Globalization's Impact on Employment Relations

Introduction

Employment relations have entered into the process of globalization, and have significantly changed the concepts of production and consumption in various countries. The impact of globalization on employment relations has always been a crucial and central issue in the contemporary political economy. From the employees’ point of view, especially in developed countries, they note that although globalization is regarded as a threat, the fact that increased employment in these countries poses as a major contribution towards reducing poverty, as well as meeting the goals of millennium development (Cooke, 2016). Moreover, they also note that the globalization impact on the labor markets, as well as the mechanism associated with the global economy often leads to the creation of jobs. Particularly in developing countries, the significance of the relationship between employment relations and globalization is gradually increasing. However, it is also evident that this relationship is difficult for various reasons, owing to the fact that globalization poses as a multi-faceted phenomenon, in which every facet has varied impacts on employment relations, which is also noted to vary by country, industry, and policies. It comes as an array of technical, legal, economic, social, as well as political changes having different interactions and feedbacks that make it difficult in separating the impact of globalization (Islam & Yokota, 2008). There are various ways in which globalization impacts employment relations. The most vital ones come through increased trade, international technology transfer and through Foreign Direct Investment. Firstly, governments regard employment creation as a significant contribution, which FDI can incorporate to their economies. As such, FDI technology transfers can consequently increase, and there would be rise in competitiveness and efficiency in the affected industry sector. Significantly, these would positively impact on employment relations and would consequently increase export performance (Cai & Wang, 2010). Secondly, FDI could negatively impact on employment relations as in the present competitive economy, multinational enterprises are noted to capitulate employees’ rights whilst reducing costs, and this leads to increased labor demand, which consequently deteriorates payments balances, and negatively impacts on employment relations. Thirdly, the recent technological advancements intensify international trade, reduce low-level manufacturing employment, and increase competition. These factors impact on employment relations (Bamber et al., 2015). Moreover, post-industry societal changes, as well as globalization often accelerate the interactions existing between these factors, which consequently impact on employment relations. Notably, with the increased rate of interaction, globalization is noted to shift from post-industrial society and is moving towards information society. Whilst this change is noted in the current world, economic, as well as structural changes, are also becoming inevitable, owing to the fact that there is knowledge-intensified work, purposing to replace the employment-intensified work. As such, it can be noted that countries that fail to keep up with various structural changes brought forth by globalization face problems of unemployment (Cai & Wang, 2010). As such, the impacts of globalization on employment relations are vital.

Changes in China’s employment relations over the past years

The employment relations structure in China has had fundamental changes, precisely over the last two decades. The most significant change is the reduction in the rate of state-sector employment. This has always been accompanied by continues emergence, as well as expansion of various ownership forms, and also rapid rate of employment by foreign-owned enterprises, as well as investments from Macao, Taiwan and also Hong Kong; domestic privately-owned businesses; self-employed businesses, and township, as well as village enterprises (China Labour Statistical Yearbook, 2002, 2005). Factually, the state government of China had always been a predominant employer in China, providing employment to its citizens to approximately 80% of the total number of urban employees until towards the end of the 1970s. However, the state employer purposed to provide employment to just approximately a quarter of the total number of urban employees, until towards the end of 2004. This was owing to the fact that China had experienced a decade-long downsizing, as well as privatization of various state-owned business, which formed a part of the state-sector restructuring program. Over the years, for the individual who remains employed by the state, their employment relations have changed considerably, as there has been marketization, as well as a significant reduction in the delivery of benefits related to workplace benefits (China Private Economy Yearbook, 2003). These are the main features, which are convergent to those encountered by the rest of China’s labor force.

The second change is that after China purposed to join the World Trade Organization (WTO), in the year 2001, there was increased rate of FDI, which had declined in the year 1994, and thus return increasingly to double digits. In this regard, FDI increased by 14.9% in the year 2001, 12.4% in the year 2002, and 13.3% in the year 2004 (Friedman & Lee, 2010). This is as shown below:

