Employment Relations in Globalised Economies
The Scenario and Task:The strike at Honda’s automobile plants in China is one of the best known cases in a wave of industrial disputes that arose in that country during 2010. It was examined in a series of contemporary media articles (two of which are attached below) and there have been more recent academic articles (some of which are listed below).
You are a senior Employment Relations Advisor to the CEO of Honda in China. You must write a report providing the CEO with two alternative strategies towards employment relations that would avoid the problems experienced in 2010 while at the same time sustaining the company’s performance.
Your report should identify two options:
? one option should be based on unitarist values, and
? the other on pluralist values.
Your advice should be informed by research, including articles in refereed academic journals, as well as information from relevant web-based sources. Indeed, you must cite and use at least five such quality academic articles. Failure to meet this requirement will result in the loss of marks.
The topic/issue of PBL 2 requires both an understanding of theory and practice. The relevant theory relates to unitarism and pluralism and to the relationship between these values/frames of reference and management ER strategy.
The practice relates to the ways in which management approach their relationships with employees and unions in the manufacturing plants of the automobile industry.
In this context, your account of the two management options should include the actions that management would take if it adopted a unitarist or a pluralist approach. In other words, you should not rely on simplistic general assertions but rather get into the detail of what management should do in to achieve their desired outcomes.
In addition, you need to explain to the CEO (i) how these actions are consistent with the respective value positions; and (ii) the potential advantages/disadvantages or benefits/risks of each of the two options. In these ways, you are demonstrating your understanding of both the theory and the practical aspects of the issue.
As with all ER analysis, your account of the alternative management strategies and their likely success will be influenced by context. In other words, given that the scenario relates to automobile manufacturing in China, the plans and actions of management will be influenced by China’s labour laws and institutions. The likely success of either strategy will also influenced by other contextual factors, from the state of the automobile product market and changing labour market conditions; to the contractual obligations and/or financial situation of the company; to the personalities and career ambitions of the managers and union representatives involved.
Despite the importance of context, however, this exercise is not expecting you to be experts on Chinese law or the automobile industry. Nor do we want you to make all sorts of assumptions about the ‘facts’ of the scenario.
Initial Reading from Academic Sources:
To successfully answer the question you need to read as much as you can about (i) unitarism, pluralism and their links with management/government ER strategy; and (ii) employment relations in the automobile industry. The following suggestions are where you might start your reading. In other words, they are the beginning – they will not be sufficient by themselves.
(i) Unitarism, pluralism and management ER strategy
Bray, M., Waring, P. and Cooper, R. (2014) ‘Studying Employment Relations: Values’ in Employment Relations: Theory and Practice, Sydney: McGraw-Hill, Chapter 3.
Fox, A. (1966). Management’s Frame of Reference, excerpt from Industrial Sociology and Industrial Relations, Royal Commission on Trade Unions and Employer Associations, Research Papers 3, HMSO, London, Part 1, pp.2-14 in A. Flanders (ed) (1969) Collective Bargaining. Harmondsworth: Penguin.
Ross, P. And Bamber, G. (2009). Strategic Choices in Pluralist and Unitarist Employment Relations Regimes: A Study of Australian Telecommunications. Industrial and Labor Relations Review. 63 (1), October: 24-41.
(ii) Employment relations in the Chinese automobile industry
Zhao, S. et al. (2012). Changing employment relations in China: a comparative study of the auto and banking industries. International Journal of Human Resource Management, 23 (10), pp. 2051-2064.
Lyddon, D., Cao, X., Meng, Q. and Lu, J. (2015) ‘A strike of ‘unorganised’ workers in a Chinese car factory: the Nanhai Honda events of 2010’, Industrial Relations Journal, 46 (2), pp. 134-52.
‘Honda’s China strike a lesson for Japan’
Sydney Morning Herald, 6 June 2010: http://news.smh.com.au/breaking-news-business/hondas-china-strike-a-lesson-for-japan-20100606-xm9z.html
After an unprecedented strike log jammed Honda’s China production line, Japanese firms in the country may need to redraw their plans in a growing market that has emboldened low-wage workers, analysts say.
