Shi Xiuyin, Labor Discussions in Good Faith

The principle of “Labor Discussions in Good Faith” is a way for some Chinese companies to coordinate and handle labor relations, promote industrial harmony and build a win-win scenario for both the employee and employer. This method of bargaining is indigenously developed and used in China. Scientifically speaking, this principle is called “communicative discussion.”

Introduction:  We are very grateful that Professor Shi Xiuyin has shared with us this excerpt of his study on workplace ‘Labor Discussions in Good Faith.’  The excerpt is extremely valuable.   It reports on his empirical study and also explains in great detail the role that worker voice plays in workplaces where it occurs.  In addition, the piece shows how worker voice fits in the larger context of Chinese society.  Indeed there are lessons for governments around the world.  Professor Shi’s study shows that worker voice not only enhances the relationships of workers with their employers but also enhances the relationships and perceived legitimacy of the government.  We are extremely pleased to present this translation of his excerpted study.

 

 

There are many ways and methods to implement the principle of “Labor Discussions in Good Faith.” The most typical scenario is by the way of “Earnest Meeting with Employees.” In one case study, “Employees’ Earnest Meetings” were held every two months by the organization and arranged by the executive department of the company. Before the meetings, notice was posted by the company. About 40 to 60 employees attended the meetings. Some were randomly selected by management using the company employees name list. Some volunteered to attend, while others were recommended by their coworkers from the same department. From the company’s side, the president, vice president, executive deputy general manager, administration manager, personnel manager, production factory director, administration manager, director of audit, and the trade union chairman all attended.. The “Earnest Meetings” were held in a relaxing environment; snacks such as melon seeds, peanuts, fruit and drinks were served. The employees could eat while discussing issues at the meetings. The subjects of the meetings were not limited, as long as they did not involve directed personal attacks. The company welcomed any employee to make comments and suggestions on any aspect of the company’s management methods. Any comments and suggestions made by the employees were to be responded to immediately by the heads of appropriate departments. The administrative assistant recorded questions and answers discussed during the meetings. For any immediately resolvable issue, the solution and person in charge of resolving it were announced on the spot. For more difficult to resolve, or unresolvable, issues, company managers would sincerely try to explain the situation to the employees in order to gain their understanding. At each meeting, the company president debriefed everyone on the status of current business operations, and make comments on related matters and problems in the company and its corporate culture. After the meetings, records kept track of implementation of solutions in the long run, and status updates were publicly displayed on the company announcement board.The principle of “Labor Discussions in Good Faith” is a way for some Chinese companies to coordinate and handle labor relations, promote industrial harmony and build a win-win scenario for both the employee and employer. This method of bargaining is indigenously developed and used in China. Scientifically speaking, this principle is called “communicative discussion.”

The mechanism and procedures of “Labor Discussions in Good Faith” are the following: (1) expressing, (2) listening, (3) accepting or explaining and guiding, (4) coordinating, and (5) integrating.

Considering that some companies have achieved good results with the principle of “Labor Discussions in Good Faith,” the Labor Bureau of Shenzhen promoted it through means of government recommendation and company self-volunteerism in many companies. B District is an industrial region of Shenzhen with more than 32,000 various companies (mainly in manufacturing) and over 4 million workers. This paper is an evaluation report concerning the effectiveness and results of “Labor Discussions in Good Faith” in these companies.

The purpose of this report is to investigate whether the implementation of “Labor Discussions in Good Faith” achieved actual effects. If it did have effects, did they benefit the employee or employer? Does the principle, as some had predicted, enhance workers’ rights while increasing companies’ costs and disrupting its efficiency? In addition, how can such an innovative principle within the area of enterprises also help local government achieve its own goals as well?

In order to investigate the effects of the principle objectively, we implemented empirical evaluations; i.e.  large-scale and normative questionnaire surveys. On one hand, we surveyed 500 selected companies in B District. The human resources department manager, trade union chairman, and finance department manager of each company filled out questionnaire forms. On the other hand, we selected four companies that had good results due to the implementation of “Labor Discussions in Good Faith” and took random samples from different departments and positions, totaling 200 workers. For the control group, we also conducted a stratified sampling of about 200 workers from four similar companies that had no implementation of “Labor Discussions in Good Faith”. Questionnaire recovery rate was 92.8% from 484 companies and 84% from 1680 workers.

Before the statistics were analyzed, I, the evaluator, had doubts about the actual positive effects and functions of the “Labor Discussions in Good Faith” principle. “Labor Discussions in Good Faith” is a principle of communicative interaction. It is limited to verbal and “gentle” forms of expression, and it doesn’t in any way involve the use of strong actions that can force one side to submit to the other (such as strikes, factory closures, and firing). Does communication of such nature achieve positive results, especially when company’ workers, as the disadvantaged group, negotiate with company management, which has such an obvious advantage over the former? Comparing the workers to the employer is like the old Chinese saying of “comparing ants to a giant tree.” Do the company workers’ personal words and opinions really change the seemingly unyielding attitude of companies and enterprises that are perceived to sometimes not give in even at the threat of a strike?

However, upon obtaining the statistical analysis results, the evaluator found a new understanding: that the principle of “Labor Discussions in Good Faith” achieved positive and obvious results.

Questionnaire statistics show the following obvious positive effects of “Labor Discussions in Good Faith”: (1) “Labor Discussions in Good Faith” turned the strong conflicting labor & management relationship into a harmonious and cooperative one. (2) Laborers’ economic and social statuses were enhanced significantly. (3) Companies’ profits did not suffer, but rather increased. (4) Although the local government did not interfere, the pressure of safeguarding stability vanished all of a sudden. It also increased political support and endorsement of local government by laborers.

In summary, the principle of “Labor Discussions in Good Faith” did benefit laborers, companies and the government. The three relevant parties -- laborers, management and the local government -- all benefited a lot from the principle of “Labor Discussions in Good Faith.” This is the positive effect that the creator and supporters of the principle and the nation all wanted for companies and laborers!

A. Laborer and management relations changed from conflicts and contradictions to harmonious and friendly.

The principle of “Labor Discussions in Good Faith” does not rely on force and violence; it is based on the power of righteous and logical thinking. Surveys showed that the principle of “Labor Discussions in Good Faith” improved worker-enterprise relationships through the following three aspects:

(1) Communications and exchanges - Before the implementation of “Labor Discussions in Good Faith,” both sides did not have essential and positive mutual communications or exchanges. Some were just in the form of administrative orders and imposing pressure from the higher ups in command. Laborers didn’t have the courage or power to voice their own opinions in the face of management’s absolute power. However, as a living human being, they do have a lot of opinions and emotions on their mind that they want to express to company management, but instead they must keep these feelings bottled up inside. “Labor Discussions in Good Faith” opened up a channel and created a platform for mutual exchanges and communications. Not only do they communicate with each other, they also exchange ideas and positive thoughts and praise. This form of communication has always been what the nation and government believed and upheld as the “people-oriented” philosophy (and not labor being treated as an “object to be utilized” in its relation to the employer).

