State-Endorsed Exploitation and a Segmented Labor Market in Shenzhen’s Garment Industry

Abstract

This chapter concerns the structural changes of factory regimes in Shenzhen, China, by way of capturing the up-to-date situation of state regulations and labor market conditions. A close look at Chinese labor laws reveals that many new statutes either are not enforced or contain loopholes, resulting in what I refer to as “state-endorsed exploitation by law non-enforcement.” Factory management has enjoyed great managerial autonomy inside factories. Yet, workers’ increasing legal knowledge becomes a check on management’s autonomy. Another focus is the changing labor market in Shenzhen’s garment industry. In the past decade, the local migrant labor market has been increasingly segregated by age. This results in migrant workers in their 30s facing very different working conditions compared to younger workers in their 20s.

In the previous chapter, I detailed the social and material lives of migrant workers under factory-dormitory and industrial-village settings. Under the dormitory-labor regime, management could easily access their workforce at any time. However, to allow this factory regime to function, two conditions were necessary. First, state support for the reproduction of labor power and the state’s direct regulation of labor relations had to be low; accordingly, factory management could enjoy internal managerial autonomy and thus exercise despotic control inside factories. Second, a labor surplus has to exist in the market as a counteracting force to limit wage increases and restrain a high turnover; management can appropriate particular qualities of labor power and drive down wages without difficulties.

In the 1990s, the two critical conditions were in place in Shenzhen. Shenzhen’s minimum wage guideline was passed in 1992, but labor officials in the 1990s were reluctant to enforce it in foreign-funded factories, and workplace trade unions and collective bargaining mechanisms were either unrecognized or did not protect workers from despotic control and wage reductions. As Ching Kwan Lee observes, the local state in Shenzhen was a “clientalist state”—local state officials and foreign investors colluded to build clientalist relations with officials through “guanxi” and a “gift economy” to pursue their power and interests. These clientalist relations made state support for migrant workers’ reproduction of labor power non-existent. Migrant workers were vulnerable and had to sell their labor power cheaply to factory management for survival,¹ placing them in a disadvantageous bargaining position and undermining their resistance to managerial domination.² It also gave Shenzhen’s employers plenty of choice in the labor market to set recruitment criteria to select the best and most suitable types of labor. In the 1990s, Shenzhen’s labor was selected along age, gender, and locality principles, under which young female workers provided the prime labor force for foreign-funded factories (Lee, 1998, pp. 56–57).

After two decades as one of the migrant workers’ major destination cities, Shenzhen has a less homogeneous labor market. Today, it is a mixed pool of old and young migrants, male and female, skilled and unskilled, literate and illiterate. As more of China’s inland provinces began to industrialize, Shenzhen’s labor market competes with labor markets in other cities for its migrant workforce. Occasionally, Shenzhen has experienced labor shortages in the past decade. Today most foreign-funded factories comply with Shenzhen’s minimum wage guidelines. Other labor legislation such as work-time arrangements, overtime compensation and labor contracts, have been passed. Thus, in light of the legal changes, we should ask: Is exploitation, in the form of labor law violations, still serious in today’s Shenzhen? If so, in what ways does factory management violate workers’ labor rights? Do workers possess any knowledge of the labor laws? In what ways does new labor legislation change relations between the state, capital, and labor? Most importantly, does factory management still enjoy internal autonomy as was the case in the early 1990s?

Empirical evidence for this chapter includes qualitative and quantitative data. For the qualitative information, apart from my ethnographic fieldwork in Jade Village, I visited another eleven garment factories elsewhere in Shenzhen in 2010 and 2011. During these visits, I interviewed workers in those factories and observed their working and living environments. The quantitative data utilized in this chapter derives from my 2010 Shenzhen garment factory survey of six Hong Kong-invested garment factories in Shenzhen. The survey was conducted outside the gates of two small, two medium-sized and two large factories. I collected 389 questionnaires in total, with the number of respondents from each in proportion to the estimated factory size. Interviews were also carried out with factory owners, middle management, merchandisers, and workers.

This chapter is divided into three parts. The first focuses on state regulations: the continuity of and changes to labor law violations in Shenzhen, workers’ legal knowledge and loopholes in the Chinese labor law. The second examines the conditions of Shenzhen’s labor market. In particular, through statistical analysis, the principal mechanisms that draw migrant garment workers to different types of garment factories are identified. The third explains the existence of different types of garment factories through examining the impact of global garment production on Shenzhen’s local garment production, factory competition, and operations. The chapter concludes by addressing the role of the state, labor ordinances, and labor market conditions in shaping changes in factory regimes, particularly the state’s role in workplace exploitation of today’s post-socialist China.

State-Endorsed Exploitation and Employers’ Managerial Autonomy

Although China’s first national labor law was passed in 1994, the drafting of the law had begun early in the reform era but was delayed for many years as competing interests in the bureaucracy argued for various provisions. As Murray Scot Tanner (1999) notes in his study of lawmaking in China, the labor law was affected by the vagaries of central leadership struggles over the path and speed of economic reform. Before 1994, Chinese employers and workers were regulated by a wide array of administrative regulations, State Council directives, and laws passed by the National People’s Congress. These regulations, laws, and directives were chaotic, fragmented, and not comprehensive, resulting in unequal standards among different enterprises based on ownership type and becoming increasingly untenable as economic reform deepened in the 1990s (Dong & Gallagher, 2011).

