Counterpoint: Xiaoya Liang.

Xiaoya Liang, Ph.D.

Department of Business Administration

School of Management

Fudan University 

Shanghai, P.R. China

Hosting the 2008 Olympics will become one of the most significant events in China. It presents a golden opportunity for China to demonstrate its economic prosperity and technological leadership. At the same time, the Olympics bring about some major challenges. For example, Fox and colleagues argue here that abused Olympic-related labor practices might cause China a huge potential public relation crisis if not handled properly. Taking an alignment perspective, Fox, et al., stated that China's Olympic mission is seriously misaligned with China's human resources practices in various Olympic projects. The authors go on to elaborate five factors to manifest this serious HR misalignment. I comment here on these factors by offering updates and alternative opinions.

1. China's economic growth has been based on a "low pay model." China has enjoyed an average growth rate near 10 percent for the past two decades. Many factors can be attributed to China's economic growth; however, no official statistics show to what extent low labor cost has contributed to China's economic success. At least in recent years, labor is not cheap any more. In a recent survey of over 1,800 manufacturing enterprises in the Yangtze River Delta Region, the authors found that on average the surveyed enterprises hired 67 percent of blue-collar workers and faced strong pressure on rapidly increasing labor costs (Wang, et al., 2007). Take the textile industry as an example: Labor cost in Wuxi is about nine times higher than in Vietnam. This year, some enterprises have had to raise the salary of floor workers two to three times. Thus, I would argue that Chinese enterprises have been able to offer low cost products by utilizing large economies of production scale, convenient industry clusters, and favorable government policies (such as tax reduction, subsidies, and land usage). If a "low-pay workforce" drives rapid economic growth, why have we not yet seen countries with even cheaper labor growing as fast as China?

2. Cheap labor has been supplied, predominantly, by migrant laborers moving from the rural farms across China to the metropolitan areas. China has a long-established dual structure system. Because of the residence registration system, many people are constrained in rural areas. Because of low productivity, poverty, and high unemployment in rural areas (unemployment in rural areas is estimated at least 150 million), many young peasants go to cities to get a job. Today, peasants comprise 46.5 percent of the employment in the second and the third industries and 80 percent of the building industry. They mostly take the risky and tiring jobs in the cities and receive discriminatory treatment such as unequal pay policy, low social welfare, low job security, and poor working conditions.

3. Contractors are advantaged by foregoing legally required employee contracts. Lin (2006) interviewed 58 employees in 17 domestic enterprises in 2003, and findings on sweatshop practices were mixed. In six of the 17 enterprises, working conditions were poor and basic labor rights were not in place. In the other 11 workplaces, protections against work-related hazards and safeguards of labor rights were adequate and basic compliance with labor law requirements was in place. In addition, the Chinese Academy of Social Science surveyed 1,800 employees in 1998 to investigate the status of labor practices. They reported in the study that:

1. Sufficient protection against work-related hazards was provided;

2. Arbitrary pay cuts and assaults on workers were rare; and

3. Withholding of deposits or the bonus system were seldom adopted.

Finally, China has in place the outdated "Labor Law of1995." The national people's congress issued a new labor contract law on June 29, 2007. The new labor contract law took effect on January 1, 2008, with an objective to prevent illegal employment practices and promote harmonious labor relations. The new labor law will have a significant impact on human resource management practices in China at least from two aspects:

1. From the perspective of individual employees, the new labor law will greatly enhance labor rights protection by making an employment contract mandatory and specifying terms of employment, transferring, and firing.

2. From the perspective of employers, including all types of for-profit and not-for-profit organizations, the direct and most significant effect is that the new labor law dramatically increases their labor costs. Because the new labor law includes terms and penalties if employers do not obey the law, the cost of illegal labor practices will be high.

Thanks heartily to the commentators for their thought-provoking comments. Thanks especially to the HRPS and Anna Tavis for putting this format together. We believe it will provide for some interesting reading.