(2) Discussion and reasoning - The principle of “Labor Discussions in Good Faith” includes the important aspect of discussion and reasoning. In the past, labor & management relations used to be in simple forms of “order & obedience” or “order & implementation.” There was no room for discussion between the two parties. Thus, laborers’ rights are infringed and their dignity and motivations diminished. This became a primary source of conflict between labor and management. The essence of “Labor Discussions in Good Faith” is that “any issues can be calmly discussed” and “any discussions can be done in a calm fashion.” In this way, company management increased its openness to negotiation, and the laborers became more open to accepting negotiated terms. Discussion, on one hand, means expressing one’s own opinion and reasons. On the other hand, it also means accepting the opinion of the other side and understanding their reasons. In this way, the conflict between these two sides is resolved, which is good for enhancing understanding with each other and improving relations for both parties.

(3) Mutual acclimatization and tolerance - The internal process of “Labor Discussions in Good Faith” is that both sides must adapt to each other and make changes according to what the other side needs, in order to increase tolerance for each other’s interests and rights. Before the platform of “Labor Discussions in Good Faith” was established, workers did not have any official approach to express their own needs and values to company management. They could only react in forms of rejection and strikes against unfair treatment. Company management often used mandatory orders and personal insults to make workers obey, and the workers would often “obey but disapprove, or approve but not admit it, or admit it but remain resistant to it.” The results of such actions would only decrease the likelihood of achieving a positive relationship and understanding between the two sides. In the end, major labor and management conflicts are bound to occur. The implementation of “Labor Discussions in Good Faith” can help adjust attitudes and values between employer and employee and enhance openness, thus also enhancing their mutual tolerance towards each other.

(I) Resolving Sudden Strikes

Laborers’ questionnaire statistics showed that companies with frequent implementations of “Labor Discussions in Good Faith” had only a ratio of 1.6% of their workers going on strike in the last two years. Contrast that with companies with less or with no such implementation that had as many as 8.5% and 8.1% of their workers going on strike, respectively, in the last two years. Companies with regular or infrequent implementations of “Labor Discussions in Good Faith” had no workers who went on multiple strikes. Contrast that with companies with no such implementation that had 1.4% of their workers going on multiple strikes (See Table 1). In summary, “Labor Discussions in Good Faith” resolves workers’ strikes and reduces the possibility of strikes occurring.

Generally speaking, strikes by Chinese workers tend to be impulsive and emotional, like the actions of an irrational feral cat. The fundamental cause of emotional and impulsive strikes is that workers receive frequent improper treatment, thus suffering “a stomach full of anger;” once reaching their limit, they will “ignite with just one spark.” One important function of “Labor Discussions in Good Faith” is to reduce improper treatment of workers. If the workers can voice their own opinions and ideas through means of communication and negotiation with company management, this will remove “anger” from the equation and can “calm” the workers, two factors which often are the fundamental causes for strikes.

Table 1 - Implementation of “Labor Discussions in Good Faith” (LBIGF) and strike frequency.

 

(II)Resolving group petitions/complaints.

Workers’ questionnaire statistics showed a trend: the higher the frequency of worker participation in “Labor Discussions in Good Faith” (within reasonable limits), the less group petition/complaints there will be, and vice versa. In companies with frequent implementations of “Labor Discussions in Good Faith”, 99% of workers did not participate in group petitions in the last two years. In companies with less or with no “Labor Discussions in Good Faith”, 97.5% and 95.1% of workers did not participate in group petition in the last two years, respectively. In other words, for companies with frequent, infrequent and no implementation of “Labor Discussions in Good Faith” the percentage of workers who participate in group petitions are 1.0%, 2.5%, and 4.9%, respectively. (See Table 2)

Table 2 - Implementation of “Labor Discussions in Good Faith” (LBIGF) and group petition rates.

 

When workers go to the local government and labor department to file group petitions/complaints, it is often due to misbehavior and mismanagement by the company. When such problems cannot be resolved within the company, their only last option is to file complaints with the local government. Workers usually use this option only as a last resort in the face of arrogance and indifference by company management to workers’ requests. People in China usually are not willing to seek out “government officials.”  Unless severely mistreated, and with no other options left, workers are a disadvantaged group and are often disorganized like a pan of sand. The principle of “Labor Discussions in Good Faith” offers an important channel for solving such problems. Workers can turn to “Labor Discussions in Good Faith” for help. On this platform, workers’ demands and requests can be met and satisfied in one way or another, thus eliminating the need for group petitions to the government. Moreover, the implementation of “Labor Discussions in Good Faith” has the function of prevention; constant communication and negotiation between workers and company leaders serves as “reminders” to management, which will make them less likely to cause “problems” with employees, thus making group petitions an even less likely event.

Company questionnaires show that the principle of “Labor Discussions in Good Faith” helps a lot in resolving strikes and group petitions. Of the 464 companies that were surveyed by questionnaires, those that had regular implementations of “Labor Discussions in Good Faith” meetings for employees in 2011 had, on average,  0.05 strike incidents. For those companies without regular implementation of “Labor Discussions in Good Faith”, 0.08 strike incidents happened in 2011, an increase of 1.6x compared with the former.  In addition, the numbers of complaints, petitions and applications for labor arbitration are smaller in companies with “Labor Discussions in Good Faith” versus those without.

 

 

 

 

 

 

 

 

 

 

Table 3 – Mandatory (“Labor Discussions in Good Faith”) meetings and rates of strikes, petitions and arbitration.

 

(III)Resolving resentment and hatred.

One of the common causes for laborers’ strikes and group petitions is the accumulation of hatred. Because of company managements’ misbehavior, unfair treatment and indifference to workers, accumulation of resentments will occur. This abuse causes the workers to be in a state of resentment towards the company instead of peaceful co-existence. “Labor Discussions in Good Faith” can resolve and lessen resentment between the two parties. The survey shows that 98.9% of laborers do not have feelings of resentment in companies with regular implementation of “Labor Discussions in Good Faith,” 91.5% in companies with infrequent implementations and 78.2% in companies with no implementation of “Labor Discussions in Good Faith” at all.  (See Table 4).  In summary, companies with regular implementation of “Labor Discussions in Good Faith” can prevent feelings of resentment in employees and resolve feelings of resentment effectively when and if it does occur.

Table 4 - Implementation of “Labor Discussions in Good Faith” (LBIGF) and workers’ resentment.

 

(Ⅳ)Reducing chances of future strikes and group petitions.

“Labor Discussions in Good Faith” brings peace of mind and reduction of resentment in employees, leading them to believe that strikes and group petitions are unnecessary. In companies with regular implementation of “Labor Discussions in Good Faith,” 96.4% of workers reported that strikes and petitions were “not necessary.”  Companies with infrequent implementations had an 81.6% rate and companies with zero implementation had 72.9% of workers reporting strikes and petitions are “not necessary”. In contrast, in companies with frequent implementations of “Labor Discussions in Good Faith” nobody expressed a “very necessary” need to strike or file petitions. And in companies with no principle of “Labor Discussions in Good Faith,” 3.2% of workers reported that strikes and petitions are “very necessary.” (See Table 5)

Table 5 - Implementation of “Labor Discussions in Good Faith” (LBIGF) and workers’ intentions of strikes and petitions

 

B. Significant improvement of financial and social status for employees

Statistics show that the mechanism of “communication, discussion and reasoning, mutual adaptation and tolerance” in the principle of “Labor Discussions in Good Faith” significantly improved the financial and social status of employees. This corresponds to the above-mentioned analysis to the harmonious labor-capital relations because of implementation of said principle. This result contrasts sharply to earlier doubts by the evaluator in regards to the disadvantaged employees being able to make changes to actions by the management.  The mechanism of communication offers an opportunity, a platform, and the ability to express employee discontentment and expectations. And with the guidance of correct and innovative concepts, management can keep an open mind to the expression of employees, and to the axiom and the embodiment of rightfulness. The mechanism of discussion and reasoning also enables employees to explain their own reasons of discontentment while at the same time enabling management to explain their side through the same platform. In this way, both sides can negotiate and have calm discussions with each other, and reach conclusions that are mutually acceptable. The mechanism of mutual tolerance allows management (to some extent) to accept and tolerate employees’ concerns for improvements on business management and operations. While in the meantime, employees (to some extent) will also be able to better accept and tolerate the solutions and viewpoints of the enterprise, and make reasonable adjustments to their own demands.