Despite the Chinese government’s effort to improve migrant workers’ work conditions and livelihoods through introducing new laws and adjusting local minimum wages, its impact on migrant workers was not great and these efforts were still widely criticized as “formal” rather than “substantial.” The government was also criticized for purposively setting the minimum wage too low as a way of attracting foreign investment. For example, as Fig. 4.1 illustrates, although Shenzhen’s legal minimum wage rose from 286 yuan (42 US$) to 330 yuan (49 US$) between 1993 and 1999, when adjusted for inflation the real minimum wage shows barely any real increase during the period, sometimes even having declined in real terms. Not only did the minimum wage have no real impact in lifting workers’ livelihoods, throughout the whole 1990s income inequality between migrants and urbanities was further widening. As shown in Fig. 4.1, the gap between migrants’ real minimum wage and urban residents’ real average wage doubled between 1993 and 1999.

Fig. 4.1

(Source Shenzhen Statistical Yearbooks [1993–2018])

Urban residents’ average wages and migrant workers’ legal minimum wages (adjusted by cumulative inflation) in outer Shenzhen city, 1993–2016

To make things worse, during the 1990s most foreign investors simply paid no attention to the minimum wage guidelines and labor officials were reluctant to enforce it. Thus, in most cases, migrant workers were paid less than the guideline. The Zhili factory workers’ private letters are instructive again here. In 1993, the monthly minimum wage set by the Shenzhen government was 280 yuan (41 US$). This was a benchmark standard to which factory employers were supposed to abide; any monthly pay for an eight-hour workday below this standard was illegal. From the private letters received by Zhili factory workers, 44 out of 76 letters mentioned wage details. Two non-production-line workers earned more than 280 yuan (41 US$) monthly. Among the line workers, the highest pay earned was 760 yuan (112 US$), earned by a woman who worked extremely long hours a month and led to her serious weight loss down to 90 pounds when she wrote her letter. Only four line workers earned at the legal minimum—280 yuan (41 US$). Nineteen line workers earned between 200 and 280 yuan (between 30 and 41 US$). Another eighteen line workers earned less than 200 yuan (less than US$ 30), the lowest pay being 60 yuan (9 US$) a month. Only a small portion of Shenzhen workers could earn at or above the legal minimum. However, after we consider the daily work hours they usually performed—12 hours as a normal working day (rather than the eight-hour working day set by the Law)—we can confidently say that almost all line workers in the sample were paid below the legal minimum standard.

In fact, failure to enforce the legal minimum wage standard was just a part of the story. After the promulgation of the 1994 labor law, legal violations were still common. Industrial injuries due to OHS violations, excess overtime, wage arrears, and physical punishment could be found in most foreign-funded factories in south China (Chan, 2001). In particular, because local state officials had vested interests in promoting the local economy, low labor costs was one of their strategies to attract foreign investment. To maintain low labor costs, Shenzhen’s officials colluded with foreign investors. Officials deliberately ignored labor law violations in foreign-funded workplaces. As discussed in the previous chapter, excessively long working hours (often over 12 hours a day) and extremely low wages in export processing factories were “infamous norms” in the 1990s and characterized the Chinese way of production.

Entering the 2000s, migrant workers’ conditions and livelihoods greatly improved. As Fig. 4.1 shows, between 2004 and 2016 the minimum legal monthly wage for the first 40 hours a week, even when adjusted for inflation, almost tripled. Until less than a decade ago, employers used the legal minimum wage as the basis for what migrant workers earned during ordinary work hours, but what Fig. 4.1 does not show is that starting in the late 2000s many employers began offering more than the minimum wage as they competed for labor. In 2010, the legal minimum monthly wage for a 40-hour week was 1100 RMB, and when I conducted a survey (N = 394) of six garment factories of different sizes in Outer Shenzhen, the average wage of garment factory workers (including overtime work) was about RMB 1807 per month (Chan, Franceschini, & Siu, 2016; Siu, 2015). In early 2017, the minimum legal wage in Outer Shenzhen stood at RMB 2030 per month, but recruitment notices at the gates of factories in that region offered RMB 3500–4200 for non-skilled workers (including overtime work).

As Fig. 4.1 shows, during the previous year, 2016, the real minimum legal monthly wage had dipped slightly, as the Chinese economy slowed and as factories in the Pearl River Delta one after another moved to lower-wage countries such as Cambodia, India, Bangladesh, and Vietnam and to less expensive inland provinces in China. Whatever the future may bring, the tripling in real wages during the previous decade means the migrant workers, while still poor, are not desperately so, and can afford to spend part of their incomes on discretionary spending such as extra clothing, shampoo, electric fans, and mobile phones.

