Changes on the world's factory floor

An argument in recent years runs thus: China's export-driven economy enjoys an unfair advantage in its supply of cheap labor – whereas production prices in developed nations are fettered by such concerns as labor unions, minimum wages, and a stronger respect for human rights. Taken to its conscientious conclusion, the argument goes, American households should shun Chinese goods and American businesses should demand a level playing field before doing trade with a non-participatory command economy.

Simplistic perhaps, but with a few truths to it. For years, much of the Chinese economy has relied on the undocumented labor force of rural migrants seeking work in violation of the hukou system, which makes leaving one's registered economic hometown difficult. Those who do bypass the system eke out a living as migrant workers, with few rights and fewer still avenues of redress. Naturally, with little other choice, such workers have formed the backbone of China's cheap labor force, sustaining the breakneck rate of development for years.

Foreign firms and laborers alike have noted this dubious supply of labor, but have generally met with limited success in changing the market. This has held true of the consumer habits of U.S. households, which have continued to purchase cheap goods, from luxury items such as flatscreen TVs to basics such as furniture and tools. It has also held true of the situation on the factory floor in China, where the government has proven more concerned with sustaining its fragile boom than it is for worker welfare.

Image property of The Economist. Chinese caption reads "What do we want? More money! When do we want it? Now!"

However, a series of high-profile worker's grievance issues over this past summer, involving strikes at Honda and Toyota, and a spate of suicides at Foxconn, have shaken the image of Chinese workers as uncomplaining laborers, and hint that the era of an infinitely pliable Chinese workforce may be coming to an end.

The 2010.07.31 issue of The Economist mused on the socioeconomic implications, with the primary points being:

• 2008's new labor law will incentivize workers to bring suit for redress, and demographic change in the 15- to 29-year-old age group will reduce the amount of available workers;
• China's government, though historically heavy-handed in its quelling of strikes, may be more willing to let workers air grievances against foreign firms;
• A rise in workers' wages and living standards would in turn help wean China's economic growth off its heavy reliance on exports to include greater consumer spending;
• As China's advantage with a cheap workforce plateaus out, it will come to emphasize a skilled workforce – which in turn will require revisions to its hukou system and a greater focus on the training and wellbeing of individual workers.

The change may be later in the dialog than expected for proponents of the "Chinese workers deserve better" school of thought, but it appears to be gaining in traction.

Perhaps most noteworthy, however, is the fact that the greatest engine of change appears to be coming from the factory floor itself. It's indignant Chinese workers, and not indignant foreign commentators, that are driving the recognition of workers' rights.