Download Overseas-funded Enterprises’ Social Responsibility in Dealing with “Labor Shortage”

M & D FORUM
Overseas-funded Enterprises’ Social Responsibility in Dealing with
“Labor Shortage”
CHEN Wei
College of Foreign Studies, Shandong Institute of Business and Technology, Yantai, China, 264005
[email protected]
Abstract: China has always been regarded as a country with limitless labor supply, but this phase was
broken in recent years when China is enforcing its economic transition. The supply falls behind demand
in labor market, and manpower shortage has become the so-called “Labor Shortage”. By analyzing
causes of “Labor Shortage” both empirically and theoretically, this paper is to get solutions in dealing
with this problem in overseas-funded enterprises’ fulfillment of their Social Responsibility. It aims to
find a good way for those enterprises to perform their social responsibility well after the occurrence of
“Labor Shortage” in this economic transition period..
Keywords: “Labor Shortage”, Overseas-funded enterprises, Social Responsibility, Economic transition
1 Introduction
Under the trend of Economic Globalization, the co-existence in world market is becoming more and
more obvious. Enterprises’ social responsibility is no longer an enterprise’s or a country’s unilateral
action. Enterprises’ social responsibility, which centers on the law of value, has become the world trend.
The better that the enterprises are managed, the more social contributions they are making. After the
Reform and Opening Policy, overseas-funded enterprises are occupying a large percentage in China’s
enterprises composition, their social responsibility problem has been an important part in China’s
enterprises’ social responsibility.
China has always been regarded as a country with limitless labor supply, but this phase was broken in
recent years. The supply falls behind demand in labor market, and manpower shortage has become the
so-called “Labor Shortage”.
In 2004, China’s coastal cities first experienced “Labor Shortage”, and the shortage is becoming more
and more severe. By 2006, the whole Yangtze River and Pearl River Delta Areas, and some of the inland
traditional labor-exporting provinces are all suffering from the shortage. After the financial crisis in the
year 2008, the economy started its revival from May, 2009, this lead to another round of “Labor
Shortage”. After the Spring Festivals of the year 2010 and 2011, manpower shortage in enterprises of
China’s eastern coastal areas has become the most rigorous.
2 Situation and Causes of “Labor Shortage” and the Theoretical Analysis
In 2004, the severe problem of “Labor Shortage” first occurred in the coastal areas of China, and from
the economic revival after the worldwide financial crisis in 2008, the devoid of manpower shortage in
eastern coastal areas has become the most rigorous. Many export-oriented enterprises are lack of
manufacturing ability, so they cannot shipment in time according to orders or contracts. What is worse is
that this makes them lose the credit to gain new orders.
Seen from Table A—Guangdong Province’s Labor Supply and Demand from 2001 to 2005, the labor
supply cannot meet the demand in labor force market. In 2005, the Gap between labor supply and
demand reached up to 662.9 thousand people.
145
M & D FORUM
Table A Guangdong Province’s Labor Supply and Demand from 2001 to 2005
Notes:
V: Vacancy
N: Number of job hunters;
M: Multiple between vacancy and
number of job hunters
Source of data: China Labor Force Market Official Website,
http://www.lm.gov.cn/gb/data/node-4673.htm/
2.1 Analysis of causes of “Labor Shortage”
The present “Labor Shortage” embodies a concentrated expression in the private small and
medium-sized enterprises (including the overseas-funded small and medium-sized enterprises). These
enterprises, most of which are labor-intensive ones, are most located in small cities and towns, and they
are based on the limitless labor supply and its co-related cheap labor cost.
As pointed out by some experts, China’s economic development, based on demographic bonus—cheap
labor cost, is drying up, “Labor Shortage” is a universal phenomenon in inland areas. The traditional
labor-intense industry is losing its dominant. With the development of inland cities, labor shortage is not
only a problem for coastal areas, but a national phenomenon. Its causes are listed as follows:
2.1.1 Laborers’ low income and their neglected working atmosphere
For many years, China’s migrant manpower was considered to be limitless, because it is far above
demand. This makes the enterprises, taking the advantage of buyers’ market, feel reluctant to raise
laborers’ pay. From the aspect of working atmosphere, the migrant laborers mainly enter the cities to
take some heavy physical labors that are largely intensified, least technology involved and with long
working hours. Besides, their working atmosphere is vile, it is short of necessary labor safety and
hygiene protection measures. This may lead the migrant laborers to some occupational diseases.
Some enterprises deduce laborers wages, and lengthen working hours. It is difficult for the laborers to
get their low pay.