Labor Law Violations: Illegal Overtime, Unpaid Wages, and “Voluntary Overtime Work”

My 2010 garment factory survey provides data on how Chinese migrant workers were treated at garment workplaces in 2010. The sampled garment workers still worked extremely long hours in 2010. Under Chinese labor law, regular work hours are limited to 40 hours per week, which amounts to on average 21.75 days or 176 hours a month. All work hours are overtime hours beyond the regular hours of 40 hours per week with two days off a week, and not more than 36 hours of overtime a month. However, survey findings show that on average workers toiled about 300 hours a month, 124 of which were overtime hours. Based on the legal maximum of 212 hours as stipulated under the Chinese labor law, 88 overtime hours were illegal. Workers’ total work hours per month were 42% more than the legal maximum. Over half of the workers (52%) reported that they had to work more than eleven hours a day, and 93 out of 349 workers (about 27%) had fewer than four rest days a month, despite a minimum of four rest days required by the law. In the sample, only 38% of the workers could enjoy four rest days or more a month.

In fact, foreign investors today even do not hide their great appetite for workers’ time. In Jade Village, Pearl Factory management simply wrote, “Working time: Monday to Saturday; 10 to 11 hours of work every day” on their recruitment notices and posted them outside the main gate of Pearl Factory. It was common to hear Pearl Factory workers’ complaints about long working hours and insufficient rest days, especially during rush seasons. For instance, a female Pearl Factory worker complained, “I am already working from morning to night everyday now. Sometimes, I am even demanded by my line leader to work on Sundays!”

Not only is illegal overtime problematic, underpaying workers’ entitled wage was also serious. Under the Chinese labor law, the legal overtime rate for an ordinary working day is 1.5 times the regular hourly wage. After the fifth day, every hour is to be compensated at 2 times the regular hourly wage. Each hour of the seventh day is supposed to be compensated at 2 times the regular hourly wage. On public holidays, workers are compensated at 3 times the regular hourly wage. As we can see from Fig. 4.2, surveyed garment workers received on average 1807 yuan (267 US$) a month. But for the vast amount of overtime they put in, their legal entitlement should have been 4214 yuan (622 US$). Their received wage is only 43% of their legal wage. The gap is enormous—as wide as 2.3 times—which reflects on an extremely lax monitoring system. Only 40% of sampled workers were able to get a legal or slightly higher overtime rate for normal workdays while the remaining 60% got no overtime premium at all. Instead, they only got either the regular hourly rate or less. The most stunning finding is that about 15% of workers reported that they earned less than the regular hourly wage for overtime work on weekdays.

Fig. 4.2

Legal monthly minimum wage, basic wage, received wage, desired wage, and legally entitled wage, minimum monthly expenditure to support family (in US$) (N = 349)

More serious is the underpayment on Saturdays, Sundays, and public holidays. Less than 37% of workers earned a legal Saturday pay rate, which should be 2 times the regular hourly wage; in fact, 58% of workers earned the same or below the regular hourly wage on Saturday. Similarly, 60% of workers earned the same or less than regular hourly wage on Sunday. Work on a public holiday should be compensated at 300% of the regular hourly wage, but none of the workers in the sample were able to get this legal rate; 71% got 200% of the regular hourly wage or less (see Table 4.1). In point of fact, foreign investors in China do not usually pay Chinese workers an overtime premium. The data explain the usual ways in which foreign investors exploit Chinese workers and violate labor laws in China in terms of overtime payment.

Table 4.1 Chinese garment workers’ overtime compensation systems

Today a notorious expression, “voluntary overtime work” (yiwu jiaban), has been invented by factory management in China when they force migrant workers to do illegal overtime work. When factory management demands workers to turn up on Sundays or public holidays without paying any wages, they simply demand workers to come to work as usual without punching time cards. In this way, factory inspectors find no records for this illegal overtime work, and workers have no way of claiming these “voluntary” work hours. In case, factory management is caught by inspectors or corporate social responsibility (CSR) inspectors sent by their clients, they simply say that employees “voluntarily” work for them. Some factories even coach workers on how to respond inspectors.³

The way factory management makes use of the time cards to manipulate workers’ records is also revealed in my survey findings. Almost all workers (376 out of 381) reported that management did not always punch their time cards. In some factories, workers have two different time cards. When overtime work extended until very late at night, 13% (48 out of 370) of the workers said that they would be told to use the second time card to record their working time. That means either that workers’ overtime can have different calculation methods when using different time cards or the second time card is just a way of management cheating workers’ overtime without paying them.

Workers’ Knowledge of the Legal Minimum Wage and Maximum Monthly Overtime Limit

Do workers know they are underpaid? To answer this, we have to investigate whether workers know the related labor laws. The related clauses in the Chinese labor law that protect workers’ time and wages are the legal minimum wage guidelines and maximum monthly overtime limits. But do workers know the contents of them?