Through such a mechanism, the financial and social treatment of employees improved on a noticeable level, and the relative indicators also shows significant improvements in other areas.

Employers around the world have six evaluation indexes in regards to employees’ economic and social status. They are: (1) Employment stability, i.e. whether there is a sustainability of employment and whether the enterprises unilaterally fire or lay off employees at random. (2) The intensity of labor. Whether the intensity of labor, labor quota, and assembly line speed are appropriate for the bearing capability of the laborers, and whether there is an overload of work and damage to their health of body and mind. (3) Labor time. Whether the duration of work and rest and holiday arrangements are in line with the laborer’s bearing capacity, and whether it greatly affects his social and family life. (4) Safety and health. Whether the workplace and the use of machinery and equipment, and raw materials make laborers feel comfortable, reduce discomfort and pain, and whether it damages the physical and mental health of laborer especially concerning avoiding the occurrence of work-related injuries and occupational diseases. (5) Wages and benefits. The level of employees’ salary, welfare, social insurance and retirement funds, relative to others of their positions in the industry. (6) Human dignity. Whether the management style is employee-oriented, whether it respects employees. Whether there are cases of forced labor, imposition, humiliation, beating, corporal punishment, incarceration, yelling, abuse, and harassment, etc.

In reality, the reasons behind labor-capital conflicts and strikes often boils down to one or a combination of the above-mentioned six reasons. For example, management’s often laying off of employees, withholding of wages, and verbal abuse at will are common reasons for strikes. Researchers also tend to use such indexes for reference when analyzing the treatment of employees.

Research studies show that the principle of “Labor Discussions in Good Faith” significantly improved these six indicators. They greatly enhanced employees’ financial and social status, their levels of well-being, and promoted the principle of a ‘people-oriented’ policy.

 

(I)Increased the rate of labor contract signing and employment stability.

“Labor Discussions in Good Faith” increased the rate of labor contract signings, making enterprises more in line with national laws and regulations. For enterprises that had an implementation of “Labor Discussions in Good Faith,” the rate of labor contract signing rate is 100%. For enterprises without “Labor Discussions in Good Faith,” the rate of labor contracts signings is 96%.

“Labor Discussions in Good Faith” also extended the term of these labor contracts, giving employees job security. For enterprises that often implemented “Labor Discussions in Good Faith,” labor contracts of 1 to 3 years reached 78.6%. For enterprises with infrequent implementation of “Labor Discussions in Good Faith”, labor contracts of 1 to 3 years was at 63.2%. For those that don’t implement the principle at all, labor contracts of 1 to 3 years only accounted for 51.9%. On the contrary, among the three categories of enterprises with different implementations of the principle of “Labor Discussions in Good Faith”, ratios of laborers with labor contract of less than one year account for 2.7%, 9.9%, and 13.4%, respectively. In summary, enterprises with “Labor Discussions in Good Faith” tend to have longer contracts, while enterprises with no such principle tend to have a larger proportion of shorter contracts. (See Table 6)

Table 6 - Implementation of “Labor Discussions in Good Faith” and length of labor contract.

 

Having “Labor Discussions in Good Faith” enhances employees’ sense of job security.  They tend to be more stable and dependable in their work. Statistics showed that in enterprises with “Labor Discussions in Good Faith”, 88.4% of employees felt stability in employment, while in enterprises with no such implementation, the number is only 50.8%. Those who feel that employment stability is “just ordinary” accounts for 10.1% in enterprises with “Labor Discussions in Good Faith” and as high as 40.6% in enterprises with no "Labor Discussions In Good Faith." Those with “not so stable” and “not stable ”only accounts for 1.6% in enterprises with “Labor Discussions in Good Faith” and 8.7% in enterprises with no such principle. Therefore, it can be concluded that having “Labor Discussions in Good Faith” enhances employees’ sense of job security, stability and lessened their sense of insecurity and feeling of wandering from one place to the next. (See Table 7)

Table 7 Implementation of “Labor Discussions in Good Faith” and employees’ sense of stability.

 

(II) Reduction in overload of work.

The principle of “Labor Discussions in Good Faith” reduced the overload of work, and maintained a level within which the employees can withstand. In enterprises with the implementation of “Labor Discussions in Good Faith,” 89.9% of employees report that they could finish their work within 8 hours. In enterprises with no such implementation, only 59.2% reported that they could finish their work within 8 hours. In enterprises with the “Labor Discussions in Good Faith,” 7.9% of employees report that they can sometimes finish their work. In enterprises with no such implementation, this ratio is as high as 33.5%. In addition, those reporting failure to finish work was at just 2.1% in enterprises with the “Labor Discussions in Good Faith” and 7.3% in enterprises with no such principle. (See Table 8)  To sum up, employees in enterprises with no “Labor Discussions in Good Faith” have higher instances of work overload, while companies with “Labor Discussions in Good Faith” have a lower workload that is maintained at a relatively more reasonable level.

Table 8 - Implementation of “Labor Discussions in Good Faith” and possibility of finishing workload.

 

(III) Shortening overlong work hours.

Enterprises with “Labor Discussions in Good Faith” create company vacation schedules according to national regulations. Currently, employees in many companies have to work overtime, with very few days off or almost no day for rest every month. Having “Labor Discussions in Good Faith” increases the days of vacation and conform the vacation schedule to national regulations standards. In enterprises with monthly implementation of “Labor Discussions in Good Faith”, 89.1% of employees work five weekdays every week. In those with semi-annually implementation of “Labor Discussions in Good Faith,” 85.7% of workers have five weekdays of work every week. In those with no implementation of “Labor Discussions in Good Faith” only 68.8% of them have five weekdays of work every week. (See Table 9) In summary, in enterprises with regular levels of implementation of “Labor Discussions in Good Faith,” employees tend to have higher possibilities of a normal weekly worktime (five weekdays every week).

Table 9 - Implementation of “Labor Discussions in Good Faith” in correlation of implementation of working five weekdays every week.

 

The principle of “Labor Discussions in Good Faith” shortens lengthy work hours, and conforms it to national regulations. In enterprises with regular implementation of “Labor Discussions in Good Faith” overtime every month is on average 36.7 hours. In those with not-so-often implementation of “Labor Discussions in Good Faith” overtime every month is on average 54.1 hours. In those with no such principle at all, overtime every month is on average 69.0 hours. This shows that “Labor Discussions in Good Faith” reduced overtime dramatically and ensured the health of employees.

