Luo Guangfu, a serious 27-year-old from the city of Chongqing, spends long nights at the weaving and dyeing machines of a textile factory in the industrial suburb of Panyu just outside Guangzhou. When he finishes his 12-hour shift at 7 a.m., you might expect him to sleep the day away. Instead, he usually grabs just a few hours of shut-eye, then heads for a rundown building surrounded by electronics, toy, and textile factories.
Once there, Luo climbs the stairs to the Panyu Migrant Worker Culture Center, joining dozens of other migrants in a stuffy room on the second floor. Though the center offers ping-pong, movies, and well-thumbed comic books in its small library, Luo usually opts for classes taught by the center's small volunteer staff -- most of them workers themselves. His favorite is a seminar on his rights at the factory. "If a worker doesn't know China's labor law, then he's in big trouble," Luo says.
Luo has put his knowledge to good use. In April he and 300 other workers sent a letter to their factory manager demanding that wages be raised from less than $60 per month to the legal minimum of $69. At an earlier job, he joined 1,000 workers in a six-day strike that also successfully led to a wage hike. "If bosses don't pay us enough money, we can use the law and confront them with it," he says.
Luo and migrant workers like him are at the vanguard of a new labor-rights revolution sweeping China. Last year alone some 3 million workers joined a total of 57,000 protests countrywide, according to China Labour Bulletin, a Hong Kong-based rights group. These employees are no longer the docile hero workers of the Communist era, or the eager, exploitable legions who made China a manufacturing powerhouse. Today they're harnessing the power of the Internet and communicating with each other via cell phones to make sure they get their due. From Guangzhou to Zhengzhou, a network of training centers and legal aid clinics are giving workers support and helping them take thousands of their grievances to the courts each year. "It's a de facto labor movement happening in China," says Robin Munro, research director at China Labour Bulletin.
This surge of activism is part of the changing labor math of China. Worker shortages are popping up in the manufacturing strongholds of Guangdong, Fujian, and Zhejiang Provinces. Rising rural incomes mean fewer people are migrating in search of work. The one-child policy has cut population growth, which means there are fewer young people to staff factories. After years of wage stagnation, salaries are starting to creep up. "Workers have more choices than before," says Huang Huiping, deputy chief of the labor bureau in the Pearl River Delta city of Dongguan. She estimates the city's factories have 267,000 unfilled jobs.
If this labor movement is sustained, foreign investors will have to consider their China strategy in a whole new light. China's phenomenal growth has been based on an endless labor supply and wage rates a fraction of those in the West. But suddenly, China's pool of the willing doesn't look quite so vast. The country's 169 million manufacturing workers are more mobile, and those who are now migrating often do so in search of a specific job, not just whatever work they can round up. That means China's attraction for sweatshop investors will diminish. The country will begin trumpeting its other advantages: new highways, railroads, ports, phone and data networks, pools of hyperefficient suppliers of everything from hubcaps to hard drives, and perhaps most important, its huge domestic market.
Growing activism has special significance for the coastal areas where multinational activity is most intense. There are clear signs that many foreign companies and their suppliers are entering into a new social compact with workers in these regions. At the same time, some of the most sophisticated players simply need fewer workers in any given factory. In General Motors Corp.'s (GM) most automated mainland plants, for example, labor accounts for less than 10% of the cost of a car produced -- lower than many factories in the U.S. and Europe. That means GM can more readily afford the wages and training needed to woo the best workers.
If other companies emulate GM, the low-wage model for China could slowly start to morph into one that depends on higher pay and greater productivity. Other factors -- spiraling costs for construction, land, and housing on the coast, as well as the revalued yuan -- could help speed this trend. China will have to compete more and more in areas where the stress is on delivering sophisticated, value-added products that depend on state-of-the-art factories and highly skilled labor. The increasing sophistication of Chinese consumers -- who now want the best, most advanced products possible -- will accelerate the demand for value-added manufacturing.
Employers in the lowest-tech industries, meanwhile, may shift away from China's coastal regions. Guangdong's "factories have been designed with the most cutthroat wage structure," says Judith Banister, a demographer with Beijing's Javelin Investments, a management consulting firm. With wages creeping up, low-end "manufacturing is moving to other countries like Vietnam, India, and Pakistan."
These changes will take years to play out, of course. And for now, the activists are much less concerned about the macroeconomic implications of what they're doing than they are about the day-to-day battle for better wages and working conditions. "A high-growth economy shouldn't be based on violating workers' rights," says Jiang Junlu, a labor lawyer at King & Wood, China's largest law firm.
It's a slow struggle. There's still only sporadic enforcement of rules on everything from overtime pay to child labor and safe working conditions. In China's vast hinterlands you'll find no shortage of workers willing to toil long hours sewing shirts, cutting and polishing the rubies and jade sold in U.S. malls, or digging coal from some of the world's most dangerous mines. Last year more than 137,000 workers were killed on the job. And Western retailers and marketers that buy the bulk of China's exports apply relentless pressure on manufacturers to cut costs, so plant managers are loath to raise wages.
