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Exploitation of Migrant Workers in China's Export Manufacturing Sector
By ANITA CHAN

The recent expansion of China's manufacturing exports has spurred job growth in the country's low-wage export industries. But the sector's production workers, many of whom are migrants from the countryside, have seen little or no improvement in wages and working conditions. The minimum-wage system, designed to protect these employees, has not led to meaningful gains; and employers continue to demand long hours, withhold pay, and offer few safety and health protections. The hukou (household registration) system, which controls the movement of the population, adds to worker insecurity and vulnerability.

Minimum Wages

	At a factory near Shenzhen, migrant workers fill the street in front of their dormitory during shift change. Photo by Earl Brown.

When China instituted a minimum-wage system in the early 1990s, policymakers had the good intention of helping workers in the export sector. In practice, however, these workers' gains have not kept pace with those enjoyed by other employees. This is particularly true in locations where export production is most heavily concentrated.

Most developed countries have a single minimum wage, but in China there are hundreds. Each city-or even a district in a city-can set its own minimum wage based on a formula provided by the central government. That wage, which is adjusted annually, is supposed to take into account factors such as the local cost of living, the prevailing wage, and the inflation rate.

According to the international standard employed by the Chinese government, the minimum wage of a locality should be set within 40 to 60 percent of the average wage in that area. However, Table 1 shows that many of the nation's largest cities fail to meet this standard. Since 1993, the minimum wage has reached the 40 percent level in only two of the six listed cities-and the wage even in those cities failed to meet the legal standard in some years.

Download PDF of Table: Proportion of Minimum Wages to Employees' Average Wages in Selected Large Cities of China (1993-2000)

The general trend in minimum wages has been one of stagnation or steady decline when compared to the incomes of urban residents overall. In Beijing, for example, the minimum wage declined from 36.7 percent of that city's average wage in 1994 to only 27 percent in 1999. Similarly, the minimum wage in Shenzhen City fell from 40.3 percent 1993 to 23.8 percent in 1999. This means that the income gap between migrant workers and the rest of China's urban population widened in the 1990s.(1)

Although minimum wages were established to benefit export-sector workers, the income gap since 1997 has been at its widest in the coastal areas of Guangzhou and Shenzhen, cities that have the highest average income in the country and that were the first areas the central government allowed to woo foreign investment. In these cities, the most recently available figures show a minimum wage at less than 30 percent of the local average wage.

In fact, the lowest minimum-wage level (relative to average wages) found in the nine cities listed in Table 1 is the latest wage for China's most famous export zone, Shenzhen (23.8 percent of average wages). In contrast, Chongqing, located in the interior of China and the least linked with the global economy relative to the others in Table 1, usually reached or exceeded the 40 percent "minimum wage relative to average wage" figure during the period 1996-2000.

These wage figures reflect a worrying trend. As a region becomes richer, it violates the national guidelines and seeks to maintain its attractiveness to foreign capital by keeping its minimum wage low. In accordance with this competitive logic, the benefits of globalization do not trickle down to those who make the products.

Competition within China between different regions exacerbates this problem of low wages, and the central government has intervened in a way that encourages even lower pay. Though migrant workers' wages in Guangdong province are very low, the central government has been worried that Guangdong is pricing itself out of the international market. The government therefore has started to encourage foreign capital to move inland to places where the pay is even lower. In fact, the owner of an Australian toy company who sources some of her merchandize from China told me that she now sources from factories further north and away from big cities; the products, she said, are just as good-and cheaper.

Although Table 1 shows that the minimum wages have been increasing every year, adjusting for price changes reveals that these wage gains have almost exactly kept pace with inflation. In other words, even though the Chinese economy is rapidly developing, in real terms the minimum wages have remained flat throughout the 1990s.

Hours, Withheld Pay, and Working Conditions
What Table 1 doesn't show is that the wages of migrant industrial workers are even lower than they appear. The minimum wage, defined as a monthly rate of pay, does not reveal the illegally long hours often worked by migrants to attain that minimum. According to a survey I conducted in China's footwear industry, the average number of work hours came to about 11 hours per day, often with no days off-that is, about an 80-hour workweek.

	In China's footwear industry, employees--such as those shown here at a factory that makes Keds sneakers--often work an 80 hour week. Photo provided by National Labor Committee.

Nor do the official statistics take into consideration the staggering amount of wages owed but not paid to migrant workers. In 2001, unpaid wages were the source of 43 percent of the 51,000 workers' complaints lodged to Shenzhen authorities by letters or personal visits.(2) One Chinese newspaper article described this withheld pay as having become a "custom" in Guangdong, while another described it as an "incurable disease."(3) When the long work hours and unpaid wages are taken into account, a sizeable proportion of workers are making considerably less than the legal minimum wage.

The official minimum-wage figures do not tell the whole story in other ways. They reveal neither the violence and physical abuses that have become pervasive in the factories in China owned and managed by Taiwanese, Koreans and Hong Kong Chinese, nor the acute and chronic occupational health and safety problems. For example, a startlingly high incidence of severed limbs and fingers has been recorded: In Shenzhen City alone, there were over 10,000 certified cases in 1999 among a migrant population of 3 to 4 million.

