HONDA WORKSHOP: Workers at an assembly line at Honda Auto Parts Manufacturing Co. (CHEN PINGSHENG)

On June 4, representatives of workers and the management negotiated again. Chang Kai, a labor law professor at the Beijing-based Renmin University of China, participated in the negotiation as the workers' legal consultant.

After hours of negotiation, the two sides agreed to a 24-percent pay hike and production at Honda's Foshan facility resumed.

Following the strike, workers elected the new leadership of the factory's trade union. The new leaders have successfully struck two further collective bargains with the factory's management.

At the end of 2010, the management offered workers a bonus equivalent to two months' standard wages plus some merit pay. Workers, however, demanded a bonus equal to 4.5 months' standard wages plus merit pay. Under the mediation of Kong, the two sides agreed on a bonus equivalent to approximately 3.5 months' standard wages plus merit pay.

In 2011, the trade union again attempted to negotiate for an annual pay increase. On February 15, the management offered workers a 431-yuan ($68) monthly increment. The workers, however, asked for an increase of 880 yuan ($138). The management then raised their offer to 561 yuan ($88) and said if the workers could not accept this, the company would request government arbitration.

Once again Kong helped broker a compromise between the management and the workers. On June 25, the two sides agreed upon a 611-yuan increase to workers' monthly salary in 2011.

Currently, workers receive an average monthly salary of 2,471 yuan ($387). Plus bonuses, their average monthly income totals 3,345 yuan ($524), up 80.6 percent from the time before the strike.

After the negotiations, Kong said, "Big pay raises are not necessarily good, and only sustainable growth in salaries will be mutually beneficial to the company and the workers in the long term."

Policy implications

Throughout last year's strike, the Foshan City Government took the view it was simply a labor dispute, rather than a threat to social stability, and did not intervene in the negotiations.

When work stopped, Wu Xinyu, Director of the Information Office of Nanhai District, where the Honda auto parts facility is located, told the media as neither side broke the law, the dispute should primarily be resolved by the two parties involved.

Professor Chang at Renmin University of China said he felt by taking a neutral position the government had prevented things from getting worse.

Cai He, Director of the Center for Urban Studies at Sun Yat-Sen University in Guangzhou, Guangdong Province, said there are two types of labor disputes. In some disputes, workers defend their basic rights by requesting employers to comply with government regulations on remuneration, work hours, social security and working conditions. In others, workers strive for a better quality of life by asking employers to keep their salaries on par with inflation, profit levels and industry benchmarks.

"In the first type of dispute, workers can sue their employers for violating their legal rights. Whereas in the second type of dispute, the government has no legal base to intervene in favor of labor, so such disputes must be solved through negotiations and not litigations," Cai said.

Over the past few decades, China has banked on its low labor costs to achieve rapid economic growth, but this growth has sometimes come at the cost of workers' interests.

"Labor pay increases have lagged behind the rapid rate of economic growth for a long time, and to make things worse, because of the absence of collective bargaining, many companies have flouted rules regarding workers' rights," said Director Qiao with the China Institute of Industrial Relations..

China's new Labor Law, which took effect on January 1, 2008, stipulates that trade unions or workers' representatives can sign collective wage contracts with employers.

In reality, however, it is difficult for workers to negotiate a fair and reasonable pay raise through collective bargaining. "Employees in non-state-owned enterprises do not dare and often do not know how to negotiate," said Su Hainan, Vice President of the China Association for Labor Studies.

Su suggested workers in labor-intensive small and medium-sized enterprises ask independent agents to represent them, as these agents are not paid by the employers, do not fear losing their jobs and have experience negotiating.

"Workers at Honda's facility in Foshan set a new example in collective bargaining, which has encouraged other workers to take similar actions to secure higher pay," Qiao said.

Ji Hua, a lawyer in Beijing told Caijing magazine, in general, workers' spontaneous actions to express their demands should be supported, and this is in line with the government policy to increase front-line workers' remuneration.

"Local governments should not suppress such actions, instead, they should work to implement relevant labor laws and regulations," he said.

Some economists believe to shift from an export-driven growth model into a domestic demand-driven one, it is important to increase salaries in all sectors.

For example, Li Yining, Deputy Director of the Economic Commission of the 11th National Committee of the Chinese People's Political Consultative Conference, China's top advisory body, has long argued the government should increase the salary of low-income people, and establish a regular wage growth mechanism.

Since 2008, the Ministry of Human Resources and Social Security has been drafting a wage regulation, which will include provisions on minimum wages, collective bargaining and a regular wage growth mechanism. Currently, the parties concerned have not reached consensus on all aspects of the new rule. Yin Chengji, a spokesperson for the ministry, said on July 25 the regulation was still in the making and a date for its publication has not been set.