Table 4.2 shows garment workers’ knowledge of the minimum wage guideline. In 2010, outer Shenzhen’s minimum wage standard was 900 yuan (133 US$). One of my survey questions asked workers, “What is the legal minimum wage here in outer Shenzhen now?” Results show that workers had a fairly good knowledge of the minimum wage standard, as 72% of workers answered correctly. For those who answered incorrectly, most tended to overestimate the minimum wage level. However, when we asked workers questions regarding the legal maximum overtime limit per month, the situation was the opposite. As shown in Table 4.3, surprisingly, over 80% of workers said that they had never heard of or had no idea of the law. Only 58 out of 394 workers replied that they knew there was a law. But when we further asked those workers who claimed they knew the law and tested their accuracy on the content of the law, as shown in Table 4.4, only 8 of these 58 workers could answer correctly that the legal maximum overtime limit per month stated in the Chinese labor law is 36 hours. In short, most workers simply had no concept or had an erroneous idea of the legal maximum overtime limit. In fact, most (35 out of 50) workers thought the overtime limit was greater than 36 hours per month. This is not surprising if we consider their long monthly work hours—over 300 hours. Workers simply did not believe the Chinese labor law could be so good. The content of the law contradicts their everyday working experience.

Table 4.2 Accuracy of Chinese garment workers’ knowledge of legal minimum wage (N = 122)

Table 4.3 Chinese garment workers’ responses to knowledge of legal maximum monthly overtime limit (N = 394)

Table 4.4 Accuracy of Chinese garment workers’ knowledge of legal maximum monthly overtime limit (N = 50)

Loopholes in the Chinese Labor Law

Previous labor studies pinpointed why labor law non-enforcement and violations have been so serious in China for so many years. For example, Mary Gallager and Baohua Dong suggest that the Chinese labor law contains many loopholes for local officials and factory management to exploit (Dong & Gallagher, 2011). These loopholes were designed by the central government to enhance local state officials’ discretionary power. So what are the loopholes that enable employers to compel workers to perform so much overtime while paying them so little?

When China’s labor law was passed in 1994 by the Ministry of Labor, the Measure Concerning the Implementation of a Non-standard Working Hours System and Accumulated Working Hours (hereafter as “the Working Hours Measures”) was also promulgated (Ministry of Labor, 2012). The Working Hours Measure gives the local labor bureaux great latitude to approve employers to calculate working hours under the “accumulated hours” scheme, which permits employers to calculate on a weekly, monthly, seasonal, or annualized basis. Although the Working Hours Measures specify that the average working day and working week under the “accumulated hours” scheme must be “basically similar” to the standards in the national Chinese labor law, the phrases “average working day,” “average working week,” and “basically similar” are ambiguous and undefined. As Sean Cooney (2011) rightly points out, “The Working Hours Measures do place some constraints on the implementation of these schemes, but these are not tightly drawn… [and] such systems can be used to reduce overtime payments.” As a matter of fact, the Working Hours Measures are quite short, which gives local governments space to issue more detailed rules (except for particular state-owned enterprises, where the rules are enacted at the national level). The end result of the Working Hours Measures empowers the local labor bureaux to exclude many, if not most, workers from the restrictions enacted in the national labor law (Cooney, 2011).

As Ching Kwan Lee (2007) observes, it is China’s decentralized legal system that enables local officials to engage in serious labor law non-enforcement and violations. Local governments usually took a long time before they issued rules on implementing the labor law. For instance, it was not until 2004 and 2005 that Beijing and Guangdong provinces’ labor bureaux respectively passed specific local rules to regulate non-standard working hours and accumulated hours of work. During this time lag of ten years, it became normal practice among foreign investors not to observe China’s labor law. The announcement of the rules on implementation by then had little impact on reality. Most foreign investors in China had been violating the labor law with impunity. This is well illustrated by my survey result. Almost all (95%, 366 out of 386) Chinese workers had worked beyond the 212 maximum monthly hours limit.

In short, although migrant workers experienced a general improvement in their livelihoods over the past ten years, it doesn’t mean that exploitation has dissipated. Labor law violations over unpaid and underpaid wages and illegal overtime work are as bad as they were in the early 1990s. While workers’ increasing awareness and greater knowledge of certain clauses of the Chinese labor laws is a positive development, particularly regarding legal minimum wages, this is offset by the loopholes in the Chinese labor law designed by the central government to enhance local officials’ flexibility. In particular, the clauses and directives related to non-standard work hours and mixed forms of payment systems are too confusing to workers to comprehend, and factory management are keen on exploiting the loopholes to violate workers’ labor rights. These loopholes, alongside local officials’ continued reluctance to enforce labor laws in Shenzhen’s workplaces, provide the basis for factory management in Shenzhen to enjoy a certain degree of internal managerial autonomy in their factories.

Varieties of Garment Factories and the Segmented Labor Market

Since factory management in Shenzhen still enjoy managerial autonomy inside their factories, why is the dormitory labor regime vanishing? And what kind of workers are still working under the dormitory labor regime? What are the mechanisms channeling workers into different particular factory regimes?

During my fieldwork in Shenzhen, apart from the Pearl Factory, I visited five other garment factories that are included in my survey and another six garment factories that I did not include. These factory visits allowed me to observe the patterns of workers’ accommodation and work environments.