In short, in the face of intensified competition with Southeast Asian labor, which had become much cheaper in the wake of currency devaluations, China remains attractive to foreign investors in industry partly because it turns a blind eye to labor violations.

The Hukou System
Worker exploitation in China is not just the result of ineffective labor standards. It is also a product of the hukou (household registration) system, which prevents an uncontrolled rural-to-urban influx of population. This works in similar ways to the "pass system" under South Africa's former system of apartheid.

Since some readers might immediately react negatively to such a comparison, let me emphasize that the two systems differ markedly from each other in origin and ideology. The South African pass system was intertwined with a history of racism, colonialism and the development of South African capitalism, all of which favored control of the movement of African people as a way to provide greater political security and enhanced efficiency in the use of black labor. The ideology on which the system was based was white supremacy, and apartheid was the cornerstone of the South African ruling elite's state-building project after the Second World War.

The hukou system has a shorter history. It was established in China after the Communist Party came to power in 1949. To ensure that the planned economy met the urban people's basic needs, a rationing system was instituted in the 1950s, which in turn required the registration of people. As ration coupons could only be used in the locality where they were issued, this automatically restricted the geographical mobility of all people, not just peasants. To reside in a different locality, one needed a special temporary certificate.(4)

This system of passes has been retained to the present day. The system is similar to what prevailed in South Africa in the way it constrains the geographical mobility of workers and in how it can drive down wages and labor standards. Although it was designed for other purposes, China's hukou system continues because it serves an economic function in this transitional period from socialism to capitalism.

The passes act like sluice gates controlling the influx of labor. The hukou system lets in more laborers when needed, and drives them out when their numbers are excessive or when they stretch local facilities to the limit. When workers lose their ability to work through industrial accidents, or when they have become too "old" (by the age of about 30) to keep up with the break-neck work intensity, the system enables cities to ship them back to the countryside; without a job a migrant has no right to stay in an urban area. This high degree of labor flexibility cannot be achieved by relying solely on the local urban population.

For local governments, admitting migrants can be lucrative. Migrant workers generate tax revenue by attracting companies that want cheap labor. At the same time, these localities have no responsibility for the welfare of the migrants, who are not eligible for any of the medical, housing or unemployment benefits available to local residents. Nor are the workers allowed to bring their families, which means the urban government has no additional educational expenses to meet.

Despite this pass system and the enormous bureaucratic edifice erected to administer it, China has not been able to effectively regulate the number of peasants surging out of poor regions in search of jobs. Estimates of their numbers usually range between 60 and 80 million. In the week immediately after the Chinese New Year, when migrant workers who have gone home for the festival return to the cities, often bringing with them relatives and friends seeking work, the effect on transportation is dramatic. For instance, in a matter of days Guangzhou, the largest city in South China, suddenly has several million migrant workers descending upon it by trains and buses. In the hope of dampening this vast simultaneous inflow, the Guangdong provincial government announced in 2002 that factories should not recruit new migrants at that time of year, but still 5.2 million migrants poured in after the New Year, a quarter of a million more than the year before.(5)

Insecurity and Exploitation
The large volume of people looking for low-end jobs drives down wages and working conditions, and allows employers to exploit workers. New arrivals, desperate to recoup the amount they have invested in transportation expenses and in applying for the array of necessary documents and certificates before leaving home, are particularly vulnerable.

Here is the case of one migrant, as reported in a Chinese newspaper. A friend informed the young migrant that if he went to Shenzhen he would find a job. The migrant was advised that before leaving home he had to apply for a number of documents. These included a "border region pass" (at 120 Yuan, taking six months), a personal identity card (another 80 Yuan, taking a month), an unmarried status certificate (60 Yuan and valid for one year), and a certificate to prove that he was not born out of quota (45 Yuan and valid for a year), documents totalling 305 Yuan.(6) To put this into perspective, the minimum wage in Shenzhen in 2000 was 547 Yuan for a full month's work, and this young man would be lucky if he could enter a factory that would even pay him the minimum wage.

On arrival in Shenzhen, armed with these documents, he thought he could become a legal migrant worker and begin working. But the factory demanded 300 Yuan as a deposit before it would give him the job. In all, including transportation expenses, the trek cost him almost twice as much as the monthly wage. This explains why most new migrants are in debt soon after arriving in a city.

According to official statistics, each of the three- or four-million migrants in the Shenzhen Economic Zone spends an average of 600 Yuan per year on certificates, almost 10 percent of their total annual income.(7) Migrants must carry these documents with them at all times. To possess all the certificates, one needs to hold a job, and so there is a nervous race to secure one.