The implementation of “Labor Discussions in Good Faith” reduces the length of overtime even more dramatically for common (low level) workers.  In many companies, common workers tend to work overtime more consistently and severely than other types of employees. In this investigation, common workers in companies with no “Labor Discussions in Good Faith” worked as long as 85.5 hours of overtime every month. While those in companies with regular implementation of such principle, common workers only work 37 hours of overtime every month. (See Table 10)

Table 10 - Implementation of principle of “Labor Discussions in Good Faith” and monthly hours of overwork

 

(IV) Protects and enhances the health of employees.

Implementation of “Labor Discussions in Good Faith” improved the working environment, reduced many painful instances of negative stimulations to workers (noise, bad odors, strong lights, etc.), and increased comfort levels at work. The following table shows that such principle increased the comfort of the work environment to a new level. In enterprises with implementation of “Labor Discussions in Good Faith” 25% of employees reported being “very comfortable” at work, and 54,8% being “relatively comfortable,” with a total combination of 79.8%. While in enterprises with no such implementation, only 0.9% of workers reported “very comfortable,” and 19.7% reported “relatively comfortable,” a combination of just 20.6%. Companies with “Labor Discussions in Good Faith” only reported 1.1% of workers being “a little uncomfortable,” while nobody reported being “very painful.” In companies with no such principle, 13.8% of workers felt “a little uncomfortable,” and 3.4% reported being “very painful,” with a combination of 17.2%. (See Table 11)

Table 11 - Implementation of “Labor Discussions in Good Faith” and comfort levels in the work environment.

 

“Labor Discussions in Good Faith” enhances and improves the safety and security in production industries and considerably increased the protection of employees’ health.  Companies with “Labor Discussions in Good Faith” had 13.3% of workers reporting having enough and very complete levels of safety and protection at work, 60% reporting yes and basically enough protection, with a combination of 73.3% satisfaction. While companies with no “Labor Discussions in Good Faith” only 8.5% reported enough safety and protection equipment existed in the workplace, 55.1% reported yes and basically enough, with a combination of 63.6% satisfaction. On the other hand, at companies with no “Labor Discussions in Good Faith” 4.7% of workers reported that there is a need for protection and safety equipment but that they don’t have any, in comparison with 0% in companies who frequently had “Labor Discussions in Good Faith” (See Table 12)

Table 12 - Implementation of “Labor Discussions in Good Faith” and Having Safety & Security equipment and protection at the workplace.

 

“Labor Discussions in Good Faith” reduced industrial injury accidents and occupational diseases, and protected workers’ health. In companies with “Labor Discussions in Good Faith” 97.9% of workers never suffered industrial injuries. While in companies with no such implementation, 86.6% did, exceeding the former by 11.3%. Also in comparison, companies with no “Labor Discussions in Good Faith” the percentage of slight and medium levels of work injuries are 13.4%, while in companies with “Labor Discussions in Good Faith” the percentage is just 2.1%

In the case of occupational disease, companies with “Labor Discussions in Good Faith” had 98.9% of their worker with no signs of such disease. Companies with no “Labor Discussions in Good Faith” showed 93.7%, lagging behind by 5.2%. Also, companies with no “Labor Discussions in Good Faith” reflected obvious or serious disease rates of 2.2%, while companies with “Labor Discussions in Good Faith” showed zero percent. (See Table 13)

 

 

 

 

 

 

 

 

 

 

Table - 13 Implementation of “Labor Discussions in Good Faith” and rate of work injuries.

 

(V)Increased levels of salaries, benefits, and social security.

“Labor Discussions in Good Faith” increased levels of salaries dramatically. Here are the following big differences: companies with “Labor Discussions in Good Faith” tend to have a bigger fraction of high-level income workers. While companies with no “Labor Discussions in Good Faith” have a bigger fraction of low income workers. Companies with “Labor Discussions in Good Faith” had 10.1% of workers with monthly income of 4000 yuan or above. While companies with no “Labor Discussions in Good Faith” had just 3.0% of workers with monthly incomes of 4000 yuan and above. Similarly, workers ratios with monthly incomes of 2000 to 3000 yuan in companies with “Labor Discussions in Good Faith” tend to be higher than that of companies with no such implementation. Also, companies with no “Labor Discussions in Good Faith” had 20.6% of workers with monthly income of 2000 yuan or below. While companies with “Labor Discussions in Good Faith” had that percentage at just 3.7%.  Companies with no “Labor Discussions in Good Faith” had 4% of workers at 1500 yuan or below. While companies with “Labor Discussions in Good Faith” showed zero percent. In summary, workers in companies with “Labor Discussions in Good Faith” have an average monthly salary of 2797 yuan, and in companies with no such implementation the average was just 2533, lagging 264 yuan behind the former.  (See Table 14)

 

 

 

 

 

 

 

 

 

 

Table 14 Implementation of “Labor Discussions in Good Faith” and levels of monthly income.

 

Having “Labor Discussions in Good Faith” also increased levels of work benefits for workers. Studies showed that out of a total of 26 work benefits in the industry, companies with “Labor Discussions in Good Faith” had 13 benefits on average. While companies with no “Labor Discussions in Good Faith” had only 9 on average. For example, 91% of companies with “Labor Discussions in Good Faith” provide free accommodations. Only 85 % of companies without “Labor Discussions in Good Faith” provided free accommodations. (See Table 15)

Table 15 - Implementation of “Labor Discussions in Good Faith” and number of benefits.

 

“Labor Discussions in Good Faith” increased social security protection levels comprehensively. Companies with and without “Labor Discussions in Good Faith” have social security protection/submission rates of 89.8% and 74.8%, medical insurance coverage rates of 93.8% and 80.2%, unemployment insurance rates of 3.3% and 1.0%, work injury insurance protection rates of 78.6% and 51.3%, and maternity insurance rates of 2.3% and 1.6%, respectively. To sum up, each of the above insurance rates in companies with “Labor Discussions in Good Faith” tend to be higher than that in companies without “Labor Discussions in Good Faith” In comparison, companies with “Labor Discussions in Good Faith” (versus those without) have increased social security protection rates of 15% , increased medical insurance rates of 13.6%, increased unemployment  insurance rates of 2.3%, increased employment injury insurance rates of 27.3%, and increased maternity insurance protection rates of 0.7%. (See Table 16)

Table 16 - Implementation of “Labor Discussions in Good Faith” and social protection rates.

 

(VI)Enhanced the “people-oriented” method of management and protected workers’ dignity.

Only 1.3% of workers in companies with “Labor Discussions in Good Faith” were reported as being mistreated by managers in the past year. In companies with no “Labor Discussions in Good Faith,” the number is at 14.3%, ten times that of the former number. Only 1.6 % of workers in companies with “Labor Discussions in Good Faith” were scolded by managers. The number in companies with no such implementation is 10.3%, six times the former. In addition, companies with “Labor Discussions in Good Faith” don’t beat workers. In companies without such principle, 1% of workers were beaten, and 3.2% were searched. (See Table 17)

Table 17 - Implementation of “Labor Discussions in Good Faith” and the “people-oriented” method of management.

 

86.4% of workers in companies with “Labor Discussions in Good Faith” feel that they are treated using the better “people-oriented” method of management, while the ratio in companies without “Labor Discussions in Good Faith” is only 54.2%. In summary, “Labor Discussions in Good Faith” enhanced the “people-oriented” method of management and protected workers’ dignity.

