As noted in an earlier post on this subject (“A Union Even Wal-Mart Can Love”) Walmart, the world’s biggest retailer, has reconfigured its operations around the world, even pulling out of some markets altogether. But, in a reflection of just how different operating conditions are in China, Walmart signed collective-bargaining agreements with workers in two provinces in July. Further agreements covering all 50,000 of its local employees in China are a foregone conclusion.
The Chinese Union Model
The financial terms of the contract are of only minor importance. Far more important are the other implications of Walmart’s new ties to the All-China Federation of Trade Unions (ACFTU), a monopoly that claims 193m members and is deeply intertwined with China’s government and Communist Party. Like it or not, Walmart now has a business partner, and if it wants to close stores, lay off employees, or change other aspects of its business such as operating hours and work quotas (what employees are expected to accomplish), that partner must be consulted.
The All-China Federation of Trade Unions
The history of the ACFTU is, in many ways, the recent history of China. Founded in 1925, it was crushed by the nationalist government in 1927, rose with the Communist Party’s ascension in 1949, and was crushed again in the Cultural Revolution before being revived in the general opening following Mao’s death in 1976. Competing unions are not allowed and by discouraging any sign of dissent, including strikes, the ACFTU has often been accused of failing to act in its members’ best interests. This point was made with particular vehemence in the 1980s and 1990s, as China emphasised growth and business investment at the expense of workers’ rights.
Unrelenting pressure is applied to convince companies to sign up with the ACFTU. Many are visited every two weeks by union representatives. Firms that are willing to co-operate receive two critical benefits: the ability to influence who their union chairman will be, and some negotiating freedom around a 2% payroll “tax” to the national union, much of which is remitted back to the municipal and company branches and, in the best circumstances, may then be used to pay for social functions, medical benefits and bereavement leave.
These two benefits are far more important than they sound. The union chairman is typically tied to the government and the Communist Party, must be consulted on critical issues and, in effect, cannot be fired. The union chairman is therefore critical to a firm’s management. And the ability to negotiate on the payroll levy can mean, for example, that expatriate salaries are excluded from the payroll figure, or that a smaller figure from a previous year is used as the basis of the calculation.
By contrast, companies that resist, according to a senior union official quoted in the China Daily, a government newspaper, will be blacklisted. They will not face pickets and strikes, as they might in the West. Instead they will be subject to endless audits, tax examinations and, as in the cases of McDonald’s and Yum!, accusations of employment-law violations. It is also possible, given the wording of the new labour law, that resisting unionisation is illegal.
So it is difficult to imagine that any company will choose to resist.
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