Reforms and Labour s Landscape in Contemporary China Praveen Jha Sakti Golder Abstract By all accounts China s economic growth in the recent years has been an astounding one However one of the major issues of concern that has emerged in a context of very impressive growth performance for almost three decades now is the well being of workers in this country Even though there is not much theoretical support or hard evidence to connect economic performance to labour market flexibility policy makers almost everywhere in the world including in China appear to be persuaded by such a connection This paper focuses on some issues related to the well being of labour in contemporary China in particular we take a look at the relevant labour related policies and their implications for employment Introduction Praveen Jha is on the faculty of the Centre for Economic Studies and Planning and Sakti Golder is pursuing his Ph D at the same centre Inspite of the lack of theoretical and empirical evidences labour market reforms have acquired a centrality in official economic policy discourses across the globe and labour market flexibility is being prescribed as the key to enhance productivity to be more competitive to accelerate employment generation and also to step up the tempo of economic growth Blanchard and Wolfers 2000 Besley and Burgess 2004 Burki and Perry 1997 Forteza and Rama 2002 Heckman et al 2003 Salvances 1997 among others In this context India and China have been at the centre stage of the recent debates and discussions as both these countries are going through an economic transformation and the issues relating to their respective labour regimes have been in sharp focus Given that these two giants of the global economy account for almost 41 percent of the global workforce the significance of their labour policies can hardly be overstated As is well known China started its transition to market economy towards the end of the 1970s and its remarkable growth story for almost three decades now has led to debates regarding the aspect of its policies that can be emulated elsewhere In this context the view that China has managed to address marked rigidities in its labour market and India also needs to do away with the high degree of protection to its organised labour has gained considerable ground and the official thinking has endorsed such a view explicitly However the view that labour laws ought to be considered a major hindrance to industrial growth in India is quite suspect as is well known such laws for all practical purposes are applicable to less than 10 percent of the workforce Furthermore in the recent years these laws have been diluted in many ways Given that very significant 2 changes towards flexibilisation even for this small segment the socalled organised sector have taken place the overall policy environmental can hardly be considered as creating significant rigidities in the country s labour market For instance the introduction of a voluntary retirement scheme in the early 1990s and its rapid spread subsequently may well have legitimized layoffs retrenchments and in general freer policies of hire and fire across the board in India s registered manufacturing sector although on paper the labour laws have largely remained unchanged It is well documented that their implementation appears to have been diluted substantially as the governments at different levels have become even for indifferent towards enforcing them in the recent years Anant et al 2006 Sharma 2006 In other words a realistic assessment of the ground reality of India s labour market would seem to suggest that except for a miniscule segment of workers with some degree of protection we almost have a classic text book model of flexible labour market Hence the clamour for its further flexibilisation to accelerate GDP growth rate or other indicators of economic performance seems quite bizarre in the Indian case even if there is some such connection in the case of China Furthermore it is elementary commonsense that a country whose labour market is almost fully flexible whatever the laws1 may be has little to learn about the virtues of flexibilisation from some other economy Sure enough the transition to a market economy in China has resulted in a process of gradual withdrawal of the protective coverage for workers associated with socialism however to argue that the labour market in China is considerably more flexible than India may well be off the mark In fact the request of the Second National 3 Commission on Labour 2002 set up by the Government of India took the view that China s labour market was substantially more protected and regulated than that of India s In this paper we do not wish to enter into a comparative assessment of these two labour markets but would only like to note that the judgement of the above said Commission appears closer to the ground reality than the opposite view as we have argued in some detail elsewhere Jha Golder 2007 Nonetheless there is hardly any doubt that the policy makers have increasingly become anti labour in China with the progress of its economic reforms One may also go along with the view that the complex story of China s very impressive economic performance which many consider praiseworthy should also take into account the ongoing transition in its labour regime During approximately two and a half decades beginning 1980 China s GDP expanded seven fold or about fourfold in terms of real GDP per capita and it stands to reason that this wouldn t have been possible without a gradual marketisation of the economy and integration with the world market during the era of ongoing globalization2 However as has been observed by several commentators Patnaik 2007 HartLandsberg and Burkett 2007 among others there are several worrisome aspects of the Chinese growth pattern3 in terms of the sources and stability of the growth as well as extremely inadequate transformation of its growth into commensurate welfare improvements for all its citizens During the reform period since the late 1970s China has increasingly adopted the foreign driven and export led growth strategy which has an intrinsic tendency to breed social inequality and consequently the persistence of deprivation Patnaik 2007 which the country has already experienced it in the recent 4 years As Hart Landsberg and Burkett have argued systematic dispossession of workers and pesants through the break up of communes massive layoffs in the
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