Academic journal article Contemporary Economic Policy

Do Chinese Unions Have "Real" Effects on Employee Compensation?

Academic journal article Contemporary Economic Policy

Do Chinese Unions Have "Real" Effects on Employee Compensation?

Article excerpt

I. INTRODUCTION

Although the unions in developed countries, particularly the United States, have been studied extensively, limited research has focused on the experiences of developing countries. In discussing future extensions in this field, Freeman (2005) noted that

  More research resources should go to studying how
  unions operate under the far wider range of economic
  and social structures outside the United States, in
  particular to the potential development of real unions
  in China, and union activity in India and other large
  developing countries that compete with us in world
  markets through low wages. [p. 663]

Do unions "really" affect employee compensation in China? There is a popular view that China has no "real" unions because the so-called "unions" in China are very different from those in advanced economies. For example, Chinese unions are not politically independent, but rather controlled by the State-Party through a hierarchical system. Union officials are usually appointed by the State-Party rather than elected by the union members, and they belong to the government administration. Chinese unions have weak bargaining power in collective consultation/bargaining with management and are sometimes subordinate to management. A unique feature of Chinese unions is that they have multiple objectives: to assist the State-Party in an administrative function by retaining social and political stability, to collaborate with enterprise management to improve production efficiency, and to represent and protect the interests of employees. These objectives have grown increasingly contradictory, especially in the nonstate sector.

We treat Chinese unions as a special form of labor institution operating in a unique social and economic environment in our investigation of their effectiveness. First, we show that Chinese unions have a "triple-face": a strong "State-Party voice" face, a weak "monopoly" face, and a significant-collective voice" face. Unions function as a "transmission belt" through which the State-Party can reach the majority of workers. The State-Party's political influence plays an important role in unionization, which is highest for state-owned enterprises (SOEs) and lowest for private and wholly foreign-owned enterprises. Chinese unions' "monopoly" face is weak due to weak bargaining power in collective consultation/bargaining with management and the lack of a "strike weapon." In contrast, Chinese unions have a significant "collective voice" face and welfare functions. They take part in a wide range of activities such as accepting employee grievances, mediating labor disputes, monitoring the implementation of labor laws, providing various services and welfare benefits to employees, promoting technological innovation and employee training, and participating in corporate governance and policy making.

Second, we use the enterprise population-level data to test the link between unionization and employee compensation. Our data come from the First National Economic Census in 2004. conducted by the National Bureau of Statistics of China (NBSC). It is the most comprehensive micro-level cross-section data set covering the entire population of Chinese enterprises, and it is the first economic census that reports the information on workplace unions. The empirical findings suggest that Chinese unions have "real" effects. The presence of unions in the workplace is positively associated with the enteiprise average wage, nonwage compensation, and employee training. Moreover, the presence of multiple unions in the same region and industry generates positive spillovers for employee compensation.

This article is organized as follows. Section II discusses the effects that unions have on employee compensation. Unionization in China is described in Section III. Section IV presents the empirical evidence and Section V concludes the paper.

II. UNIONS EFFECTS ON EMPLOYEE COMPENSATION

"Everyone 'knows' that unions raise wages. …

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