Today, Shenzhen’s garment industry includes not one but three types of factories, namely large-, medium-sized, and small factories. Each differs not only in the size of its workforce and production capacity, but also in the physical environment, workers’ accommodation pattern, working conditions, and workplace culture.⁴

Large factories, such as Pearl Factory in Jade Village, are usually located in industrial villages. The size of the workforce is usually over 10,000. Although some factories provide dormitories, most workers live in private rental apartments in the industrial villages. Medium-sized factories, where the workforce usually ranges from 100 to 1000, are usually located in so-called industrial zones where factories of different industries cluster. Inside these industrial zones, there are buildings specifically for dormitories. Factories can rent apartments in these buildings as dormitories. However, as different factories of different industries share these buildings, the dormitories are separated from the workplaces. Workers enjoy a level of freedom in terms of physical mobility. They can enter and leave their dormitories at any time without strict regulations, and outsiders can also enter these dormitories easily.

Small factories, in which the workforce is usually under 100, more often have dormitory labor regimes like the Zhili Toy Factory of the 1990s. A factory of this type usually occupies several floors of a multistory building and is located in an urban area. Compared to the large- and medium-sized factories, security, and management control at the factory entrance is the tightest. They often have security guards checking entrance permits. Workers employed under this type of factory usually live inside the dormitory rooms provided by management. These dormitory rooms are frequently just a floor above or below the site of production. Some of these factories also have small canteens to provide meals for workers, while some allow workers to cook inside dormitory rooms.

Table 4.5 presents the outcome of a Logit Analysis of workers’ job distribution, with large factories as the reference group for comparison against the other two factory types. First, there are age differences. The positive coefficient of age variable (over 30 years old) in small factories suggests that these tend to employ more workers aged over 30 years old. The odds of finding a worker there aged over 30 years old is about 10 times higher than in large factories and 13 times higher than in medium-sized factories, holding other variables constant.⁵ This result is further supported by my personal observations: In a large factory, I could easily find a worker aged between 23 and 30 years old, but not over 30 years old. In a small factory, it was also easy to meet a worker aged over 30 years old, not under 30. The coefficient in the age variable in medium-sized factories is negative, but the magnitude of this coefficient (= −0.286) is far smaller than the one in small factories (= 2.303) and the strength of significance is weaker. This supports the hypothesis that small factories have the major reservoir of workers aged over 30 years old, while medium-sized factories tend to employ workers younger than 23 years old, and large factories tend to employ workers aged between 23 and 30. This finding is important because it dismisses the popular portrayal of previous studies that only young workers are employed in foreign-funded factories in Shenzhen. But workers’ ages today are no more homogeneous. They are of all ages, though different age groups tend to concentrate in factories of different sizes.

Table 4.5 Logistic regression of selected variables vis-à-vis migrant garment workers’ job distribution in Shenzhen, China

When we turn to the gender variable, the positive and significant coefficients in medium-sized factories suggest that medium-sized factories are more likely to employ female workers. Although gender is less important than age as a factor determining the kind of factories workers end up in, it still suggests that both small and large factories are employing more male workers. It dismisses the popular notion in the literature that young female migrant workers numerically dominate large factories. More and more young male workers are working in big factories.

For the factor “place of origin” (whether workers are from Guangdong province or not), the negative coefficients in small- and medium-sized factories suggest that the smaller the factory, the more the local workforce. However, the effect is only significant in small factories. This means that small factories are less likely to employ workers from outside Guangdong province compared to medium-sized and large factories.

The job experience factor, i.e., “the number of factories worked in before entering this factory,” is as significant as the age factor. The very high significance level (<.001) means that it is not by chance. The positive coefficients in small- and medium-sized factories suggest that workers in small- and medium-sized factories usually have more job experience than workers in large factories. Taking the relatively older workforce in these two types of factories, this finding is not surprising for older migrant workers should have more jobs. Other variables (such as marital status) are statistically insignificant.

When we turn to the disaggregated data for work conditions by size of factories, interesting patterns are revealed. Table 4.6 shows a summary table of sampled garment workers’ work conditions by factory size.⁶ When we turn to work-time variables, such as monthly work hours, daily overtime hours and monthly days off, a pattern surfaces: the smaller the factory, the longer the monthly work hours and the daily overtime hours, and the fewer the number of days off per month. Although work hours for large- and medium-sized factories approach a gruelling 300 hours per month, work hours for small factories tend to be even higher, up to 337 hours per month. This volume of extremely long monthly work hours in small factories is not only 12% higher than at medium-sized and large factories. It is also about 60% more than the legal monthly maximum work hours permitted under the Chinese labor law (i.e., 212 hours per month). Even worse, in the sample, three workers at small factories reported that they had to work over 380 hours per month. These three workers worked almost 90 hours a week, a far cry from the 44 regular work hours per week under Chinese labor law and the 60-hour week limit. Data for daily overtime also show a similar pattern. While workers in large factories on average worked three hours of overtime per day (i.e., 11 hours per day), workers in small factories on average worked one hour more a day (i.e., 12 hours). For monthly days off, all types of factories violated the Chinese labor law by not giving workers at least one rest day a week, i.e., four rest days a month. Workers in large- and medium-sized factories on average were only given three days off a month, workers in small factories were given fewer than two rest days a month, i.e., they had to work for 12 hours almost every day of the month!

