How Does China's New Labour Contract Law Affect Floating Workers?
| DOI | http://doi.org/10.1111/bjir.12056 |
| Published date | 01 December 2015 |
| Date | 01 December 2015 |
How Does China’s New Labour Contract
Law Affect Floating Workers?
Xiaoying Li and Richard B. Freeman
Abstract
China’s new Labour Contract Law took effect in January 2008 and required
firms to give migrant workers written contracts, strengthened labour protec-
tions for workers and contained penalties for firms that did not follow the labour
code. This article uses survey data of migrant workers in the Pearl River Delta
before and after the law, and a retrospective question on when workers received
their first labour contract to assess the effects of the law on labour outcomes.
The evidence shows that the new law increased the percentage of migrant
workers with written contracts, which in turn raised social insurance coverage,
reduced the likelihood of wage arrears and raised the likelihood that workers
had a union at their workplace.
1. Introduction
A massive flow of low-wage migrant workers from rural areas to urban
factories and construction sites fuelled China’s economic growth. Between
1980 and 2010, some 150–160 million persons without official household
permits for urban residence migrated to work in cities.1With limited skills
and little access to legal protection, many migrants faced ‘sweatshop condi-
tions’ that included wage arrears (in which firms delay wage payments or do
not pay them in full), unhealthy work environments, violations of their legal
rights at work, poor treatment by employers and limited provision of the
social insurances that Chinese law requires employers to give to workers.
Informal employment became widespread among both migrant workers and
urban workers (Kuruvilla et al. 2011: 1–14). In response to these conditions,
workers increasingly engaged in protests, ranging from wildcat strikes to civil
disobedience — blocking roads, surrounding work sites in large numbers and
the like — which the government viewed as threatening social stability (Lee
2007).
Xiaoying Li is at Sun Yat-sen University. Richard B. Freeman is at Harvard and NBER.
British Journal of Industrial Relations doi: 10.1111/bjir.12056
© John Wiley & Sons Ltd/London School of Economics 2014. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
53:4 D ecemb er 2015 0007–1080 pp. 711 –735
British Journal of Industrial Relations
To improve the way employers treat workers and to direct workers’ griev-
ances to legal channels, the Chinese government passed a new Labour Con-
tract Law on 29 June 2007 to take effect on 1 January 2008. The new law
sought ‘to specify rights and responsibilities of management and labor,
protect labor’s rights, develop harmonious labor relations’, and to tilt the
labour management system towards workers (Chang and Qiu 2011: 43–7).
The law generated considerable debate within China and in the international
business and labour community as well. Proponents and opponents of the
law based their positions either on prior beliefs or ideological preconceptions,
or on a limited number of cases and interviews (Lee and Liu 2011).
Did the new contract labour law increase the likelihood that migrant
workers would gain an individual contract? If so, did gaining a contract
improve the working lives of migrants?
In this article, we use cross-section surveys of migrant workers in 2006,
2008 and 2009 in nine cities of Pearl River Delta (PRD) in South China —
Guangzhou, Shenzhen, Dongguan, Foshan, Huizhou, Zhaoqing, Jiangmen,
Zhongshan and Zhuhai — to answer these questions. The surveys asked
workers about their current labour situation, including their contractual
status. Since the 2006 survey precedes the new law, and the 2008 and 2009
surveys follow the law, we analyse the implementation of the law by a
before–after design. The 2008 and 2009 surveys also asked workers about
the first time they received a contract. We use this question to conduct a
‘retrospective longitudinal analysis’ of the contract status of the same
worker before and after the law. We assess the effects of gaining a contract
on the receipt of social insurance, wage arrears and union status by
comparing these outcomes for workers who obtained their first labour
contract after the law with workers who lacked contracts before and after
the law.
Our principal findings are (a) that the new contract labour law substan-
tially increased the likelihood that migrant workers obtained a written con-
tract; and (b) that workers who gained a contract were more likely to have
social insurance and a union at their workplace, and less likely to experience
wage arrears.
The remainder of the article is organized as follows. Section 2 places the
Labour Contract Law into the context of China’s movement to a modern
labour market and labour relations system, and summarizes the debate over
the law’s enactment. Section 3 introduces the PRD surveys and presents our
estimates of the effect of the law on the likelihood that migrants obtain a
written contract. Section 4 analyses the effects of the change in coverage on
provision of social insurance, wage arrears and unionization. It decomposes
the law’s effects into its impact on firm policy, the movement of workers from
firms without contracts to those with contracts and the contract status of new
entrants relative to exiting workers during the period when the law took
effect. We conclude by situating the experience of the Labour Contract Law
in social and economic analysis of changes in the institutions that govern
labour practices.
© John Wiley & Sons Ltd/London School of Economics 2014.
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