Analyzing Labor Relations in China, India, and the USA

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Table of Contents

Comparing Labor Laws in China, India, and the USA
Choosing Between Expanding in India and Opening a Subsidiary in China
The Expatriation Experience
Reference List

Comparing Labor Laws in China, India, and the USA

The business environment varies from country to country, with some having excellent conditions while others are rather abysmal. One of the most critical factors to consider when deciding whether to establish operations in a country is its labor situation. Some countries, such as the United States, have strict rules and regulations to protect employees’ welfare. Some countries have less stringent laws, which has made them preferable destinations for businesses looking to push their workers’ limits. This paper will look at a software company, XYZ, operating in India for a while and is looking to establish operations in China.

Labor Laws In China

Foreign firms experience a disadvantage against local firms who usually hire local employees without contracts (“Employment & Labour Laws| China,” n.d.). Workers employed without contracts are put at a disadvantage for lacking basic protections such as severance for termination. There are also ongoing reports of labor camps in the Xinjiang province against the Uyghurs (“Employment & Labour Laws| China,” n.d.). The US Department of Commerce has banned 28 Chinese companies from violating human rights (“Employment & Labour Laws| China,” n.d.). These circumstances underscore the moral dilemma that comes with doing business in China.

One would expect China to have unique labor laws given its socialist philosophy. The only legally recognized union in China is the All-China Federation of Trade Unions (ACFTU) (“Employment & Labour Laws| China,” n.d.). Chinese law prohibits the establishment of independent trade unions (“China,” 2020). Even though the law allows some collective bargaining, this only applies to collective wage negotiation in practice. The ACTFU is an organ of the CCP and controls all trade union activities in China, including enterprise-level trade unions. Employers are mandated to pay the enterprise unions under the ACTFU a fee of 0.5% -2% of total payroll; this is often done through local tax bureaus (“Employment & Labour Laws| China,” n.d.). Despite Chinese law failing to guarantee the right to strike, strikes are commonplace, and they happen regularly. Official channels for solving labor disputes such as mediation and arbitration rarely work in China (“China,” 2020). Even when courts issue verdicts, it is not easy for local authorities to comply.

Labor Laws in India

This section will look at the labor laws in India where XYZ has had presence for a while. India has more than 20 million unionized workers; less than 5% of Indian workers have union representation (“India,” 2020). Unions are usually strong in state-owned organizations and are generally connected to political parties. Areas with powerful trade unions include railroads, ports, insurance, and banking sectors (“Overseas business risk – India”, n.d.). Official figures from 2018 indicate that strikes caused a total loss of more than 1.74 million workdays (“India,” 2020). Labor unrests are common in India over such disagreements as remuneration, union representation, and working conditions. India has stringent and complex labor regulations, which have impeded India’s manufacturing sector growth.

With India receiving competition from many countries, it would be prudent for them to improve their labor laws. The Indian parliament passed a law to streamline labor issues in 2019; the Act was called Code on Wages (“Employment & Labour Laws| India,” n.d.). The code combined existing Acts, namely, the Minimum Wage Act, the Payment of Wages Act, the Payment of Bonus Act, and the Equal Remuneration Act (“India,” 2020). Minimum wage requirements for India’s workers vary by state; they range from per day pay of $2.20 for unskilled workers to above $9.3 for skilled workers (“India,” 2020). The Industrial Disputes Act governs reduction, layoffs, and closures; the Act requires government permission to retrench workers or close a business that employs over 100 workers. However, several states such as Madhya Pradesh, Haryana, Maharashtra, and Rajasthan have raised this threshold to 300 (“India,” 2020). Foreign banks must also obtain RBI approval when closing branches. To circumvent the law, firms have resorted to employing non-permanent workers because it is usually hard to obtain closure approvals.