Since the year 2003, China significantly surpassed the US, where it became the country having the highest inflow in the rate of FDI in the world. As such, various export-oriented businesses of light goods such as electronics benefited by having a reduction in tariff after China was already a member of WTO. This led to increased rate of economic growth, as well as an increased rate of employment in the country (China Private Economy Yearbook, 2003). The third change is that Chinese cities, as well as towns, are have been experiencing an increased rate of employment shortage, which began surfacing in 2003. By mid-2003, there was a report, which indicated that this problem has reached its peak, especially in China’s coastal regions, and in Dongguan city, where the factories headed by Taiwanese are concentrated (Chan, 2010). This shortage was noted immediately after migrants that initially lived in the countryside came looking for employment. It was reported that the scarcity of employment was because of various reasons including poor working conditions, decreased rates, wage arrears, variety of abuses, as well as improved economic conditions in rural areas, owing to the fact that there were high prices for agricultural products, as well as low agricultural taxes (Meng, 2012). The fourth change related to workers’ increased awareness, as well as usage of the legal arena. It is worth noting that there emerged three major laws that were employment related, and they included the following: The Enterprise Law, which was passed in the year 1988, the Labor Law, which was passed in the year 1994, and finally, the Trade Union Law, passed in the year 1992. These laws have significantly provided a legal framework, as well as clauses that empowered and continually empower works through various labor protection articles, without the need to organize establish independent trade unions (Meng, 2012). As relating to the trade union law, work slowdowns, as well as stoppages are regarded as legal, and the right to collective bargaining, which is a core international labor right, is guaranteed as mandated in the labor law. It is evident that the new laws purposefully stipulate the number of working hours, as well as a minimum age that can be allowed for employment. Moreover, the laws have established the procedures for labor disputes, and also include the clauses, which mandate the right for employees to have a democratically-elected workplace union-statutes, which are at par with the international standards. Factually, at least one of the overall Chinese laws purposes to surpass the international employment standards (Cai, 2012).

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Challenges and issues facing China employment relations

Recruitment difficulties

Since 2009, China has experienced labor shortages, especially in the coastal areas, which has resulted from the country’s economic recovery. Moreover, there has been a shortage in the number of rural migrant employees, which has intensified in the Yangtze River and also around Pearl River Delta. In addition, due to globalization, export-oriented companies were concerned with the labor shortage (Unger, 2016). In a bid to measuring the relationship between the supply and demand for employment in the Chinese market, the CIER index is used in reflecting the intensity of competitiveness of the labor market. The calculation of the CIER index is by dividing the number of employment seekers by the job vacancies available. The bigger the CIER index indicates that there are more competitors for job vacancies, and also, there is more intensive labor market. Based on the CIER index noted between 2010 and 2014, as provided below, it can be noted that there is a decline in CIER index, because of the rising employment demand and sluggish supply, thus, implying that recruitment is becoming much more difficult (CIER, 2014).

The aging China population poses as the major cause of employment shortage. Over the years, the largest contribution towards economic growth accounts for approximately 71%, which is noted to be a direct correlation existing between the demographic dividend and the capital investment. Since 1970s, there has been a decline in birth rate, and a growing population of individuals aged between 15 and 64, where the ration of gross dependency had been decreasing until 2011, as shown in the figure below. The ratio of low dependency, as well as the increase in labor force brings a population bonus to the economy of China through labor supply, and also technical promotion (Li & Lin, 2016).

The rapid increasing in the aging population, implies that the demand for employement cannot be met. Moreover, the increasingly growing Chinese economy, cannot be sustained. This has created a serious challenge to the labour maeket of China, as well as to its economic development (Li & Lin, 2016).

Imbalance of the competence structure

It is evident that the Chinese economy has gotten into its development stage, from havinga dual economy to a classical stage growth. In this regard, its economy relies on labor productivity improvement, in order to enhance a sustainable growth (Hao et al., 2016). The capital ratio improvement of the capital labor is a significant way of promoting labor productivity in China and it has been noted that this contribution ration of the productivity of capital labor has been growing gradually in China from 45.3% in the years 1978 and 1994, 64% in the years 1995 and 2009, and finally 65.9% in the years netween 2010 and 2015. However, a challenge has been created in China, where there is limited ratio of high capital labor, thus bringing forth decrease in the amount of capital returns. The World Bank had predicted that the capital ratio distribution will purposely decrease between 2016 and 2020 and shown below, and this would boost the productivity factor, which is a vital way of improving labor productivity (Friedman & Kuruvilla, 2015).