“Labor Discussions in Good Faith” reduced the rate of random deduction in salary or fines. 2.7% of workers in companies with “Labor Discussions in Good Faith” received a deduction in salary, while the ratio in companies without “Labor Discussions in Good Faith” is at 19.4%, seven times the former ratio.

“Labor Discussions in Good Faith” brought a sense decency and dignity to workers. Two-thirds of workers in companies with “Labor Discussions in Good Faith” were satisfied with the level of decency and dignity shown to them at work and in regards to their salaries. While less than 1/3 of workers felt the same way in companies without “Labor Discussions in Good Faith”. The former is twice the number of the latter. In contrast, one-fourth of worker feel ill-treated and unappreciated in companies without “Labor Discussions in Good Faith” while the ratio in companies with such implementations is only 6.0%. (See Table 18) In summary, most of the workers in companies with “Labor Discussions in Good Faith” feel that they are treated well. While companies without “Labor Discussions in Good Faith” most workers felt unhappy and mistreated.

Table - 18 Implementation of principle of labor bargaining in good faith and workers sense of decency.

 

C. Significantly increased financial benefits for enterprises.

Does “Labor Discussions in Good Faith” affect the company financially? If it does, does it improve or diminish it?  Speculation from intuition would say that such implementations will cost the company financially. Here the argument would be that “Labor Discussions in Good Faith” will improve wages, lead to better working conditions, and the inevitable increase in labor and operating costs. “Labor Discussions in Good Faith” will reduce the flexibility of employment, labor hours, labor intensity, and weaken management’s power. These factors will then inevitably lead to a reduction in enterprise efficiency and corporate earnings. Based on the consequences of such speculations, enterprise managers tend to resolutely reject the principle of “Labor Discussions in Good Faith” In addition, such a principle may also increase the tension between employees and employer, leading to better knowledge of workers’ rights among employees, and increasing tension and likelihood of forceful actions by employees, thus possibly resulting in fierce clashes with company management. These tensions and conflicts will not only affect the enterprise financially, but could also affect the development of the local economy and even threaten political stability. Because of this, some local governments also fear the principle of “Labor Discussions in Good Faith” and try to ignore and reject it. However, in reality, both the company managers and local governments have no empirical evidence proving the above mentioned speculations.

Then, what are the actual effects of “Labor Discussions in Good Faith” in companies and enterprises?

Modern enterprises are defined as economic organizations that need outside resources from the economy, society and political environments in order to survive and thrive.  According to this definition, there are three evaluation indexes when looking at enterprises. (1) Economic efficiency.  Efficiency is the ratio of input versus output, the more units of output per input, the higher the efficiency. Specific indicators of economic efficiency include profit margin, cost ratio of labor versus profit, profit per laborer, and productivity from labor, etc. There are also time and speed efficiency indexes, such as being able to produce on time, etc. (2) Social Factors. Everything a company needs, comes from outside sources, the ability to gain access to these resources depends on the relationships between enterprises and external social conditions, such as relations with clients, consumers, communities, and governments. Evaluation index of social factors specifically includes customer satisfaction, customer complaints, etc. (3) Growth and development. Enterprises not only need to make a profit in the present situation of obtaining resources from external factors, what’s more important is their sustainability and the ability for further development and growth. Specific indicators of enterprise growth includes product innovation, technological innovation, sales growth, increase of staff size, and asset growth, etc.

Enterprise evaluations show that all these factors and measures were improved and enhanced by the establishment and implementation of “Labor Discussions in Good Faith”. This fact shows that no matter what company managers or local governments might believe, speculations that “Labor Discussions in Good Faith” will reduce enterprise efficiency are simply not correct. Subjective feelings often do not conform to objective realities.

Evaluation results of enterprise profits are stated as follows:

(I)Improvement of enterprises’ economic efficiency.

Enterprises with regular implementation of “Labor Discussions in Good Faith” have shown stable profit ratios and even increases, while those without “Labor Discussions in Good Faith” leaned towards decreasing profits and or unstable profit ratios. According to financial reports from CFOs of 464 companies, 14.9% of companies with regular implementation of “Labor Discussions in Good Faith,” have had continuous profit improvements. While only 10.3% of companies without such implementation had increases. 40.4% of companies with regular implementation maintained a generally steady profit ratio. While only 13.8% of companies with no such implementation maintained steady profit rates. On another note, only 27.7% of companies with regular implementation of such principle showed decreases in their profit rates. While in companies without such principle, the percentage is 55.2%. (See Table 19) So generally speaking, companies with regular implementation of “Labor Discussions in Good Faith” are able to maintain profit rates at stable levels or even at increased rates.

Table - 19 implementation of “Labor Discussions in Good Faith” and companies’ profit rates.

 

More frequent implementation of “Labor Discussions in Good Faith” will generate larger levels of increases in profit rates. From 2008 to 2010 (before taxes), companies with regular implementation of “Labor Discussions in Good Faith” at least once or twice per month, or more, tend to have increases in their profit rates by an average of 351%. Companies with quarterly implementations of “Labor Discussions in Good Faith” have shown an increase of profits by 197% over the same period. Companies with one implementation every half year have increases of 193% over the same period. Companies with one implementation of “Labor Discussions in Good Faith” per year have increases of 140%. While companies with no such implementation at all only have a profit increase of 30% (Table 20)

Table - 20 Frequency of implementation of “Labor Discussions in Good Faith” and companies’ profits increase.

 

Companies with regular implementation of “Labor Discussions in Good Faith” have a better labor cost/profit ratio than those with no such implementations. In 2010, companies with regular implementation of “Labor Discussions in Good Faith” had pretax profits of 2827 yuan per 10,000 yuan spent on labor. While companies with no such implementation of “Labor Discussions in Good Faith” only had 2354 yuan pretax profit. The former has an increased profit of 473 yuan versus latter and that is a 1.2x difference versus the latter.

Companies with regular implementation of “Labor Discussions in Good Faith” have a higher average ‘profit per employee’ rate than those with no such implementation. In 2010, companies with frequent implementation of “Labor Discussions in Good Faith”, every employee created 9837 yuan in profit. While in companies with no such implementation, each employee only created on average 7561 yuan in profit. Employees of the former created 2276 more yuan than the latter at a 1.3x difference.

Companies with regular implementation of “Labor Discussions in Good Faith” have higher productivity rates than those with no such implementation. In 2010, companies with regular implementation of “Labor Discussions in Good Faith” each employee created on average 331,000 yuan worth of labor output.  While companies with no implementation of “Labor Discussions in Good Faith” each employee created an average of 181,000 yuan worth of labor output. The former created more 150,000 yuan than the latter with 1.8 times more output. From 2006 to 2010, companies with regular implementation of “Labor Discussions in Good Faith” increased productivity by 68.9%. While companies with no such implementation only increased their productivity by 36.1%. (See Table 21) According to a report concerning implementation of “Labor Discussions in Good Faith” a company called Bei Teli used less workers than its competitors for the same amount of goods produced. Other companies needed 90 workers to produce ten thousand batteries while Bei Teli only needed 80 workers.

Table 21 - Implementation of “Labor Discussions in Good Faith” and labor productivity.