As China’s economy surges, demands for higher wages are posing a headache for Japanese companies facing higher costs but could also be a boon for others banking on rising incomes to spur demand for high-quality goods.
Japan’s number two carmaker on Wednesday restarted operations at its auto parts factory after offering a 24 percent pay rise to placate staff who had walked out on May 27.
But Honda’s Chinese assembly joint ventures, Guangqi Honda Automobile and Dongfeng Honda Automobile, remained closed due to a lack of key components, the company said. Honda produces 650,000 vehicles per year in China but it has lost thousands of units because of the shutdown.
“We never expected something like this would happen,” said Tokai Tokyo Research Centre auto analyst Mamoru Kato.
After the Honda strike “Chinese workers will likely be encouraged to start making more demands and such situations will inevitably increase production costs there,” he added.
According to the All-China Federation of Trade Unions, nearly a quarter of Chinese employees have not had a raise in five years.
Labour issues in China have come to the forefront in recent weeks after suicides at Taiwanese high tech maker Foxconn, which counts Dell, Sony and Panasonic among its clients, forced it to give staff a 30 percent rise.
The unrest has raised questions about working conditions for the millions of employees in China’s factories, sparking calls for better oversight from those who benefit from Chinese labour and a ban on unions.
“As the Chinese economy grows and people’s income rises, companies are now facing the need to review their strategies,” said Mizuno Credit Advisory auto analyst Tatsuya Mizuno.
Yang Lixiong, professor at School of Labor and Human Resources of Renmin university in Beijing said opportunities at foreign companies are limited for Chinese staff.
“In the case of Honda, the management is mostly Japanese. It’s very hard for local staff to work their way up. In addition to that, salaries are very low and working conditions are not good,” he added.
To curb the effects of rising wages Japanese businesses are harnessing economies of scale that would effectively bring down unit costs.
Nissan chief executive Carlos Ghosn recently announced plans to ramp up production to more than one million cars a year in China by 2012.
Honda sold 576,223 vehicles in China last year, up 23 percent year-on-year and Toyota saw sales rise 21 percent.
Fashion retailer Uniqlo aims to open 1,000 stores in China by 2020 and achieve more than 10 billion dollars in sales.
And Sharp said it will double the number of outlets in China for its popular Aquos televisions to 10,000 this year and boost its lineup to more than 30 models from the current 24.
But rising wages are not necessarily bad as richer consumers have more purchasing power, analysts said.
Japan, which has long had a reputation for craftsmanship, “can only compete in the high-end market as it has already lost out to local rivals in terms of affordability,” Okasan Securities strategist Hirokazu Fujiki recently said.
“Japanese companies need to win out by targeting the mid-to-high level consumers.”
They must also address Chinese resentment against Japanese workers due to their long and tense history.
Chinese Honda staff complain Japanese workers in the same factory earn 50 times more than them.
“Chinese workers seem to have a strong sentiment of being discriminated by Japanese employees,” said Mizuno.
“This may become a more emotional, fundamental issue, which could potentially develop into a political problem,” he warned.
