Moving In and Moving Up? Labor Conditions and China's Changing Development Model
| Published date | 01 August 2017 |
| Author | Yujeong Yang,Mary Gallagher |
| DOI | http://doi.org/10.1002/pad.1800 |
| Date | 01 August 2017 |
MOVING IN AND MOVING UP? LABOR CONDITIONS AND CHINA’S
CHANGING DEVELOPMENT MODEL
YUJEONG YANG AND MARY GALLAGHER*
University of Michigan, USA
SUMMARY
For the last decade, a large contingent of manufacturing firms in developmental zones on China’s coast has moved to inland
provinces. What are the implications of this move inland for Chinese workers? Research on labor conditions in the current
period of economic globalization and mobile capital debates the existence of a “race to the bottom”in labor standards through
the pressures of international capital mobility. These theories predict that as inland China develops and attracts a larger amount
of foreign and domestic capital, inland governments will compete by offering cheap labor and lower or unenforced standards.
Our argument in this paper is contrarian in that we propose the possibility of a positive relationship between the movement
inland and labor conditions. We argue that the movement of manufacturing to inland China is not primarily about cheaper
workers, but instead signals the beginning of a fundamental shift in the development model through the employment of a
localized workforce. Having more workers from within the province, local governments in inland provinces will be more
inclined to develop inclusive social policies and improve labor conditions. Local governments in coastal provinces that inherit
fundamentally different demographic structures are less likely to pursue this governance style. We use audit data from Apple
corporation suppliers (2007–2013), supplementary survey data, and in-depth interviews to discuss the relationship between
localized production and better labor conditions. Copyright © 2017 John Wiley & Sons, Ltd.
key words—China; urbanization; labor standards; migration; industrial relocation; corporate social responsibility (CSR);
inclusive development; local governance
MOVING INLAND-RACE TO THE BOTTOM REDUX?
After China entered the WTO in 2001, there was widespread fear that the low cost of Chinese labor would
demolish workers around the globe as firms relocated production to take advantage of its competitive advantage,
known popularly as the “China price”(Harney, 2008; David et al., 2016; Davis and Hilsenrath, 2016). Now, these
insecurities have been passed on to China internally, as coastal governments and citizens worry about their ability
to attract new kinds of investment to replace the labor-intensive manufacturers moving inland or abroad. What are
the implications of industrial relocation to inland China for Chinese workers?
The literature on the relationship between labor conditions and the movement of capital is pessimistic as it posits
that the relative mobility of capital over labor empowers firms at the expense of workers.
1
The literature on labor
conditions in the context of economic globalization and mobile capital debates the existence of a “race to the
bottom”in standards through the pressures of international capital mobility (Huber and Stephens, 2001; Mosley
and Singer, 2015). Governments will struggle to retain or attract investment through competitive deregulation of
labor markets, adversely affecting employment security, protection, and other basic conditions such as wages
and benefits. Accordingly, these theories predict that as inland China develops and attracts a larger amount of
foreign and domestic capital, inland governments will compete by offering cheap labor and lower or unenforced
labor and environmental standards.
1
Of course, the relative mobility of migrant labor in China is much higher than workers generally, which is part of our contrarian argument.
*Correspondence to: M. Gallagher, University of Michigan, Ann Arbor, MI, USA. E-mail: metg@umich.edu
public administration and development
Public Admin. Dev. 37, 160–175 (2017)
Published online in Wiley Online Library
(wileyonlinelibrary.com) DOI: 10.1002/pad.1800
Copyright © 2017 John Wiley & Sons, Ltd.
The pessimism of “race to the bottom”theories is not limited to studies of labor conditions amid rapid economic
globalization. Research on social responsibility models of private regulation as a replacement or complement to
government regulation generally finds that private regulation by corporate social responsibility (CSR) codes and
external monitoring fail without complementary social institutions (Locke, 2013). For example, Amengual finds
that government enforcement in the Dominican Republic was more effective when it worked in tandem with
private regulation and the mobilization of workers and unions (Amengual, 2010). Amengual and Chirot (2015) also
find a synergistic relationship between social mobilization, private actors, and state regulation in the Indonesian
apparel sector.
Applying these arguments to the Chinese case, we should expect that labor conditions will be better in areas
with activist civil society actors, “rights protection”lawyers, and a more daring local union operation. These
characteristics are clearly more visible in China’s coastal cities, especially Guangdong Province with its close
proximity to labor NGOs and a free media in Hong Kong (Cheng et al., 2010; Friedman, 2014; Spires et al., 2014).
Finally, the China-specific literature on local state capacity generally finds that areas with higher levels of
economic development, foreign direct investment, and a rising middle class correlates with a more responsive
and responsible governance model (Wang, 2015; Ang, 2016). Inland areas with their focus on economic
development and investment are further behind in this evolution. These areas also face less pressure from civil
society to improve labor conditions or the environment.
However, in this paper, we find that the relocation of firms from coastal provinces to inland provinces in China
does not necessarily lead to the deterioration of labor conditions and social provision levels for workers.
Conversely, local-level labor conditions and firm-level compliance levels in inland cities are no worse than those
of developed coastal areas. What explains the possibility of a positive relationship between the movement inland
and labor conditions?
“Race to the bottom”theories may not apply when labor mobility is as important as capital mobility in
determining how firms treat workers. A primary difference between coastal and inland development is the
composition of the workforce. In the movement to inland China, employers seek out not only lower costs, but also
a more stable supply of labor, leading to a much higher ratio of intra-province employees, compared to coastal
factories that have relied on a migrant workforce from other provinces for decades. Likewise, inland employmen t
opportunities have expanded and demographic shifts have led to tightening labor markets. Rural citizens of inland
China now choose between employment options in far-flung cities on the coast and work in nearby cities. Local
governments, faced with urbanization goals and quotas from the central government, may be more likely to build
inclusive urbanization policies when the targets of urbanization hail from more proximate areas, sharing cultural
and linguistic characteristics. The incentives and expectations of all three actors—firms, workers, and local
governments—may be different under conditions of longer time horizons, less mobility, and greater social and
cultural integration of migrants and local residents. This transition to a more local workforce in inland factories
may contribute to the central government’s goal to shift China’s developmental model toward domestic demand
and consumption, as workers with more security and stability will also be more capable of consuming.
2
The paper proceeds as follow. After introducing our data and methods, we discuss how China’s development
model has shifted over time and across regions. The trajectory of economic development in inland provinces in
China is fundamentally different from that which developed in Chinese coastal provinces. In the Section
“Motivating Case Analysis: Shenzhen and Chengdu”, we examine how the two divergent development paths
emerged by comparing two motivating cases of Shenzhen and Chengdu. We identify the key differences of the
two cities and discuss how diverging initial conditions led Shenzhen to rely overwhelmingly on a migratory
workforce from outside Guangdong Province while Chengdu, as a late developer in inland China, at tracted workers
predominantly from within Sichuan Province. In the Section Firm-Level Comparison, we discuss how these
differences in workforce composition affect firm-level labor conditions as well. In the
Section Data Analysis and Discussion, we propose several hypotheses generated from Shenzhen and Chengdu
2
We do not go this far in this paper. However, we examine factors such as employment security and social insurance coverage, which are
precursors to such a shift.
161CHINA’S CHANGING LABOR CONDITIONS
Copyright © 2017 John Wiley & Sons, Ltd. Public Admin. Dev. 37, 160–175 (2017)
DOI: 10.1002/pad
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