 

However, comparing companies with regular implementation of “Labor Discussions in Good Faith” with those that have no such principle, labor cost did not increase significantly. In the recent 3 years, because of labor relationship adjustments and changes in the labor market, companies with or without the implementation of “Labor Discussions in Good Faith” both have seen increases in labor costs. Of the 464 companies surveyed, 87.5% of companies with regular implementation of “Labor Discussions in Good Faith” had increased labor costs, compared with 85.7% for companies with no such principle. The differences between the two are not big. That is to say, implementation of “Labor Discussions in Good Faith” does not increase labor cost significantly. When “Labor Discussions in Good Faith” improves benefits for workers and increase wages, companies without “Labor Discussions in Good Faith” will be forced to adjust to the higher costs as well, but without the stability that “Labor Discussions in Good Faith” brings. Those companies with no such implementation might actually face an even higher increase of labor costs in order to satisfy sudden worker demands and to maintain a stable labor force.

(II)Enhance the adaptability of the enterprise to the market environment.

Companies with regular implementation of “Labor Discussions in Good Faith” tend to have a higher rate of passing product quality inspections than those without “Labor Discussions in Good Faith”. Moreover, the more frequent the implementation of “Labor Discussions in Good Faith” is, the higher the rate of product passing inspections became. In companies with no implementation of “Labor Discussions in Good Faith” 25% of them experienced an increased product quality inspection pass rates in the last 5 years. In companies with one implementation of “Labor Discussions in Good Faith” every year, the percentage was 26.7%. In companies with implementation of “Labor Discussions in Good Faith” every half year, the ratio is 38.5%. In companies with implementation once every quarter, the ratio is 43,6%. In companies with implementation every month or more often, they have seen the best results at 52.2%. (See Table 22)  To sum up, companies’ product quality inspection pass rates increased with frequent implementation of “Labor Discussions in Good Faith.”

Table 22 - Implementation of “Labor Discussions in Good Faith” and increase of product quality inspection pass rate.

 

Companies with regular implementation of “Labor Discussions in Good Faith” have higher rates of punctual goods delivery than those with no such principle.  And just like with the above quality inspection pass rates, the higher the frequency of “Labor Discussions in Good Faith” implementation, the higher the rate of punctual goods delivery. In the last five years, only 28.6% of companies with no such principle increased their rate of punctual delivery. In companies with one implementation of “Labor Discussions in Good Faith” every year, the proportion was 20% (this figure might be affected by other important factors).  In companies with “Labor Discussions in Good Faith” every half year, the ratio was 30.8%. Companies with implementation every quarter or every month, the ratios were 33.3% and 41.3% respectively. Likewise, companies’ punctual delivery rate to clients, increased with the frequent implementation of “Labor Discussions in Good Faith” (See Table 23)

Table 23 - Implementation of “Labor Discussions in Good Faith” and punctual delivery rate.

 

Companies with regular implementation of “Labor Discussions in Good Faith” have lower customer complaint rates than those without such principle. It’s basically the same kind of improvement as product quality inspection pass rate. The higher the rate of implementation of “Labor Discussions in Good Faith”, the better/lower the rate of complaints. In the last five years, 25% of companies with no implementation of “Labor Discussions in Good Faith” have fallen complaint rates. Companies with implementation of “Labor Discussions in Good Faith” once every year, the ratio was 28.6%. In companies with implementation of “Labor Discussions in Good Faith” once every half year, the ratio was 23.1% (this figure might be affected by other important factors). In companies with implementation of “Labor Discussions in Good Faith” every season or every month, the ratios were 34.2% and 46.8 respectively. (See Table 24) Obviously, implementation of “Labor Discussions in Good Faith” reduced the rate of complaint, which improved company-client relationships.

Table 24 Implementation of “Labor Discussions in Good Faith” and rate of complaints decreased.

 

(III)Promoting enterprise growth and development.

Implementation of “Labor Discussions in Good Faith” has positively affected company growth and development. According to the data gathered, analysis indicates an expansion of the companies. In companies with regular implementation of “Labor Discussions in Good Faith” there were 1224 workers in each one of them on average, and 1335 workers in 2011, an increase of 111 workers in two years. While in companies with no implementation of “Labor Discussions in Good Faith” there were 924 workers in each company on average, and 893 workers in 2011, showing a decrease of 31 workers in two years. (See Table 25) This shows that implementation of “Labor Discussions in Good Faith” can help with company expansion and growth.

Table 25 Implementation of “Labor Discussions in Good Faith” and changes in staff size.

 

In order to achieve sustainable growth in the era of global competition, companies are now more than ever dependent on innovations, such as innovation of product, technology, management and market. The principle of “Labor Discussions in Good Faith” facilitates such innovations. Take the company “Bei Teli” for instance, which had regular implementation of “Labor Discussions in Good Faith”. This company has 27 patents, which makes it top ranking in their industry. The company created many original technology and products through its research, such as nickel zinc battery technology. Following the trend of the market, the company has already begun research and development into high-tech products such as nickel zinc power batteries, high temperature batteries, and military batteries, etc.

The principle of “Labor Discussions in Good Faith” facilitates the sharing of technical information. If researchers have new creative ideas, they have a chance to present it during meetings of “Labor Discussions in Good Faith” or take the opportunity to speak directly with the owner/president. After gaining the support of the company president, new technology can be put into research and development very quickly. With the backing of the CEO, support and cooperation from the production and sales department will follow during the important the research and development phases. While in companies with no such principle, R&D staff's creative ideas and thoughts are often truncated and/or buried due to the uncooperativeness from within their own department or other departments within the company.

(IV)Government gains political support and becomes better at management.

The legitimacy of a government’s rule is based on the people's acceptance and their political support. The ruling party's long-term ability to govern relies on the active support of the people from the most basic levels in society.  Will the principle of “Labor Discussions in Good Faith” have any effects on the legitimacy of the government and the legitimacy of the ruling party? And what will those effects be?

The evaluation index on what positive aspects the government can "obtain" depends on the nature of the government, its functions and needs. This index system includes five disciplines: (1)The legitimacy of rule. Does the power and rule of government have the recognition and approval of those being governed?  Do the people believe that the government serves the people, and safeguards social justice? (2) Political stability. Whether the government encounters challenges from other political forces, whether harmonious relations exist between different social groups, whether social order is at the norm. (3) Progress in governance.  The status of the political participation by the public, democratic order, efficiency and cost of administration.(4)Fiscal revenue. Speed and level of economic and social development, the amount of revenue and its ability to support the functions of government.(5)People's livelihood and welfare. Job employment rate, income levels of the people and employees, the level of their social security, etc.

Statistics show that the principle of “Labor Discussions in Good Faith” can significantly improve or promote these five factors.

(1)Enhanced the government's legitimacy.

“Labor Discussions in Good Faith” significantly improves the relationship between the masses and the party, and enhanced employees' trust in government. The frequency of employees’ engagement in “Labor Discussions in Good Faith” is proportional to the increased level of trust in the government. To questions like “Does the local government protect your rights and interests?” 84.2% of those who often participate in “Labor Discussions in Good Faith” answered “Yes.” While those who do not participate in “Labor Discussions in Good Faith” only 18.9 % of them answered “Yes.” In addition, workers who don’t often participate in “Labor Discussions in Good Faith” 35.2% of them answered “Yes.” This puts them in the middle of those that participated frequently and those that never did.  On another note, those who answered “partially can” and “cannot” are most often those that did not participate in “Labor Discussions in Good Faith” Those participating the most in “Labor Discussions in Good Faith” had the fewest that answered in such a way, and those that participated sometimes are in between the two other groups again. (See Table 26)

Table - 26 “Labor Discussions in Good Faith” and workers’ trust degree in government.