2.1.2 Recruitment that is short of long and effective safeguard mechanism
On the one hand, the enterprises do not contribute social insurance and endowment insurance when
employing migrant laborers, who are certain to return to their countryside farming land to deal with
birth and old age, sickness and death. They are not involved in security mechanism. On the other hand, a
universal problem for the migrant laborers is that they haven’t established the normal employment
relation.
Many enterprises refuse to or don’t award of contract. Being lack of the papery contract, migrant
laborers are to be fired at any time. Even though some enterprises or employers are forced to award
working contracts with their employees, they never fulfill the contracts or they just award the contracts
that neglect the employees’ interest.
When migrant laborers’ interest is invaded, it is difficult to be protected by taking the legal ways. The
migrant workers “jumping events” are the extreme ways they take to realize their legal interest. When
their interest cannot be effectively secured, the migrant workers’ only means to choose is to bid farewell
to enterprises to seek another way.
2.1.3 Mal-position in supply and demand from labor force market
146
M & D FORUM
China is facing its economic transition, its economy is developing fast and steadily, industries are
upgrading fast. Skill-intensive industries are improving their requirements on the laborers’ skills and
quality. So the present “Labor Shortage” does not mean the shortage of laborers with low quality or
skills, there are abundant cargadors and office boys with low quality in the society.
The devoid means more and more advanced technicians, managerial talents, and front line workers, such
skill-oriented laborers are needed. So the shortage can be regarded as “Technician Shortage”
substantially.
2.1.4 Policies to support and benefit agriculture, rural areas and farmers
China’s agricultural taxation is being phased out, and the grain subsidy policy has been enforced.
Farming is no longer risky to lose, and it may be profitable in a certain degree. All those stimulate
peasants to farm instead of migrate to be laborers especially after they compare the interest between
being a migrant laborer and a farming peasant.
2.2 Theoretical analysis of “Labor Shortage”
The so-called “Labor Shortage” is not the real shortage of laborers. Its deep analysis from the aspects of
labor input effect and supply and demand in labor force market is to be listed as follows.
Laborers get paid by making labor input, and they can also get benefits from enjoying leisure. For them,
labor input and leisure is a pair of replaceable choices. The labor input—leisure indifference curve is to
be shown in Table B.
Table B the labor input—leisure indifference curve
From Table B, we suppose (H-t) is the legal labor time that a laborer must reach, under the effect of L,
when wage rate W=(Y-I)/ (H-t), laborers labor input’s effect is equal to complete leisure’s effect with
legal time. For the laborers, they may get involved in social work, or else, they will give up labor. In the
same way, under the effect of L’, when W’= (Y’-I’)/ (H-T), laborers may get involved in social work, or
else, when pay level is similar to W or lower than W’, laborers will not work. So from Table B, we can
see that when laborers’ pay get increased, the curve will move to the upper right part; and their pay must
be higher—that means their wage rate has reached a certain level, they may work.
From countryside reality, preferential policies on agriculture should be taken, and agricultural taxation
should be canceled by government, thus to increase peasants’ family income. This increases the
opportunity cost of peasants to be migrant laborers. When migrant laborers’ income is increased, the
labor input—leisure indifference curve is certain to move upper right, which is far from origin. So it is
certain that they will increase their demand of pay level.
In coastal cities, migrant laborers’ input cost is creasing yearly because of increased consumption cost in
cities, their strengthened self-protection awareness and the mental pressure of being discriminated by
people in cities. When laborers’ work cost increases, the Curve is certain to be steep, so the laborers are
certain to demand higher pay.
The present treatment of the laborers shows clearly that their intention of being migrant laborers in cities
is declining because their pay requirement cannot be satisfied by most of the enterprises, and they even
147
M & D FORUM
can get more to farm. This is the unavoidable origin of “Labor Shortage”.
3 Social Responsibility Problems on Overseas-funded Enterprises
The World Business Council for Sustainable Development defined that Corporate Social Responsibility
(It is to be abbreviated as CSR in the following part.) as the continuing commitment by business to
behave ethically and contribute to economic development while improving the quality of life of the
workforce and their families as well as of the local community and society at large. Overseas-funded
enterprises are part domestic enterprises. Their fulfillment of Social Responsibility is part of China’s
enterprises performance of Social Responsibility. There are problems in the overseas-funded enterprises’
fulfillment of social responsibility.
3.1 Our governmental factors—there is no good atmosphere to fulfill CSR
Domestic market economy started later than other developed countries, so that the fulfillment of CSR is
left behind by them. Many domestic enterprises, especially the small and medium-sized ones, are short
of awareness of social responsibility. Even for the large enterprises, they still are not performing their
social responsibility well. After entering China, the overseas-funded enterprises will relax their vigilance
in performing responsibility especially after they notice that they are not regulated to do so by complete
laws.
