Wall Street Journal: Wage Against the Machine: Deadbeat Employers to Face Fines in Guangdong

27 June 2019

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

June 19, 2015

Faced with rising labor unrest stemming from unpaid wages among China’s legions of migrant workers, authorities in a key industrial province are proposing tougher laws to deter and punish errant employers.

Under draft laws introduced this week by Guangdong’s labor regulators, employers could face criminal prosecution for failing to disburse wages on time, or making unreasonable deductions to workers’ pay—offenses that would be punishable by fines of up to 200,000 yuan ($32,200).

Authorities say the proposed amendments would close loopholes in Guangdong’s wage-payment regulations, which don’t specifically stipulate penalties or criminal liability for employers who owe or deduct wages unfairly. Regulators currently can only impose fines of up to 50,000 yuan on employers who fail to cooperate with investigators or mediators, or flout certain administrative requirements.

The existing rules “lack deterrent power, which has led to wage-arrear cases occurring unabated,” Guangdong’s bureau of human resources and social security said in the proposal. “Setting a larger sum for disciplinary penalties will help reduce the occurrence of wage-arrear cases, and help prevent infringements of workers’ rights to remuneration.”

The bureau also proposed to create a fund to compensate migrant workers who have wages owed to them—taking up a recommendation from a recent policy paper issued by top Communist Party and government officials.

Guangdong’s proposals mark the latest efforts by Chinese authorities to curb wage arrears, a longstanding scourge for China’s roughly 270 million migrant workers. The problem has worsened over the past year amid sagging economic growth, prompting Premier Li Keqiang to pledge—during an annual policy speech in March—to curb unpaid wages for migrant workers.

“The draft legislation is clearly a response to the huge rise in wage arrears cases over the last couple of years both in manufacturing and the construction sector,” said Geoff Crothall, communications director at China Labour Bulletin, a Hong Kong-based advocacy group. The new rules will mark “an improvement on existing provisions but as with all labor law in China, enforcement will be the key.”

Labor protests grew in scale and frequency last year, according to the state-backed Chinese Academy of Social Sciences, which attributed the trend to a swelling of disputes over unpaid wages, layoffs and compensation, work insurance and benefits, among other factors.

The trend has worried top Chinese officials who in recent months called for greater efforts to foster labor harmony, signaling Beijing’s growing concern that festering industrial tensions could soon threaten social stability or even weaken the Communist Party’s grip on power.

Tensions are particularly acute in the Pearl River Delta region, a sprawling industrial slice of Guangdong that produces more than a quarter of China’s exports. By some estimates the province hosts more than 25 million migrant workers and is also one of China’s most strike-prone regions, where authorities have clamped down on industrial unrest over the past year.

It isn’t clear when Guangdong’s tougher wage-payment laws might enter into force, or how effective they may be. Labor regulators are inviting public comments on the draft laws until the end of July, and provincial legislature is expected to deliberate the proposal by the end of the year.

Labor experts say Guangdong regulators may find the new laws difficult to enforce, even if they look good on paper.

For instance, although China had revised national criminal laws in 2011 to make malicious non-payment of wages a criminal offence, few prosecutions have followed and the problem of wage arrears have worsened since, said Mr. Crothall of China Labour Bulletin.

China’s efforts to promote entrepreneurship could also complicate enforcement efforts, as the resulting proliferation of small-and-medium enterprises may overwhelm Guangdong’s already-stretched regulatory resources, according to Wang Kan, an assistant professor at the China Institute of Industrial Relations.

“The bulk of wage-arrear cases are linked to SMEs, which are more vulnerable to breakdowns in capital flows, particularly in times of economic difficulty,” Mr. Wang said. “Regulators may also be reluctant to add more pressure on employers amid the economic slowdown.”

– Chun Han Wong. Follow him on Twitter @ByChunHan.

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