Table 4.6 Summary of work hours and wages per month, the hourly wage, and overtime hours per day for Chinese garment workers; Exchange rate: CNY6.7802:US$1

Does this mean that workers who work longer hours and have fewer days off earn a higher wage? The wage variables (e.g., hourly wages and monthly wages) show the opposite—the type of workers who work the longest hours earn a lower wage each month. While workers in large- and medium-sized factories roughly earned 1830 yuan (270 US$) per month, workers in small factories could only earn on average 1546 yuan (228 US$) per month. The hourly wage figures in these three types of factories suggest the differences in their unit labor costs. Hourly wages for workers in small factories were just 70% of their counterparts in the other two types of factories. In the sample, a worker in a small factory who worked 236 hours a month could only earn at the end of the month 800 yuan (118 US$), i.e., about 3 yuan (0.5 US$) per hour—just half of the average of the hourly wages earned by workers in large factories. The miserable situations of workers at small garment factories were commonly evident in my field visits. The working experience of Ah Wei is a case in point.

Ah Wei is a 40-year-old woman who works at a small Hong Kong-invested garment factory in Shenzhen. When I interviewed her, she had already worked there for half a year. According to Ah Wei, a fellow villager introduced her into the factory. Although Ah Wei had 10 years of working experience in the garment industry and was considered a “fast hand” and hardworking, she was illiterate and did not know how to hunt elsewhere for a job herself. And at 40, she was too old to be considered by a larger factory. That is why she could only stay in this small garment factory earning such low wages. As Ah Wei recalled, the highest monthly wage she could earn so far in the factory was 1800 yuan (265 US$). To make this amount, she had to work 102 hours of overtime work. But the overtime hourly wage was only 1 yuan per hour (0.147 US$)! Every night, only if Ah Wei worked beyond 11:30 p.m. could she earn the extra night meal subsidy of 2 yuan (0.29 US$) per day. Ah Wei had three children. All of them were left behind in Ah Wei’s home village. Every month, except for 300 yuan (44 US$) for her meals and pocket money, she remitted all of the remaining earnings back home to support her children. The day I interviewed Ah Wei, she was having her day off.⁷ When I entered her dormitory room, she was having lunch, a big bowl of noodles with some vegetables but no meat. Her face showed signs of wrinkles and weariness. However, when I asked her, “do you consider it intolerable to earn so little while working so hard here?” She replied,

Eating bitterness (chiku) is nothing. I can bear it. I had worked in a garment factory before and over there I had to work every day until 2am. I could eat the bitterness there. Why can’t I stand all these hardships here? Just giving me a little bit higher wage is good enough.

Ah Wei’s work experience is not unique, as revealed from my survey results. The above findings highlight the correlation between the size of garment factories and workforce composition and labor standards. The pattern is telling: The small factories have the worst work conditions. These small factories are sweatshops where wages exemplify a “race to the bottom.” As revealed in Ah Wei’s story (and the quantitative analysis), these small factories are the major “traps” for relatively old (usually aged over 30 years old) workers. These workers, most of whom had over 10 years of working experience in the industry, were displaced by younger workers at the large- and medium-sized factories. They need to work in sweatshops to make ends meet. Once these relatively old workers entered these small factories, they had no way to escape the “low wage, long work hours” trap.

This is a major part of the pattern of “labor market segmentation” in Shenzhen’s migrant workforce. In the Chinese labor studies, most of the time, labor market segmentation is used to describe differential work conditions, entitlements, and benefits between rural migrants and urban residents (Knight & Yueh, 2000).⁸ Not many scholars have paid attention to the differential work conditions and demographic characteristics in the labor market of the migrant workforce. In the West, the theory of labor market segmentation is often used to describe a post-industrial society in which normal work patterns (e.g., from 9 a.m. to 5 p.m.) are vanishing and part time and casual work is on the rise, especially in the service industries.⁹ Under this labor market segmentation theory, the labor market is divided into the core and the periphery. Core workers enjoy better work conditions, job security, fringe benefits, and quality of life relative to those in the periphery. When we import the theory of labor market segmentation into the Chinese context, especially to the migrant workforce in urban areas, we have to be very cautious. Although there are obvious differences in terms of work conditions and work patterns between different types of factories, workers in large- and medium-sized factories still toil 11 hours a day and 300 hours a month, and their wages are still as little as US$ 1 per hour.¹⁰ The purpose of importing labor market segmentation theory into the Chinese context is to highlight the “race to the bottom” situation, which is very much still the case, especially in the smaller workplaces. In comparison, workers at the large- and medium-sized factories are in slightly better market positions than their counterparts in small factories, and it is only in this sense that the core-periphery paradigm is still applicable.