Governments at all levels are attracting foreign capitals blindly, thus the overseas-funded enterprises are
absent from supervision. China is still facing the starting point of economic development, local
enterprises and their interest are related with local governmental achievements. To import more
foreign capital, to carry out more preferential policies for the overseas-funded enterprises are important
for local governments to develop their economy. In this way, the supervision on overseas-funded
enterprises is loosened.
3.2 The Overseas-funded enterprises’ own reasons
Some capitalists invest in China for the purpose of escaping from the Social Responsibility in their
home countries. To invest in developed countries, the enterprises are pressed by heavy social
responsibility, this harms their acquiring of plum. China is a country with not complete laws, low CSR
level, less governmental supervision and little social obstruction. So after the overseas-funded
enterprises entered China, they deliberately reduce their fulfillment of Corporate Social Responsibility.
Some overseas-funded enterprises deliberately transfer their labor-intensive and environment-polluting
enterprises to China. In Western developed countries, the labor cost is expensive and workers’ unions
are powerful, so it costs a lot in developing labor-intensive industries. After being established in China,
these enterprises are free from worker’s union’s pressure, and they can take the advantage of cheap labor
cost. Besides, Western developed countries supervise environment-polluting enterprises rigorously, so in
order to escape from the rigorous supervision, many such enterprises are constructed in China.
Overseas-funded enterprises are part of domestic enterprises. So their performance of CSR should be
included in China’s enterprises’ fulfillment of social responsibility.
4 Overseas-funded Enterprises’ Fulfillment of Social Responsibility on Migrant
Laborers
When dealing with “Labor Shortage”, overseas-funded enterprises in China should pay attention to their
own problems. They should increase migrant laborers’ salary standard, pay them on time, promote
welfare, improve working atmosphere, and respect their legal rights.
Overseas-funded enterprises should set their employees’ salary standard according to the legal standards
for minimum wages, this can help to satisfy the basic necessities of migrant laborers and improve wage
148
M & D FORUM
rate level. The enterprises shouldn’t deduce employee’s salary for the purpose of punishment. Instead
they should list employees’ salary and welfare’s constitution, and make sure of all the
payment—including wage and welfare. They payment should follow the principle of bringing
conveniences for migrant laborers no matter it is in the form of cash or check.
Overseas-funded enterprises should try to secure their migrant laborers to enjoy social welfare in cities,
such as to make labor insurance and medical insurance for them.
Overseas-funded enterprises should observe legal working hours, and their migrant laborers are not
allowed to work more than 48 hours weekly, and the employees should take a-day off every seven days.
They should be paid more for extra work, and each employee is not allowed to work for more than 12
hours besides the normal weekly 48 working hours.
Comparing with Western developed countries, China’s labor laws are still not complete, and the
governmental supervision mechanism still hasn’t been enforced effectively. Even so, the
overseas-funded enterprises still should award of formal labor contract that is put on record in
governmental labor department with their migrant laborers. This can secure the migrant laborers
legitimate rights absolutely. Besides, migrant laborers in overseas-funded enterprises should be
respected by their employers to join the workers’ unions freely. And the union’s collective bargaining
that represents the employees’ interest should be accepted in such enterprises.
5 Conclusion
In the process of China’s economic transition, “Labor Shortage” problem in coastal areas has to be
recollected by the overseas-funded enterprises. How to keep their existing migrant laborers and avoid
the shortage problem is part of their managing problem. Their successful fulfillment of Social
Responsibility is beneficial to help solve their employment problem of “Labor Shortage”. Meanwhile, it
is also helpful to increase state revenue, import advanced technologies, and keep good international
relations.
References
[1]. Chen Shuni. Corporate Social Responsibility and Human Resource Management. Beijing: People
Press, 2007: 61-81 (in Chinese)
[2]. Ding Wuqi. Brief Analysis of Corporate Social Responsibility on Deficiency and Construction,
Economic Theory and Problem. [J]. 2009 (12): 34-36 (in Chinese)
[3]. Tan Deyu. Idea of Foreign Company’s Social Responsibility, Technological Development of
Enterprises. [J]. 2011 (1): 102-103 (in Chinese)
[4]. Tang Yongling. Enterprise’s Opportunity under the Crisis of “Labor Shortage”, China Economist.
[J]. 2011 (3): 14-15 (in Chinese)
[5]. Wang Dachao, Zhang Lili. Situation and Promoting measures on Chinese Corporate Social
Responsibility, The Northern Forum. [J]. 2005 (2): 142-144 (in Chinese)
149