Labor movement activity has been happening at the state level since the current regime assumed power; a good example is Rajasthan, where rules have been relaxed to allow quick hiring, firing, and closure of businesses. A web portal launched in 2014 by the Ministry of Labor will enable firms to fill an online form that contains 16 labor compliance laws (“Employment & Labour Laws| India,” n.d.). A Code of Industrial Relations drafted by the government is under review in parliament. The major trade unions in India have opposed reform of labor laws citing compromise on workers’ safety and security.

A Maternity Benefits Act passed in 2017, which increased women paid maternity leave from 12 weeks to 26 weeks. The Act also requires companies employing more than 50 workers to have a place for babies so that mothers can feed them for up to four times a day. A Child Labor Act passed in 2016 established 15 years as the minimum age for work and 18 years as the minimum age for hazardous work (“Employment & Labour Laws| India,” n.d.). A 2016 bill passed legislation allowing employers to pay their workers through electronic means in addition to the typical cash system.

Statistics are very critical for a country to monitor its labor situation. Because of the informal nature of most employment in India, there are unreliable unemployment figures, with the National Statistics Commission claiming that the 2018 rate was 6.1%, the highest in 5 years (India, 2020). Interestingly, the last time the statistic was reported in 2012, it was only 2.2% (“Employment & Labour Laws| India,” n.d.). The government has declared a shortage of skilled workers in key sectors of the economy, such as IT and manufacturing (“Employment & Labour Laws| India,” n.d.). The government is on a national drive to increase skilled workers.

Labor Laws in the USA

The primary source of labor laws in the US is the Department of Labor (DOL). The minimum wage law in the US was passed through the Fair Labor Standards Act (FLSA) (“Employment & Labour Laws| USA,” n.d.). The law is meant to ensure that every American worker attains a livable wage for their work. The minimum wage has been $7.25 per hour since 2009, although increasing this figure has been the subject of political debates. FSLA also guarantees non-exempt workers to receive time and a half for overtime work (“Employment & Labour Laws| USA,” n.d.). The law also protects minors and limits the number of hours children can work, and prohibits under-18s from particular high-risk work.

The Occupational Safety and Health Act was passed in 1970. It aims to ensure workplace conditions are safe for workers. Specific requirements are laid out for various sectors such as construction, maritime and agricultural work. The Occupational Safety and Health Administration (OSHA) act is tasked with enforcing these rules, although other agencies can implement specific parts (“Employment & Labour Laws| USA,” n.d.). The law does not apply to small family farms and self-employed persons. The Affordable care Act, passed in 2010, intended to make healthcare a right for all workers in medium and large organizations. In one of the provisions, the Employer Shared Responsibility Payment, organizations with 50 and above employees must offer them basic level health insurance, failure to which they would be penalized (“Employment & Labour Laws| USA,” n.d.). Full time means an employee who works more than 30 hours a week on average.

The Social Security Act provides disabled and retired workers with a financial safety net. As of June 2020, approximately 64 million Americans receive monthly social security checks (“Employment & Labour Laws| USA,” n.d.). The benefits are funded through payroll taxes as OASDI. The employer bears half of the 12.4% of the employee’s earnings for employed individuals, while for self-employed individuals, they bear the complete 12.4% (“Employment & Labour Laws| USA,” n.d.). America also has unemployment insurance where different states have their unemployment insurance agency; despite this, the federal government offers unemployment benefits.

There are also federal laws aimed at protecting whistleblowers; these laws are baked into industry-specific rules and regulations. For instance, Clean Air Act has provisions for those who report against environmental violations. At the same time, the Consumer Product Safety Improvement Act contains protections for those who report manufacturing violations (“Employment & Labour Laws| USA,” n.d.). The body tasked with protecting employee rights is OSHA’s Whistleblower Protection Program. If an employee feels they have suffered reprisal for reporting a breach, they ought to report to OSHA within 30 days of the occurrence.