In the past decade, Shenzhen’s labor market has occasionally experienced labor shortages. However, this kind of shortage is a labor shortage of a particular type: Shenzhen’s factory management cannot be as choosy as before. Young female migrant workers are not as readily available in the labor market as they were in the 1990s. Instead, factories have to recruit more male and older workers. The shortage is only one of being somewhat difficult to recruit 18- to 23-year-old female workers (Chan & Siu, 2010). As Shenzhen’s economy, similar to the economies of other metropolises in China, becomes diversified, young female workers do not necessarily work in factories. They may work in the service sector for a similar amount of wages (Otis, 2012). This diversification constantly adds pressure to factory management to seek a less preferred workforce—young male workers. Factory management always want young workers because they believe young workers are “fast hands” and more productive relative to old workers. As shown in the discussion above, large factories are the usual employers of young workers (be they male or female). Most large factories today require workers to have a junior high school education or above as one of the basic recruitment criteria, an education that most workers older than 30 years do not have (like the case of Ah Wei). A relative labor surplus of the older poorly educated workers, as Marx suggests, follows the logic of market supply and demand and thus not only drives down old workers’ wages but also traps them in factories with the worst working conditions.¹¹

Global Garment Production and Local Subcontracting Networks

What are the forces that give rise to different types of garment factories in Shenzhen? Are there any differences in their operations? What are their functions in global garment production? Most importantly, how do these differences affect workers’ factory conditions? As will be seen shortly, all these have a close relationship with the shortened production lead time and cost structure in the global garment production process.

First of all, in order to reduce sales risks, global garment retailers and brand-name garment companies usually place their orders with trading companies and garment supplier factories just-in-time. Sometimes they even plan styles close to or during the midst of the season and demand delivery just-in-time so that all garment products in retail shops can be sold in line with the latest fashion trends. Retailers and brand-name companies are not the only ones to push for the trend of shortened production lead times in the garment industry; trading companies also play an important role here. The trading companies’ supply chain management strategy makes the trend possible and intensifies the competition between garment supplier factories.¹²

Factory managers find it very difficult to make production plans and projections with “last minute” orders. However, to maintain a good relationship with big retailers, brand-name companies, and trading companies, they have to push workers to overtime, hire temporary workers, and—more importantly—also contract orders down to lower-tier subcontracting factories to fill them. A merchandiser, Mr. Lee, who worked in a Hong Kong-invested garment factory for a decade, told me,

All of the production process from the stage of design to the stage when products arrive at retail shops has to be done within 5 months (150 days). Sometimes, buyers will push us to finish the whole process in 90 days. You know, in a year there are usually four fashion seasons, and orders should be placed 2 and 3 months before the next fashion season starts. But it is the trend now that production lead times become shorter and shorter. ¹³

The impact of a short production time can result in a vast amount of overtime. During my fieldwork in Jade Village, a young male worker from Pearl Factory told me after working 24 hours non-stop to rush an order to meet the deadline of its shipping date,

This order was crazy. We were only given three weeks’ time to finish the order. Our line leaders pushed us so hard that we had to work 3 shifts consecutively [24 hours]. But it is not uncommon. Last time, our factory had an order to make a new product, which was very hard to produce and we were given so little time. In the end, the result was a lot of unqualified products and we had to re-do them all and the boss did not pay us any wages for the re-done work!

Similar cases are very often found in small factories. A merchandiser, Ms Pun, who has worked in a Hong Kong-invested sweater factory for four years, told me: The price of subcontracting orders down to lower-tier subcontracting factories depends upon whether it is peak or low seasons. She explained,

In low seasons, say immediately after Lunar New Year holiday, usually there aren’t many orders, and at that time, these subcontracting factories sometimes contract our orders at a very low price to us. However, during peak seasons, such as in November and December, if we contract orders to them, they can demand a very high price.

Ms. Pun’s explanation gives an important clue understanding the operations of these lower-tier subcontracting factories and explains why workers in small garment factories earn such low wages. At the small lower-tier subcontracting factories, employing workers aged over 30 years old at very cheap wages becomes their competitive advantage. As the workers’ wage level is not going to fluctuate according to order seasons, employers can weather the storm by making less profit in low seasons and making more in peak ones. In fact, lower-tier subcontracting factories are not necessarily in a passive position in the price bargaining process. Different tiers of factories are in cooperative relations with each other. Small factories can also make profits, but this is at the workers’ expense.

Suppressed prices for garments are common in industry. Big retailers, such as Wal Mart, promote this strategy in the name of “everyday low prices.” This strategy has far-reaching effects on the whole garment supply chain. As Ms Pun told me, usually the giant retailers use high volume to bargain for lower prices from supplier factories,

The buyers usually say: ‘I will place a big order with a volume of 10,000 pieces. For each piece, you [the supplier factory] have to lower the price by U.S.$ 50 cents for me. You have to give me a lower price.’ In some situations, the buyers even price the parts of clothes. For example, they might have already agreed to a deal for U.S.$ 10 per piece. Suddenly, they will call you and ask for changes in style, say the body of the clothes has to be shortened. Then they will say, ‘now as the body of the clothes is shortened and needs less cloth, your costs should be fewer; you have to lower the price for me.

Retailers, trading companies, and supplier factories are competitors; they compete for the same share of profit in each step of production of a piece of clothing. In supplier factories, according to a Hong Kong-invested garment factory boss, Mrs. Yeung, the major costs (about 70%) come from raw materials such as fabrics. Labor costs only account for less than 20% of total production costs. However, ever since the major trading companies have intervened into the global garment supply chain, the garment supplier factories’ profit margins have dropped dramatically. One of the reasons, according to Mrs. Yeung, is that before the trading companies had become dominant, garment supplier factories could procure raw material themselves; they could gain some profit from the procurement process. However, after the trading companies entered the industry and controlled the procurement process, many supplier factories have been only responsible for the cloth manufacturing and packaging processes. Thus, the room for profit is decreased. In the cloth manufacturing process, as workers’ salaries are the major costs, the only way supplier factories can have a bigger profit margin is to squeeze wages. In fact, the “high volume, low price” purchasing practices used by big retailers in particular explains why Shenzhen’s older garment workers have been unable to have wage increases even when the industry was booming.

