Wal-Mart and ACFTU agree on “win-win” formula: workers “win” wage freeze

Despite an aggressive anti-union stance throughout the rest of the world, global retailing giant Wal-Mart acts very differently in China, as demonstrated in July 2008 when the company signed its first agreement with the state-controlled All-China Federation of Trade Unions (ACFTU) in Shenyang, the provincial capital of Liaoning Province in North-East China.

Agreements have subsequently been signed in Shenzhen, a Special Economic Zone (SEZ) in southern China and in the city of Quanzhou in the South-Eastern province of Fujian. The ACFTU has claimed these agreements are a great victory and proof of the strength the ACFTU. Wang Tongxin, a representative of the ACFTU, asserted the agreement is “a win-win contract which has balanced the interests of workers and management.” (China Daily, 26 July 2008) Kevin Gardner, a Wal-Mart spokesperson, noted, “we support these efforts because of the valuable, mutually beneficial partnership the government-run union offers and because of their commitment to assisting businesses in our growth and development in China.” (Forbes Magazine, 25 July 08)

The ACFTU made plans to have agreements signed in the more than 100 Wal-Mart outlets across China by the end of September 2008. These Agreements will affect the pay and conditions of the roughly 48,000 Wal-Mart employees in the country.

The newly signed agreements cover conditions of employment, including remuneration, pay-rises, overtime work, paid vacations and social security payments. While the Shenyang Wal-Mart agreement means that employees’ wages will be above the legal minimum wage, given that the legal minimum is just 700 RMB a month (approximately $US100), this can hardly be considered a milestone given Wal-Mart’s profitability.

Further undermining the fiction that these agreements are genuine gains for workers are the details which have emerged over the process by which the agreements have come into existence.

The agreement at the Shenyang Wal-Mart was concluded after just one session of five hours on 14 July. The agreement was signed that same day.

Although minute differences have emerged in some of the agreements (eg workers in Shenyang received an 8% annual wage rise, whereas in Shenzen workers received 9%), the Shenyang agreement is being used as a template for all Wal-Mart agreements in China. This highlights the nature of the agreements as imposed from above, rather than being the product of negotiations between worker representatives and management.

Further, if one considers the wage rises themselves, workers have in effect been forced into a wage freeze imposed through these agreements.

The 8% or 9% wage rises quickly disappear in real terms if inflation is taken into account. Even using the notoriously unreliable official figures, the National Bureau of Statistics (NBS) announced that the Consumer Price Index (CPI) was at an annual rate of 7.9% in July 2008, meaning that any gains workers might get from a wage rise had already been eaten up by inflation.

But given workers low wages and the fact that a much higher proportion of workers’ income is spent on basic necessities, of even greater concern are the dramatic price rises in food in China which have increased at the rate of over 20% during 2007 and 2008 (nswgd.com 12 March 2008). Indeed, some reports have stated that the price of food increased by 40% in 2007 alone (The Economic Observer Online, 27 February 2008).

While the official September 2008 quarter annual CPI dropped to 4.6% this does not somehow magically erase the inflation rate of the past year nor negate the extreme increases in the costs of food over the last 24 months.

The 8%-9% pay rise, moreover, is not even comparable to the average increase in urban salaries across China, which according to the NBS rose 18% year-on-year to July 2008.

The Shanghai municipal government increased the minimum wage by 14% in March 2008, from 840 RMB to 960 RMB a month (approximately US$120 to US$137). This was the second increase to the minimum wage in a five month period and was brought on because of municipal government concerns over social stability given the rapidly rising costs of basic goods.

Mirroring similar concerns, minimum wages increased in Guangdong province, with increases of up to 18% in some cities, and in Shenzhen the minimum wage was increased by 20% within the SEZ. An increase to the minimum wage in Beijing of 10% was also enacted in June.

As for whether the agreements were the result of genuine negotiations or simply imposed, the case of Gao Haitao, a Wal-Mart worker representative at the Bayi store in Nanchang, is instructive. Tasked with “negotiating” with the store management, Mr Gao asserted that the template agreement reached in Shenyang was not good enough and suggested amendments to the template. He suggested adding words to the clause on overtime which would ensure employees worked “within the law” and “under conditions in which the health of the workers can be ensured” (Southern Weekend, 17 September 2008). Wal-Mart simply refused. Wal-Mart then organised for an ACFTU leader from a different Wal-Mart store to replace Mr Gao and sign the template agreement.

Given all this, what the ACFTU managed to ‘win’ for Wal-Mart workers with its “agreements” was at best a wage freeze, but was actually more like a wage reduction in real terms. This keeps Wal-Mart workers in China on wages that are only on par with the official inflation rate and significantly are behind increases in minimum wage rates and increases in average earnings in urban areas.

The ACFTU agreements with Wal-Mart point to the reality of this so-called trade union’s actions: the ACFTU’s purpose is to supress and contain workers from expressing and defending their interests and democratic rights. However, the agreements can, of course, be seen as a win for Wal-Mart. Despite refusing to deal with unions everywhere else in the world, it’s clear to see why Wal-Mart is happy to accept the ACFTU in China: because in China, Wal-Mart does not have to deal with a real trade union.

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