The US also has laws providing for family emergency leave. This is the Family, and Medical Leave Act (FMLA) became law in 1993. From the Act, eligible workers are guaranteed u to 12 weeks of unpaid leave if they decided not to report to work in case of the birth of a child, adoption process, or a seriously ill family member (“Employment & Labour Laws| USA,” n.d.). To be eligible for FMLA benefits, an employee should have worked at the company for more than 12 months and operated for over 1250 workers over the previous year. This rule applies to firms employing more than 50 workers within a radius of 75 miles (“Employment & Labour Laws| USA,” n.d.). The Civil Rights Act of 1964 was an inflection point for social justice in the US concerning employment. Title VII of this Act illegalized discrimination based on sex, race, religion, or national origin. In 2009, the Act received further reinforcement when the Lilly Ledbetter Fair Pay Act made wage discrimination against women and minorities illegal.

Choosing Between Expanding in India and Opening a Subsidiary in China

XYZ is a software company; that said, software companies require highly skilled workers. The company is at crossroads since they have been operating in India and are contemplating a Chinese venture. From the information analyzed about China’s labor situation, it is hard to get experts to move to China because of the rising costs. China is considered less attractive because of pollution; software engineers are highly skilled and do not need to be physically present to work; they can work remotely. Software engineers could be working in the USA for a company in China. It could be an uphill task for the company to retain talents because of the unaesthetic conditions brought about by pollution. To dissuade employees from leaving, the company would have to pay a premium package, putting them at a disadvantage against local competitors.

From the analysis, foreign companies complain about navigating the Chinese labor laws because of their complexity. China has also slacked in implementing international conventions of freedom of association and collective bargaining. Given that XYZ is a software company looking to maintain a positive global image, they would prefer an environment with civilized labor laws that protect employees. It is improbable that XYZ intends to take advantage of the bad labor law situation to exploit employees. They would be unwilling to do this because they have American origins and would be investigated if they violated laws abroad.

The ACTFU is the only recognized trade union in China where enterprise organizations pay mandatory fees of between 0.5% and 2% of total payroll. XYZ would be an enterprise meaning it would be eligible to deliver this payroll tax. However, this does not seem unlike any other trade union fee in any other country; it would not discourage a company from setting up a shop. The report showed that strikes are commonplace all over China even though labor laws do not protect them; disputes are also rarely resolved through arbitration or mediation. XYX being a software company, is unlikely to be affected by such issues since software engineering is a skill-intensive job where companies would be willing to pay a premium price to acquire the best in the field.

India is said to have a shortage of skilled workers for sectors such as IT; given that XYZ has been operational in India shows that they may already be skilled at navigating a slippery market. The difference between China and India is the configuration of their governance systems. India is more decentralized in its approach, with specific states having the freedom to formulate their own laws different from central government ones. Another observation was that most trade unions in India have political connections. China is objectively less complicated than India, given that only one trade union is allowed, which is also politically connected to the Chinese Communist Party. XYZ, having worked in India, has experience in navigating trade unions that have political connections. There is no reason XYZ should shy away from a new business opportunity.

India’s labor regulations were so complicated that some people attributed this to their slowed-down exports in the past. Consequently, India made an effort to ease this convolution by merging previous acts into 1 (“India,” 2020). XYZ reports that they have been in India for a while, meaning they navigated these laws even before the government decided to streamline them. XYZ has experience with convoluted systems and should take the step of moving to China.

In conclusion, XYZ should take the bold step of venturing into China by entering the proposed partnership. This verdict is informed entirely by India being a relatively more challenging market to navigate labor-wise, yet XYZ has managed a presence there. Entering into a partnership is a good step since it will give them a business presence while precluding building from scratch. China is also closer to becoming a developed country than India, meaning a bigger market.

The Expatriation Experience

Moving from the USA to China is quite an experience for an American worker because of the cultural differences between the two places. The first thing that a person willing to relocate should do is obtain the required documentation that is a passport and a visa. People must also take medical tests to determine if they have infectious diseases (“Medical Check Information,” n.d.). Regarding the language barrier issue, an employee would need to learn either Mandarin or Cantonese, depending on the region.