China’s upgrade of its industrial structure implies that it needs a highly qualified labor force, in order to improve its efficiency in micro-production. However, there were occupations having a shortage of long-term skills, as well as mobility and this created an imbalance in the labor force competency, and consequently the enhancement of economic development.

Rise in labor costs verses the widening inequality income

Labor cost is noted to be a significant factor in the growth of China’s economy. However, it is noted that the average cost continually increases since 1998, whereas the wage growth of government enterprises is becoming higher as compared to other enterprises, as provided in the figure below. Notably, the rising wage lead to high costs of labor, which consequently has undermines China’s competitiveness in foreign trade, and has as well influenced its economy (Chan & He, 2018).

Despite the continuous rise that has been noted since the past 15 years, China’s average labor cost remains lower as compared to other countries in the world as provided below:

Global talent competition

In 2001, about 200 fortune, as well as 500 multi-national companies conducted business in China, and the number increased to approximately 400 in 2005 (Joseph, 2018). Due to economic globalization, Chinese employers, as well as employees are faced with various global challenges, which force their enterprises to improve on the ideology of their HRM, techniques, as well as skills in meeting significant international standards, in a bid to attracting and retaining high-level talent. As such, Chinese labors are faced with global competition challenges, emanating from cultural, economic, social, as well as political differences (Huang et al., 2016). Owing to the fact that the Chinese employment market faces an ageing population challenge, and lower quality of labor force, this worsens the employment relations.

How China is dealing with these issues and challenges

Firstly, China has introduced policies, which expand the labor supply by. For instance, it had introduced a population policy, in order to aid in loosening the country’s rules regarding family planning and allow couples to two children. However, this population policy cannot provide sufficient labor force instantly, in order to ease the issue of difficulty in recruitment by raising the age of retirement to 65 by 2050 for both sexes (Remington & Cui, 2015). On the other hand, the China government has allowed employees to work and be paid for more years after they have retired, and this purposes to increase their personal income and also reduce the outward payment and pensions funds. Secondly, in order to promote the demand for labor, thus enhancing a sustainable economic growth, The China government purposes to support small, as well as medium-sized businesses through cutting taxes, for the small enterprise owners, and enhancing their potential to be creating jobs. On the other hand, China had purposed to accelerate the upgrading speed of its industrial structure, in order to enhance independent innovations that promote the growth of productivity, thus stimulating stability of the labor market (Chan & He, 2018). Thirdly, China has purposed to adjust its employment structure, in a bid to solving the labor supply imbalance, as well as demand. The implementation of the employability strategy includes carrying out an educational reform, whilst adjusting the curriculum towards improving the employability of graduates, and promoting various intermediary services, in order to reduce the unemployment friction (Hao et al., 2016). Fourthly, in reforming the distribution of income, in reducing income inequality, the China government purposes to enhance the implementation of targeted policy of groups having different levels of income by increasing the revenue of people having low-income, and scaling up the middle-earners group, and limiting high-income earners. Moreover, it also purposes to adjust the national income distribution structure by increasing income proportion of residents, and as well increasing share work remunerations in primary distributions, which consequently boosts the demand for consumers towards realizing continuous, and enhancing a stable growth of the economy (Remington & Cui, 2015). Finally, the Chinese government has purposed to pay much attention towards reforming its pension insurance system, and also protecting the rights of its employees. The efforts in line with this include advancing government agencies, realizing the professionalization of trade union, promoting the system of collective bargaining, and improving the capacity of its collective bargaining.

Conclusion

From the above discussion, it can be concluded that employment relations have entered into the process of globalization, and have significantly changed the concepts of production and consumption in various countries. The employment relations structure in China has had fundamental changes, precisely over the last two decades. Some of these changes include reduction in the rate of state-sector employment. The second change is that after China purposed to join the World Trade Organization (WTO), there was increased rate of FDI. The third change is that Chinese cities, as well as towns, are have been experiencing an increased rate of employment shortage, which began surfacing in 2003. The fourth change related to workers’ increased awareness, as well as usage of the legal arena, where there emerged three major laws that were employment related. It has also been noted that the Chinese employment market has been facing various challenges and issues, which include recruitment difficulties, labor demand and supply imbalances, a rise in the cost of labor versus a widening inequality of income and global talent competition. However, the Chinese Government has been able to come up with significant ways of dealing with these challenges, and over the recent years, they have aided the country in enhancing sustainable development as it shifts to a market economy.

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