Even as workers on the coast demand better wages and benefits, the Rust Belt is being largely left behind. Nationwide unemployment is only 4.2%, but in the northeastern provinces focused on heavy industries, official joblessness runs up to 18%. "Look at the industrial history of England, Japan, and Germany," says Arthur Kroeber, editor of Hong Kong-based China Economic Quarterly. "It's a span of decades before workers are able to really organize for higher wages."
Nevertheless, what's happening in China these days is truly revolutionary. The epicenter of the revolution is Guangdong Province north of Hong Kong. China's export base, the region has thousands of factories making everything from motherboards to Barbie dolls. It's home to 7 million migrant workers -- and provincial officials estimate local factories need another 2 million. "Anyplace in China that traditionally relies on migrant workers is now suffering shortages," says Wang Guanyu, director of the Guangdong labor and employment service and administration center. The shortfall has driven average wages up 30%, to roughly $97 per month, in the past year.
Some factories are taking pains to make sure their laborers stick around. Apache Footwear employs 12,000 people to produce 1.1 million pairs of Adidas shoes a month in the city of Qingyun. With monthly turnover rates of nearly 10% at its original factory in nearby Guangzhou, Apache sought to make the four-year-old Qingyan plant a more inviting place. "Before, you just had to pay workers and that was enough," says Steve Chen, Apache's Taiwanese boss. "Now you really have to take care of them."
Apache started with the living quarters. Rather than house its staff in the concrete-and-steel high-rises that are the norm at most factories, it built a series of one-story, red-brick buildings. The company organizes Saturday night movies and dances. When it hires, Apache gives preference to its employees' relatives. And it is building apartments it plans to sell cheaply to workers with families -- a rare benefit in a country where breadwinners often spend most of the year working hundreds of miles from home. Turnover in Qingyan is now about a third the level of the Guangzhou site. "The environment here is much better than at other factories," says 22-year-old Li Linli, who three years ago followed her older sister to Apache from their village in Hunan Province. "She told me the benefits were quite good and that they always pay on time," says Li.
In part, multinationals like Adidas have spurred such changes. Foreign companies face pressure from consumers and shareholders at home who are concerned about corporate social responsibility. The multinationals are targeted more often for workplace investigations by Chinese officials, so they're better at complying with China's labor law, say labor analysts. And as the multinationals compete for increasingly scarce workers, some of their labor practices are being picked up by Chinese rivals. Haier, for instance, has established a 24-hour phone hotline and a support group to help employees cope with emergencies.
The more important agents of change, though, are the workers themselves and the labor organizations that support them. The Migrant Workers Community College in Shenzhen's grubby Chegongmiao district -- home to scores of garment and chemical factories and dorms housing 200,000 workers -- provides free or nearly free training in everything from computers to AIDS prevention. The center works with the likes of Nokia (NOK), Adidas, and all their suppliers to ensure they meet Chinese labor standards. Now the center is in talks with domestic tech power Huawei, too. "We want to let companies learn how to expand their business through being responsible corporations," says former teacher and journalist Liu Kaiming, who founded the center.
Students, too, are playing a role. Law students from Tsinghua University in Beijing and Sun Yat-sen University in Guangzhou run seminars on factory floors, and some do much more. Wen He, a 23-year-old student at Sun Yat-sen, is representing four workers in Dongguan who caught a potentially fatal respiratory disease called silicosis after working long hours without protective face masks in a poorly ventilated jewelry factory. "I decided to go to law school because I saw how poorly migrant workers are treated," says Wen.
Even Beijing is lending a hand -- up to a point. Under President Hu Jintao, the government has ordered local labor bureaus to ensure that work sites are safe and that migrants get paid fairly and on time. Migrant worker detention centers -- de facto jails where authorities locked up migrants without residence papers -- were banned in 2003. That's when Guangzhou-based daily Nanfang Dushi Bao wrote about a 27-year-old graphic designer who was beaten to death in such a center.
Beijing's tolerance, though, has its limits. The law requires companies to allow a union to organize if just 25 workers ask for one -- but that only applies to the official All-China Federation of Trade Unions. Woe to those who try to set up their own unions or push too strongly for workers' rights. In 2002 two organizers of protests against unpaid wages and pensions at a ferro alloy plant in the northeast city of Liaoyang were sentenced to seven- and four-year sentences, respectively, on charges of "subversion." "The Chinese regime is very much worried about the Solidarity experience in Poland coming to China," says Lee Cheuk Yan, head of the Hong Kong Confederation of Trade Unions.
Chinese authorities will also let the press go only so far. Indeed, Hu's administration is proving less tolerant than its predecessor. The government routinely shuts down papers, magazines, and Web sites and currently has more than 40 reporters in jail for reporting on issues such as labor rights and corruption. Cheng Yizhong, the muckraking editor of Nanfang Dushi Bao was arrested on trumped-up corruption charges last year. He was released but remains barred from working as an editor.
But the workers keep asserting themselves. Back in grimy Panyu, Luo Guangfu still isn't satisfied, even following the latest wage hike. He is considering farming rice and sweet corn as his parents have long done, a more attractive proposition after Beijing cut taxes and hiked subsidies for rural regions. With workers like Luo free to make such choices, China's factories will soon need to do far more to keep workers happy and on the job. The revolution is quiet, but it's real and growing. China's workers -- as well as corporations and consumers worldwide -- will be feeling its consequences.
By Dexter Roberts