The cost of living in China varies depending on the city one is migrating to; Beijing and Shanghai always appear in the most expensive cities in the world lists. Since XYZ is a tech company, they’re likely to set up in Beijing, Shanghai, or Shenzhen (“Expat Insider,” 2017). Another challenge for an American in China is that China has blocked most American social media websites. These include Google, YouTube, Facebook, and Twitter. The great firewall is powerful, and one can only access these sites using a VPN (“Expat Insider” 2019). Americans moving to China would also need to learn to carry cash since credit card acceptance is not as ubiquitous as in the West.

The expatriate experience for an American moving to India seems like less of a hassle than moving to China. Objectively, Indian culture is more compatible with the average westerner than it is for China. There are many factors for this, including India being a democracy and foreigners not needing to learn a new language besides English (“Expat Insider,” 2018). One would only need to learn Hindi to enrich their experience. Regarding moving to India, the preliminary process of obtaining the correct documents and getting medical tests is pretty much standard. The cost of living in India is one of the lowest globally (“Expat Insider,” 2018). Since most expatriates are always well compensated, it would seem that working in India makes economic sense, and one would get massive saving opportunities. According to Expat Insider (2018), India ranked 65^th out of 68 countries in digital life. Expats have ranked India poorly in terms of obtaining digital technology. India’s advantage is that there is unrestricted access to the internet, unlike China, where they have the Great Firewall; however, it is difficult to access most government services online.

In terms of friendliness, the expatriates surveyed described India as having e a welcoming culture, although it is difficult to feel at home. Expats reported long working hours per week, with the average workweek being 48 hours compared with 44 hours globally. In terms of job security, India ranked 23^rd, which was quite a favorable spot (“Expat Insider,” 2018). For education and childcare, expatriates surveyed rated India poorly, indicating that good schools and children welfare services were not readily available or affordable.

The expatriate experience of moving from India to China depends on where one is originally from; if XYZ intends to transfer some Americans from India to China, the experience is like that of an American moving to China; the cultures of China and India are very distinct (“Expat Insider,” 2017). The languages are not the same; religions are different, politics are different and digital life is different. On the other hand, if XYZ plans to move some native Indians to China, the experience would probably not be as hard since Indians have acquired grit from the developing-world inconvenience. Anybody moving to China from a country with unrestricted internet would need to grapple with the great firewall that blocks major social media sites in China (“Expat Insider,” 2017). One will also have to deal with constant surveillance since China has become very good with big brother; they watch everything.

Concerning labor laws, China and India also have their versions of OSHA and others. Still, since China and India have been known as the world’s workshops for a long time, there are no guarantees that the laws would be as comprehensive as those in America. Apple’s Taiwanese subcontractor, Foxconn, operates massive factories in Shenzhen, and there are reports of suicides because of extreme working hours (Merchant, 2017). Minimum wages also barely guarantee a livable wage for the average American. Thankfully, expat jobs pay well to get one to move to the new country.

Reference List

Merchant, B., 2017. Life and death in Apple’s forbidden city [WWW Document]. The Guardian.

China, 2020. 2020 Investment Climate Statements: China.

Employment & Labour Laws and Regulations | China | GLI [WWW Document], n.d.. GLI – Global Legal InsightsInternational legal business solutions.

Employment & Labour Laws and Regulations | India | GLI [WWW Document], n.d.. GLI – Global Legal InsightsInternational legal business solutions.

Employment & Labour Laws and Regulations | USA | GLI [WWW Document], n.d.. GLI – Global Legal InsightsInternational legal business solutions.

Expat Insider 2017: The Ups & Downs of Life in China [WWW Document], 2017.

Expat Insider 2018: The Benefits & Drawbacks of Expat Life in India [WWW Document], 2018.

Expat Insider 2019: The Ups & Downs of Expat Life in China [WWW Document], n.d.

India, 2020. 2020 Investment Climate Statements: India.

Medical Check Information, n.d. Opportunity China.

“Overseas business risk – India.” (n.d.). GOV.uk.

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