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Does Union Voice Matter in Chinese Workplace?

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Does Union Voice Matter in Chinese Workplace? DOES UNION VOICE MATTER IN CHINESE WORKPLACE? By CHUNYUN LI A thesis submitted to the Graduate School-New Brunswick Rutgers, The State University of New Jersey In partial fulfillment of the requirements For the degree of Master of Science Graduate Program in Industrial Relations and Human Resources Written under the direction of Mingwei Liu And approved by _________________ _________________ _________________ New Brunswick, New Jersey October 2011 ABSTRACT OF THE THESIS DOES UNION VOICE MATTER IN CHINESE WORKPLACE? By CHUNYUN LI Thesis Director Mingwei Liu This study examines the effectiveness of enterprise unions‟ collective voice face in influencing employment outcomes and firm performance in China where enterprise unions do not have a monopoly face. Drawing on a sample of 1268 firms in 12 Chinese cities, this paper analyzes whether union voice activities make a difference at the workplace within unionized firms and compares the effects of unions with a collective voice face and non-voice unions. The results indicate that, without the power from monopoly face, enterprise unions‟ supposed collective voice function is very limited: union voice activities do not improve wage or firm performance and what they tend to associate with are a few benefits. Unions with a collective voice face correlate with more employment outcomes than non-voice unions, though both types of unions associate significantly with a small number of outcomes. The evidence suggests that the national union‟s effort to expand collective consultation and to promote union participation in management may strengthen enterprise unions‟ representative role to a limited extent; there is still a long way to promote Chinese workers‟ collective voice in the absence of independent unions and the right to strike. ii Table of Contents Introduction .................................................................................................................... 1 What do Chinese enterprise unions do: power sources and their two faces .................. 2 What do we know about union effects in China? .......................................................... 8 Data and Measure ........................................................................................................ 10 Sample...................................................................................................................... 10 Measure .................................................................................................................... 11 Findings........................................................................................................................ 15 Union voice activities may not create wage premium ............................................. 16 Union voice activities associate with a few mandatory employment conditions .... 17 Union voice activities have weak relationship with voluntary benefits .................. 18 Union voice activities and firm performance ........................................................... 19 Comparing different unions ..................................................................................... 20 Robust check in subsamples .................................................................................... 22 Conclusions .................................................................................................................. 23 Reference ..................................................................................................................... 25 iii 1 Does Union Voice Matter in Chinese Workplace? Introduction Most of the studies on economic effects of unions have been centered on developed economies especially the United States. In their seminal work on U.S. unionism, Freeman and Medoff (1984) found that unions, which have a monopoly face and a collective voice face, create wage premium, increase the share of compensation going to employee benefits, reduce overall wage inequality, reduce turnover and lengthen worker tenure, improve productivity, and lower profits. Subsequent studies have largely supported these empirical results (Kaufman 2005: 583), except for a close to zero productivity effect (Hirsch 2004: 432). Existing literature on union effects is lacking in empirical evidence from developing economies such as China and India. A close examination of Chinese unions’ effectiveness in representing workers is important to understand how unions protect workers’ interests under distinct institutional structures. The unique industrial relations system in China, where the enterprise unions are supposed to have a collective voice face while the institutional framework denies them a monopoly face, provides a suitable setting to test whether enterprise unions can serve as an effective collective voice in the absence of monopoly power. Few quantitative studies have examined union effects in China partly due to the popular impression that Chinese workplace unions are useless or are not real. Some qualitative studies show that employer dominance and lack of power from organized labor have rendered grassroots unions impotent and incapable of safeguarding workers (e.g. Chen 2009; Liu, 2009). However, since the early 2000s, China has witnessed an explosion in workplace institutions: by 2009, 50.2% of the workforce was organized, 2 35.9% covered by collective agreements, and 13.7% covered by collective wage agreements1. Today, China boasts one of the highest union densities (Lee 2009). Has the spike in industrial relations institutions improved the collective voice function of the unions, without changing the industrial relations framework to empower workplace unions? This study intends to contribute to the literature by exploring the following aspects of Chinese workplace unions. We first elaborate the adapted two face framework of union effects in China, which includes a collective voice face and a Party-state face (Ge 2004; Lee and Liu forthcoming), explaining potential power sources and the process through which enterprise unions influence employment outcomes. Second, this study analyzes data collected from 1268 firms to measure the effectiveness of Chinese unions‟ collective voice face in influencing employment outcomes and firm performance. Unlike most studies that used union dummy as independent variable, this paper analyzes union voice activities among unionized firms and also compares the effects of non-voice unions and unions with a collective voice face. What do Chinese enterprise unions do: power sources and their two faces The All-China Federation of Trade Unions (ACFTU) is the only official trade union in China, with a pyramidal, top-down structure consisting of three tiers, i.e., the national, regional, and primary levels. At the bottom level, primary unions are organized according to the principle of enterprise unionism (Seung 2000: 49). In general, ACFTU performs a dual role, i.e., acting on behalf of the nation’s collective good while protecting workers’ rights and interests. 1 Ratios calculated using data from Chinese Trade Unions Statistics Yearbook (2010) and China Statistics Yearbook (2010). 3 Particularly in the workplace, Chinese enterprise unions, as reported in the Trade Union Statistics Yearbook in 2008, engage in six broad categories of activities: (1) representing workers’ interests ( e.g., collective consultation), (2) participating in management on behalf of the workers (e.g., organizing SWCs, opening corporate affairs, and serving in the board of directors or the supervisory board), (3) mediating labor disputes (chairing enterprise labor dispute mediation committees), (4) supervising law enforcement (e.g., labor protection, production safety, and labor laws), (5) dealing with human resource management (HRM) and welfare issues (e.g., training, recreation and entertainment activities, employee mutual cooperative insurance programs, and financial aid for the needy), and (6) mobilizing the workforce to increase productivity (e.g., organizing labor emulations, rationalization suggestions, and technical innovation programs). Generally, workplace unions have triple roles in helping workers (representation and participation), the Party-state (defusing labor disputes and supervision), and employers (HRM functions and mobilization). Critics of China‟s unions have legitimate reasons to believe that workplace unions are useless in protecting workers‟ rights and interests. In fact, since unions at all levels accede to the leadership of the Chinese Communist Party (CCP), experts have questioned whether ACFTU is a trade union at all (e.g., Taylor and Li, 2007). Enterprise unions have neither the power nor the muscle to secure economic gains for workers in the absence of independent unions and the right to strike. Employers are never under pressure to respond to union proposals/ demands or negotiate a compromise, if ever the enterprise unions make such demands. Examination of the process that most directly influences terms and conditions of employment shows that the collective consultation and the collective contract system implemented since mid-1990s by no means match the Western style collective bargaining (Chen 2007:73; 4 Warner and Ng 1999). In short, Chinese workplace unions lack the power, wielded in the Western adversarial industrial relations model, to influence wages and benefits. However, China has its own institutional arrangements in the workplace, with unions having different functions and sources of power. Unions are mutable social institutions that operate differently
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