Fashion garments have an even shorter season than the low-end standard garments; and supplier factories find it difficult to adjust their production plans and projections. They have to spend more time training workers to make specific styles. This leads to a longer production time and risks missing delivery time. In my interviews with factory owners, managers and merchandisers, accordingly all of them agreed that the better strategy is to get “high volume, low price” orders instead of the “low volume, high price” fashion orders. A high-volume order guarantees that the supplier won’t have an idle workforce, and in a year, they do not need to bargain again and again with buyers for low-volume orders. By restricting themselves to producing “high volume, low price,” and non-fashion garments, workers’ skills become relatively unimportant to supplier factory management. What they really need is simply “fast hands” who can do simple repetitive sewing and stitching tasks.

In short, the existence of different types of factories in Shenzhen’s garment industry is the result of the mode of operations and practices of global garment production (e.g., “just-in-time,” “high volume, low price” supply chain management). Each type of garment supplier factory in Shenzhen has a particular function in relation to the global supply chain. Especially during peak seasons, small factories function to provide important “extra production capacity” for large- and medium-sized factories to rush orders. This fosters paternalistic and cooperative relations between different types of garment factories. As the production cycle shortens and rush orders become common, the breeding ground for the proliferation of small garment factories with sweatshop conditions grows.

Concluding Remarks

In post-socialist China, when the Chinese state is no longer the only employer of the Chinese working class, new political and economic apparatuses, and institutions have been established. Two of the most important apparatuses and institutions the Chinese state has developed in the reform era are the national Chinese labor law and the new labor market of migrant workers.

As this chapter has demonstrated, the national labor law not only sets the legal and contractual basis for rural migrants to fulfill the labor needs of foreign capitalists in urban labor markets. The law (and other related directives such as the minimum wage guideline) also sets a framework to limit the capitalist classes’ over-extraction of labor value from the migrant working classes. However, as a product of political and ideological struggles during the statutes’ drafting process, the laws also contain loopholes and ambiguities allowing foreign manufacturers to override legal constraints and to exercise near-despotic control over migrant workers. In a way, the capitalists’ relative managerial autonomy is also a product of the local state’s relative autonomy to exercise discretionary power, issue local directives, and ignore legal violations in workplaces in a decentralized Chinese legal context. As Bob Jessop points out, the legal and judicial framework of the capitalist state is itself full of contradictions: When the state has to resolve a dilemma between the productivity imperative and the legitimacy problem (in terms of protecting the working classes from super-exploitation), extra-legal and exceptional concrete measures, and policies contradictory to the state’s own legal-judicial framework are usually exercised (Jessop, 1990, pp. 58, 65). Of course, whether the Chinese state is a variant of the capitalist state is subject to debate, but regardless, a similar strategy has been implemented by the post-socialist Chinese state to create relative autonomy for local states and foreign capitalists that results in continued exploitation of the migrant working class from the early reform era till today. I term this “state-endorsed exploitation,” through labor law violations that the state tacitly allows. This concept not only highlights the role of the Chinese state in the sphere of production in creating and sustaining conditions of workplace exploitation, but also speaks to the resistance potential of the migrant working class. As this chapter has noted, the migrant workers are gradually gaining knowledge of the labor laws and are increasingly aware of their rights under the law. As the migrant workers get more familiarized with the contents of the labor laws, the loopholes, and ambiguities that are used to exploit workers will gradually be reduced and workers’ potential to resist workplace exploitation will grow in tandem.

This chapter has examined the conditions of the migrant-worker labor market in Shenzhen. It has shown that the spectrum of factory regimes in foreign-funded workplaces in south China has expanded to include different types of factories with dissimilar workforces. The new migrant-worker labor market segregates and discriminates against particular types of migrant workers, primarily along age criteria. The emergence of this labor market segregation and discrimination is a consequence of the interactions between global production processes and local subcontracting practices. These changes permit a continued “race to the bottom” in the lower-tier sweatshop factories in China.

In conclusion, employing Michael Burawoy’s framework of “the politics of production,” this chapter has examined several important external parameters of the regimes and cultures of Chinese garment workplaces: namely state intervention, labor market conditions, and market competition (or cooperation) among firms. It has demonstrated how the decentralized legal-judicial apparatus in post-socialist China has set the basic parameters and scope for the new “social relations of production” (i.e., the state, capital, and labor relations) in a market-oriented industrializing China. It has also shown how labor market segregation and global–local interactions have reorganized the social relations in workplaces between different types of workers to engender divergent labor standards in a particular industry. How these new relations of production and relations in production interact with specific kinds of production practices, namely the piece-rate system and employers’ inverted gendered hierarchy, to reinforce domination over rank-and-file migrant workers in Chinese garment workplaces will be the focus of the next chapter.