I get the sense that many people are in fact anti-China sourcing, which I can understand. What people need to understand is that wages have already gone up drastically over the past 3 years. From take home wages of around RMB800/month, wages are now at around RMB1400/month, and this is only the beginning. China government has now begun to strictly enforce the 35 hrs/month limit on overtime, and also 200% pay for Saturday, 300% pay for Sunday. Many factories are now being sued by workers for lost pay over the past 2 years - amounting to several millions of dollars per factory. Add on the new labor laws which mandate 90 days of PAID maternity leave, 14 days of spousal holiday every 2 years, and countless other benefits - many companies are in fact being driven out of business. At the beginning of 2008, there were approximately 90000 factories in the Pear River Delta area, of which 15000 have already closed up shop. With the rate which costs are rising, we can see a significant increase in bankruptcies and relocation. Instead of being able to make a decent wage, it may actually be very soon where a lot of people will become unemployed again and go back to the farms making RMB200/month. So in fact, this “dilemma” is really a “dilemma”. I think many people need to stop watching CNN and actually visit/live with the developing countries people first before they make their judgments.