‘Labor unrest in China reflects changing demographics, more awareness of rights’ Chinese labor dispute hits Honda plants China’s low-wage and migrant workers have begun to assert their rights, sparking waves of labor unrest, including strikes and work stoppages. The conflict was highlighted by a strike in May at Honda Motor’s transmission factory in Foshan, where hundreds of workers walked off the job and shut four assembly plants. By Keith B. Richburg (Monday, June 7, 2010) http://www.washingtonpost.com/wp-dyn/content/article/2010/06/06/AR2010060603295.html BEIJING — China has been hit with a recent wave of labor unrest, including strikes and partial shutdowns of factories, underscoring what experts call one of the most dramatic effects of three decades of startling growth: A seemingly endless supply of cheap labor is drying up, and workers are no longer willing to endure sweatshop-like conditions. China’s export-driven growth has long been linked to its abundance of workers — mostly migrants from the impoverished countryside who jumped at the chance to escape a hardscrabble rural life to toil long hours in factories for meager wages. If they were unhappy, they rarely expressed it through action, and if they did, they were quickly fired and replaced from among the hundreds of others waiting outside the factory gates. Now all of that has started to change. Shifting demographics, including years of effective population control through the government’s “one child” policy, have left China short of younger workers, particularly in the crucial 15-25 age group that many factories rely on most. These young workers don’t have to travel far from home like their parents did to find work. They are more aware of their rights. And having grown up in a more prosperous China, they are demanding a fairer share. “The first generation of migrant workers made a lot of money compared with their poor life before,” said Cai He, dean of sociology at Sun Yat-sen University. “But right now the majority of migrant workers are in their 20s. They were born in the 1980s. Most of them have no farming experience” and “are more sensitive to the disparity between the wealth of the city and their own poverty.” Cai added: “The younger people received a better education. They surf the Internet, use mobile phones and watch TV. Their awareness of their rights is much stronger than the older migrant workers.” These young workers are asserting those rights in the form of work stoppages, slowdowns and demands for higher wages and shorter hours. The unrest was highlighted by a strike that began May 17 at Honda’s transmission factory in the city of Foshan, where hundreds of workers walked off the job. The Japanese carmaker had to shut its four assembly plants in China. Around the same time, the Taiwanese-owned Foxconn electronics plant in Shenzhen, which assembles Apple iPhones and iPads, was struck by 10 suicides among its workers and three suicide
attempts, which labor activists blamed on the stress of long overtime hours. Bus and taxi drivers also have staged strikes this year, affecting tens of thousands of passengers. The recent cases — particularly the Honda strike — are also noteworthy for receiving extensive coverage in the Chinese media. While labor unrest has become increasingly common across China in the past two years, experts said, most incidents typically go unreported. “We’re having major problems with labor unrest right now,” said Sunil Balani, a Hong Kong-based businessman who exports garments to Europe from Chinese factories. “Some of our factories are running 30, maybe 40 percent empty at times.” Although the Honda and Foxconn plants are in southern China, Balani said that most of the five plants he subcontracts are in the north and that “they’re still facing the same problem,” indicating widespread unrest . In mid-2008, China introduced a labor law that allows workers with grievances to file complaints and opens a new mechanism for mediation. Publication of the law probably made workers more aware of their rights, experts said. Since the law went into effect, the number of known complaints has doubled to about 700,000, and they “are going up even faster now,” said Mary Gallagher of the University of Michigan, an expert on Chinese labor. Businessmen and academics predict that the wave of unrest would probably increase, mainly because of China’s shifting population trends. “This is the thin end of a very long wedge,” said Arthur Kroeber, managing director of GaveKal-Dragonomics, a research firm. He said the number of 15- to 24-year-olds in China is set to fall by one-third over the next dozen years, from 225 million today to 150 million in 2022. Kroeber noted that as the number of young workers declines, the number of factories needing laborers has increased rapidly. “This is the beginning of a long process in which bargaining power is going to shift from the company to the workers,” he said. The labor unrest poses an acute challenge to China’s ruling Communist Party and a dilemma for the All-China Federation of Trade Unions. That group, China’s only officially sanctioned union, is supposed to represent workers but in practice has worked more as a partner with the government to enforce labor discipline and keep production high. Zhang Jianguo, a top official with the federation, said the reason for the current unrest is the huge income disparity in China. He said the portion of the country’s gross domestic product that has gone to wages has declined by almost 20 percent in the past two decades. But some say China’s official union is itself part of the problem. “The labor union should promote fairness in society instead of promoting economic development,” said Lin Yanling, a professor at the China Institute of Industrial Relations. “But in China, the labor union doesn’t do that.” Researcher Zhang Jie contributed to this report.