The deposit that migrants are forced to pay to an employer is symptomatic of the desperate situation of most migrant workers. Paying a substantial deposit has become a common practice at the foreign-owned factories. At first sight, the practice seems paradoxical. Instead of the employer paying workers for the work performed, workers first have to provide a payment to an employer as surety for the job. The deposit obliges a worker to remain at the factory or forfeit it. For all intents and purposes, the worker is a bonded laborer.(8)

Another practice of many unscrupulous employers is to withhold a portion of wages every month, promising to pay it at the end of the year. In this situation, the longer a worker has worked, the more money he or she is owed by the employer, and the more difficult it is for the worker to quit. This leaves the worker vulnerable, afraid to forfeit unpaid wages in the face of poor treatment by factory managers.

Workers' dormitories, usually located within a factory compound, extend management control over migrants' lives beyond work hours. Movement into and out of the compound can be monitored and controlled. Disciplining workers is easier because there is near-total control over them. Especially in the factories in China owned and managed by Taiwanese and Koreans, the discipline is so strict that the management style can be described as militaristic. In some of the bigger factories that I have visited, workers are even marched to and from meals and dormitories in tight military-style squads.(9)

Another effective way for employers to control migrants is to take away and lock up their documents. Without these papers, workers cannot look for another job even when workplace conditions are intolerable and when they desperately want to quit. Taking such papers from migrants is a widespread practice. As a result, it has become common for workers who want to escape to another job to borrow documents from friends or to purchase forged ones, just as was the case in South Africa.(10)

According to one survey conducted by a government labor bureau in Guangdong, 80 percent of the foreign employers admitted that they did not care whether job applicants' documents were forged because this did not affect production. When the violation of regulations is so widespread, this implies that the local authorities and police have granted their tacit approval.

Yet this does not stop the police from detaining migrants and arbitrarily demanding bribes. Police stations consider this a lucrative business, because bail, fines and bribes can each generate a few hundred Yuan. The practice had gotten so out of hand recently that the Guangdong government felt it needed to pass a regulation in 2002 which emphasized that detaining "vagabonds" should be restricted to beggars and not applied to migrant workers who do not have the right papers on them.(11) Rather than comply with the regulation, however, the provincial police declared that the law was not being misused, reaffirmed the necessity of rigorously implementing the pass system, and never mentioned that the police had been detaining and abusing large numbers of migrant workers.(12) Those who gain from the system are not going to desist so easily.

After a university-educated migrant-not an ordinary production-line manual worker-was recently beaten to death at a Guangdong detention center, the central government reacted to a nationwide outcry by passing a new regulation specifying that migrant workers can no longer be arrested for not possessing the right papers. It is too early to tell whether local police forces are obeying this rule, however. Notably, the hukou system remains firmly in place.

It has been observed here that the Chinese hukou system generates outcomes similar to those produced by the pass system under apartheid in South Africa. Each system yielded a large underclass subject to daily discrimination, suppression, hardship, and denial of their human dignity. Despite labor-market regulations and rapid export-sector growth, life for China's migrant workers remains insecure and vulnerable.

Notes
1. The trend in minimum wages relative to average wages parallels China's increasing Gini coefficient, a measure of income inequality, in the 1990s. The Gini rose from 0.42 in 1996 to 0.458 in 2000. (Zhongguo Gaige Bao [Chinese Reform News], September 11, 2001.) A figure of 0.4 is considered high internationally.
2. Zhongguo Laodong Baozhang Bao [Chinese Labor Insurance News], February 19, 2002.
3. Gongren Ribao [Worker's Daily], May 9, 2001; Zhongguo Laodong Baozhang Bao, February 19, 2002.
4. Cheng, Tiejun and Mark Selden, "The Origins and Social Consequences of China's Hukou System," China Quarterly, No. 139 (September 1994), pp. 644-668.
5. Li, Clara, "Migrant Workers Out in Cold," South China Morning Post, February 26, 2002.
6. Yangcheng Wanbao [Guangzhou Evening News], March 30, 2001.
7. Ibid.
8. Chan, Anita, "Globalization, China's Free (Read Bonded) Labour Market, and the Chinese Trade Union, " Asia Pacific Business Review, Vol. 6, No. 3 and 4 (Spring/Summer 2000), pp. 260-81.
9. Chan, Anita, "Regimented Workers in China's Free Labour Market," China Perspectives, No. 9 (January-February, 1997), pp. 12-16.
10. Chan, Anita, "The Culture of Survival: Lives of Migrant Workers through the Prism of Private Letters," in Perry Link, Richard Madsen and Paul Pickowicz, editors, Popular China: Unofficial Culture in a Globalizing Society. Boulder: Rowman & Littlefield, 2002, pp. 163-188.
11. Nanfang Ribao [Southern Daily, Guangzhou], March 29, 2002.
12. Yangcheng Wanbao, April 22, 2002.

ANITA CHAN is a Research Fellow at the Contemporary China Centre, Australian National University. She is also co-editor of The China Journal. Her research focuses on Chinese labor issues, and her most recent book is China's Workers Under Assault: The Exploitation of Labor in a Globalizing Economy.

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