 

“Labor Discussions in Good Faith” significantly promoted people’s understanding of the nature of “government for the people,” and enhanced the legitimacy of the government. The specific indication is that workers’ participation in “Labor Discussions in Good Faith” is proportional to people’s understanding of “government for the people.”  To questions like “Do you think that the local government serves the people?” 84.3% of workers who regularly participate in “Labor Discussions in Good Faith,” answered “Yes.” While only 23.7% of those who never participate in “Labor Discussions in Good Faith” answered “Yes.” The former is 3.6 times the latter. Likewise, 40.8% of those who only participate in “Labor Discussions in Good Faith” only once or twice answered “Yes.”  Workers who often or regularly participate in “Labor Discussions in Good Faith” tend to think that the answer is “Yes.” While those who seldom or never participate in “Labor Discussions in Good Faith” often tend to think that the local government does not serve the people well. (See Table 27)

Table 27 - Implementation of “Labor Discussions in Good Faith” and understanding of legitimacy of the government.

 

“Labor Discussions in Good Faith” significantly improved the relationship between the government and the people, employees’ trust in the government, and the government’s legitimacy. These statistics and results are very surprising to me, the evaluator.  “Labor Discussions in Good Faith” are conducted within the company between management and the workers. Local government officials basically never attend. Labor departments of local governments usually “communicate sincerely” with management directly, introducing methods and experience from other enterprises in regards to “Labor Discussions in Good Faith”. Employees generally have no knowledge of these meetings between enterprise management and government officials/staff.  In meetings of “Labor Discussions in Good Faith” employees do not see government personnel attend, nor did they know the benefits that government officials have brought to them by introducing the concept of “Labor Discussions in Good Faith” to the enterprise, and yet there is still an improvement of employee understanding and knowledge of the government.  This is a question worth studying, and which deserves the close attention of the government.

In China, the government often possesses the dominant and leading roles in the area of labor relations. Laws and policies of the government determine the status of labor relations between the employer and employee. Chinese people tend to associate their own social status to be tied-in closely with the government. When their status is improved, their rights are protected. They then tend to thank the country's good policy, local governments’ good leadership, and so on. When employees in enterprises encounter bad or unfair treatment, or their requests are being strongly rejected by companies, they tend to question why the government doesn’t reign in these bad people, or think that the employers had bribed the government officials. “Praising government when good, blaming government when bad,” not caring whether it could be their own factors at play, employees always attribute both good and bad to the government.  When “Labor Discussions in Good Faith” improve the interests and rights of employees and increase fair distribution of wealth, they naturally will also give credit to the government, thus enhancing their understanding and trust in the government and its legitimacy. These facts in turn suggests that implementing and promoting “Labor Discussions in Good Faith” in companies and enterprises is of vital significance to enhancing the legitimacy of the government, and strengthening of the party's ruling foundation. In this area, the government have accomplished very much.

Compared to collective bargaining, “Labor Discussions in Good Faith” is a very gentle and flexible approach. And yet, this bargaining mechanism of such flexibility, to a great extent, has led to such a big difference in the understanding and evaluation of the government, this is a fact that needs to be acknowledged.  It can be seen from this that employees are quite sensitive to their own conditions and the improvement of their situation. A small change can lead to a huge change in their understanding of the government.  Between the employees’ condition, and their trust of the government, exists a "magnifying effect". The government should pay close attention to such a “magnifying effect” and make the most of it.

(2)Enhanced  political and social stability.

The statistics in the first section showed that “Labor Discussions in Good Faith” greatly reduces the incidence of strikes and collective petitions to the government. In many companies, the incidence of such events was zero year after year. Labor Bureau Officials of B district reported that before the system of “Labor Discussions in Good Faith” was set up, enterprise strikes and collective petitioning happened frequently. Labor Bureau Officials were busy almost every day meditating such incidents. One of the local officials said, “The most frightening thing was the phone ringing.”  Every day he was in a state of nervousness and intense pressure. The Chief and Vice bureau officials responsible for dealing with strikes and group disturbances both fell ill to serious medical conditions, and often had to be hospitalized from the overwhelming stress. However, after establishing the system of “Labor Discussions in Good Faith” the situation improved a lot. It is now much quieter than before in front of the local government building, and local officials are now more relaxed than ever. Now, every day routine work is no longer to deal with strikes and petitions, but to summarize “Labor Discussions in Good Faith” experiences at different companies and enterprises, collect good examples of such experiences, and get training for other companies’ HR department heads.

An obvious fact is that “Labor Discussions in Good Faith” significantly reduced the pressure of maintaining stability for the government, government grounds became quieter and the officials were less burdened.

(3)Promoted the progress of national and local governing.

a. Realized a change from government rule to self-rule.

In the past, local governments are accustomed to the traditional way of ruling. The government has all of the centralized power and a monopoly of power. It tends to intervene in all things directly. Government has unlimited power, and unlimited liability. Government doesn't trust the people’s ability to self-resolve issues. Nor does it allow or encourage enterprises to establish internal governance and mediation mechanism. As a result, more conflicts happen in the enterprise. And any time a conflict or problem arises, both employee and management turn to the government for solutions.

This type of governance caused three major problems and crisis for the government. (1) Crisis of government overload. The government is the sole controller in the area of labor relations. Once a problem has been encountered, both sides will always turn to the government. Local governments are faced with directly handling thousands of businesses, and millions of employees. The responsibilities are huge, with many tasks, intense work, and extremely exhausting. (2) Crisis of government legitimacy. When employees file a petition to the local government, the government's usual way of practice is to order the business executives to carry out any requirements or recommendations of the government at the same time, oppressing the employees, and arresting their leaders. Oppressing executives can easily cause conflicts between the government and enterprise, and the enterprise will start to have doubts about the legality of the government. Suppressing or arresting employees causes conflicts in the relationship between the government and employees. The employees will then shift their “spears” from targeting the enterprise towards targeting the government. Financial disagreements between the employee and employer, suddenly becomes political issues between the people and the government.  If government handling and resolution of conflicts is not timely or deemed unfair, employees will again shift the blame from the enterprise’s management to the local government. (3) Crisis of labor conflicts intensifying. Government forced oppression of management causes the enterprise to react defiantly. There is no intrinsic and reasonable motivation for management to truly resolve the issue in their labor relationships with employees. They will not only disobey government orders, they will also find many other alternative ‘methods’ to deal with employees. Employees will learn from experience that, “no disturbances means no resolution, big disturbances means big resolution.” They will make frequent use of strikes and petitions. The final result of this governance method will be the gradual breakdown in labor relations.

In terms of political legitimacy, after more than 30 years of experience, the local government gradually realized that labor conflicts without government intervention are usually contained within the boundaries of the enterprise, and is an internal affair of that single enterprise. Both management and employees tend to see this as personal problem and a matter of relationship between the superiors and the subordinates. However, with government intervention, the employees will shift their attention to the government. Since there is only one government within national boundaries, the government then becomes the focus of conflict for employees of different and multiple enterprises. When that many employees have a common problem with the government, they might unite based on this common purpose. If the employees unite across different enterprises, industries, and regions, then the government will bound to be facing a political crisis.

