Labor Conditions in the Pearl River Delta (Part 2 of 3):

UNCLAS SECTION 01 OF 03 GUANGZHOU 032431

SIPDIS

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LABOR FOR ILAB NEWTON, LI ZHAO, SCHOEFFLE
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SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ELAB PHUM EFIN PGOV SOCI CH
SUBJECT: Labor Conditions in the Pearl River Delta (Part 2 of 3):
The Government's (Limited) Role

(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT
ACCORDINGLY.

Ref: A) Guangzhou 32421; B) Beijing 22277


1. (SBU) SUMMARY: Provincial and municipal authorities both inside
and outside of Guangdong Province have enacted protective measures
such as labor rights training, vocational training, higher minimum
wages, labor inspections, and the blacklisting of malfeasant
companies to deal with labor violations in the Pearl River Delta
(PRD). The number of labor-related government programs seems
impressive but accurate data is lacking to gauge them effectively.
In addition, Guangdong has seen few successful prosecutions of labor
violators. This is the second of three cables on labor conditions
in the PRD. END SUMMARY.

Background
--------------



2. (U) The Pearl River Delta has been called "the shop floor of the
world," because of the number of factories in the region. This
cable, the second of three on the labor situation in Guangdong
Province's Pearl River Delta (PRD),focuses on government
(provincial and municipal) policies and programs designed to improve
the situation. The problem of migrant workers extends to broader
issues besides labor violations, including education, health and
social welfare. Additionally, there are a number of on-going
national-level initiatives (unionization and a new contract labor
law),as well as programs run by the All China Federation of Trade
Unions and the Guangdong Labor Bureau that provide labor rights
training programs and legal aid centers in many cities. Guangzhou,
for example, has four such centers.

The "Six Haves" and Successes in 2006
--------------


3. (U) The Guangdong Labor Bureau began a program in 2006 to
provide "six haves" for its migrant workers: on-the-job training,
labor contracts, wage guarantees, medical insurance, channels to
uphold labor rights, and improvement in living conditions. In
November and December two different central government inspection
teams, including one led by Minister of Labor and Social Security
Tian Chengping, visited a number of PRD cities to examine labor
standards. Guangdong officials reportedly told Tian that
Guangdong's successes in the past year included:

-- helping 25,979 families to find jobs; providing vocational
training to one million rural youth;

-- providing health insurance to 8.64 million migrant workers and
work injury insurance to 10.87 million as of September of this year;
and

-- research on establishing a new grassroots-level labor relations
system.


4. (U) In early 2006, the South China Morning Post reported that
Shenzhen has become the first city to adopt a medical insurance
system for migrant workers. The system will cover about 80 percent
of outpatient service costs and 60 percent of in-hospital fees for
approximately three million migrant workers. Workers will be
required to pay only four RMB (USD 0.50) per month, while their
employers will have to contribute double that amount.

Help from Other Provinces
--------------


5. (U) A number of Chinese provinces have representational offices
in the PRD (and in other major Chinese cities),which provide
services for migrant workers from their respective province.
Recently Congenoff met with the Henan General Affairs Office in
Guangzhou, which supports approximately three million Henan
residents living in Guangdong. The office has a staff of 20 in
Guangzhou and 10 in Shenzhen. It provides Henan residences monthly

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training in technical skills (for example, garment manufacturing
skills); helps workers earn labor certificates (necessary to work in
certain factories) and provides free legal assistance (if the worker
qualifies) from 100 available lawyers throughout the PRD. The Henan
office publicizes its programs through the Labor Department's
websites.

Minimum Wage Increase
--------------


6. (U) The minimum wage of many PRD cities increased on September

1. Shenzhen increased its wages to RMB 810 (USD 101.25),Guangzhou
to RMB 780 (USD 97.50),and Dongguan, Zhuhai, Foshan and Zhongshan
to RMB 690 (USD 86.25). The average increase across the province
was 17.8 percent - the highest to date. The increases were
reportedly an attempt to draw more migrant workers to Guangdong,
which may be experiencing a labor shortage. In comparison, the
minimum wage in Shanghai is only RMB 690 (USD 86.25) and in Beijing
RMB 640 (USD 80). Since 2001, Foshan has increased its wages by
97.1 percent, Dongguan 72.5 percent and Shenzhen 41 percent.
Minimum wages legally apply to work completed in normal work time
(maximum of 168 hours per month).

Labor Inspections, Wage Default and Punishment
-------------- -


7. (U) PRD Labor Bureaus also conduct random inspections throughout
the year, in search of labor violations. Guangzhou Labor Bureau
Director Cui Renquan recently told Congenoff of multiple campaigns
conducted since May 2006, including: inspections focusing on labor
contracts (May),general inspections (July) and migrant worker wages
(October). Cui told Congenoff that in July and August alone, labor
inspectors visited 11,000 companies that employ over 29,000 workers,
but found only eight labor violations. However, Cui admitted that
the Labor Bureau only inspects registered companies and that the
Bureau cannot collect accurate data on unregistered migrant workers.
Cui noted that Provincial regulations require companies to report
migrant worker numbers to the Labor Department. A Guangzhou Academy
of Social Science professor, however, recently said that Guangzhou's
Labor Department is seriously understaffed and was planning to hire
100 new inspectors to ease the burden.


8. (U) In June, the Guangdong Labor Bureau "blacklisted" 30
enterprises (including five Hong Kong-invested and one
Taiwan-invested) on its website because of massive wage arrears to
their workers. Among the 30 companies, a total of 8,000 workers (an
average of 277 workers per factory) failed to receive a total of 20
million yuan (USD 2.5 million) in wages owed them. Zhang Xiang,
Guangdong Labor Bureau spokesperson, said that the actual number of
wage defaulters was much larger than 30, but these enterprises were
singled out "because they refused to mend their ways after repeated
education, warnings or even heavy punishments." The website lists
the companies' names, addresses, financial backings and labor
violations.


9. (U) While the blacklistings are potentially effective in shaming
companies, such measures lack legal strength. Currently some
lawmakers in Shenzhen are proposing to criminalize "willful wage
default." In fact, a search of local media sources found only one
example, from early 2006, of criminal detainment - eight Shenzhen
individuals were arrested for wage arrears of 1,200 employees. In
all other examples, companies were simply fined or, in the case of
child labor, the children were taken away from the factory.

Comment: Many Programs but Few Results
--------------


10. (SBU) During meetings, labor officials described numerous
on-going programs to improve worker's rights or welfare. Despite
these efforts, labor violations continue unabated. The government's
solution to the problem tends to be to create more government-run
programs, often ineffective, or government-led NGOs. Many of these
government initiatives (e.g. universal unionization and the new
Contract Labor Law),which fall under the rubric of a "Harmonious
Society," are more motivated by securing government power than

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improving labor conditions (ref B).

GOLDBERG