Local government is the specific implementer for such a type of governance. When labor conflicts occur within their jurisdiction, local government is the first to bear the main responsibility. This leads to a common phenomenon: in a region where conflicts exist between local government and its people, this is also the region where the central government often has good relationships with the same people.

“Labor Discussions in Good Faith” shows that the manner of governance by the local government is shifting to enterprise autonomy (Local Self Governance). The features of this governance are: (1) Let the enterprise and workers solve their own problems in regards to their labor relations. (2) The government provides guidance in the establishment of enterprise self-governance and autonomy. (3) Governments should praise enterprises that show good self-governance.

In fact, as long as enterprises set up a system of “Labor Discussions in Good Faith,” employees will often solve the problems they encounter all by themselves. They will turn to the government for help much less than before.  Even if problems occur, they also tend to think that this doesn't concern the local government, and thus will not blame the local government. Also, when employees turn to the government for help, they would be asked to “go home” and solve the problems between themselves. By removing forced government decisions onto employee and employer, they are then free to find alternate ways to resolve the problems themselves.

Through the autonomous way of “Labor Discussions in Good Faith”, enterprises can achieve reconciliation and harmony with the people, government will have a reduction in the pressure to maintain stability, and more importantly achieve a harmonious relationship with its people, and increase the acceptance of the legitimacy of government.

b. Realizing the shift from making temporary solutions to affecting a permanent cure in social management issues and resolving problems before they occur.

In the past, the way of social management by the local government was taking actions long after the problems have occurred. Local government often just “grant” powers of self-management and decision making to the company managers, the enterprises become sole dictators of all terms. Employees have no rights to speak up, bargain, or participate. They do not have the mechanism of “Labor Discussions in Good Faith” or collective negotiation to mediate labor-capital relationships issues. A dominant power necessarily puts employees at a disadvantage. They can’t find a way of solving problems when they occur, or methods of resolving disputes. This naturally leads to the intensification of conflict between labor and management. And employee's behavior become emotional and extreme. When conflict breaks out, they can only turn to the local government for further help and to mediate solutions. The local government will then use the “putting out fires” method of resolving direct conflicts, and use administrative orders to force management into fixing the problem.  However, this doesn’t change the internal power structure of enterprises and labor-capital conflicts will still happen as usual.  The government solved the problem temporarily but did not effectively cure it.

The principle of “Labor Discussions in Good Faith” adopts the social management way of taking precautions and preventive solutions before the outbreak of conflict. Its core concept is to establish a systematic and institutional approach for employees to deal with problems at their workplace. Through such a platform and channel, employees can voice their doubts and discontent. The enterprise can solicit public opinions before making system and policy changes. Both sides can exchange views and opinions on related differences and solve employees’ grievances and demands.  With a way out of conflicts, there will be no cause of conflicts to escalate, and employees will have no needs to file complaints to the government. The government will then have less pressure to “put out fires,” changing from the condition of “urgent need to keep stability” towards “no instability.”

C. Achieved the concept of governance from forced-collaboration to mutual-cooperation

Local governments’ traditional governance idea was conducted by means of using their administrative power to force cooperation. For example, local government might use administrative orders to force enterprises to cooperate with the government, and force managers and employees to cooperate within the enterprise. In normal times, this concept might leave enterprise-labor relations in an uncontrolled state, including the oppression and exploitation of employees. After the escalation of conflict, local government tend to adopt a policy of strong administrative action to force mediation.  This is known as “ability to settle is talent and having no conflict equals being capable”.

“Labor Discussions in Good Faith” is a management concept of governance that’s shifting from forced mediation to true cooperation. The local governments’ creation and innovations of this management concept and related ideas were gained from their own experience and from the understanding of world trends. In action, enterprises found true reasons and see the benefits of cooperation, and using the government's public resources, spread the use of this management style.  This will strengthen the cooperation and improvement of relations between labor and management, a win-win situation for both parties.  With less government-forced mediations, both the enterprise and employees will now have a good relationship with the government.

(4)Promoted economic development and increased financial revenues.

As analyzed above, “Labor Discussions in Good Faith” enhanced the financial aspects of the enterprises, improved the enterprise’s ability to adapt to the market and social environment, and promoted the growth and development of enterprises. As part of the national economy, when enterprises grow, their growth will also bring about local and national economic growth and social improvements and developments.

Statistics show that “Labor Discussions in Good Faith” did not reduce taxes submitted by enterprises, but rather increased tax revenue.

Companies with “Labor Discussions in Good Faith” have a bigger total taxation submission amount than those without “Labor Discussions in Good Faith”. Companies with regular implementation of “Labor Discussions in Good Faith” had an average taxation submission amount of 10.55 million yuan in 2010. In contrast, those without “Labor Discussions in Good Faith” only had an amount of 2.04 million yuan in the same time period.

Companies with “Labor Discussions in Good Faith” tend to have higher tax submission increase rates than those without “Labor Discussions in Good Faith”. From 2008 to 2010, companies with regular “Labor Discussions in Good Faith” had an average tax increase of 272%. In contrast, those without “Labor Discussions in Good Faith” only had an increase tax submission rate of 59% over the same period.

Companies with “Labor Discussions in Good Faith” tend to have higher rate of tax per capita than those without such implementations. Companies with regular “Labor Discussions in Good Faith” created 6172 yuan of tax per capita in 2010, while those without such principle created 4595 yuan over the same period.

Companies with “Labor Discussions in Good Faith” tend to have higher rate of tax out of every ten thousand yuan than those without such principle. Companies with “Labor Discussions in Good Faith” created 2512 yuan of taxes out of every ten thousand yuan in 2010, while those without such principle only created 1999 yuan over the same period. (See Chart 1)

In summary, “Labor Discussions in Good Faith” promoted the growth of the enterprise, expanded the tax base, promoted enterprise efficiency, and improved tax revenue from capital and human resources.

 

 

 

 

 

 

 

 

 

 

(5)Improved the livelihood of the people and job employment rate.

“Labor Discussions in Good Faith” increased job employment rates, something which the government is very focused on. The related data was already analyzed in the previous section of this report, “Growth of the Enterprise.”  The specific indications are: (1) “Labor Discussions in Good Faith” significantly promoted the growth of enterprises, expanded the employee base, and increased the employment rate. (2) From the principle of Labor Economics, “Labor Discussions in Good Faith” enhanced economic efficiency, improved the marginal output of labor, and so companies are willing to hire more employees.

“Labor Discussions in Good Faith” has a very beneficial effect on the “working/enterprise” class of society. “Labor Discussions in Good Faith” increased employee salary levels for one of the most important groups of people in society, promoted the distribution of wealth from the successes of the enterprise, increased benefits, increased benefit standards, and improved social security payments.

To the local governments, “Labor Discussions in Good Faith” might be considered an important “chess move,” a move which, once taken, had changed the outcome of the entire chess game for the better.  Employees, enterprises and government all benefited from this move, and no one suffered losses.  The three parties now moved away from the previous relationship of friction, and towards a new relationship of “three parties all win”.