Millions of Laid-Off Urban Workers Are Getting Angry

By David Murphy. The Wall Street Journal. 11/06/2002.P.A19.

Shenyang, China -- "HAPPY HAPPY GO to work. Safe safe return home," exhort the Mao Zedong-era, cast-iron slogans above shuttered factory gates.

Most of those who worked for decades in the smelter, the cardboard factory and the other plants in this city's Tiexi district have lost their jobs.

Rundown buildings lend weight to estimates by local residents that 70% of the district's workers are idle. They are a small part of a huge groundswell of unemployed urban poor that has appeared in the past five years.

As former urban industrial workers, they were once the proud vanguard ofthe proletariat -- unlike the rural poor, who always lacked money and status.

Under communist central planning, such steelworkers, miners and oilmen won respect and extensive housing, health and education benefits for half a century. But things have changed.

"This is not a socialist country anymore -- the gap between rich and poor is too wide," says Xu Ming, 63 years old and laid off after working 40 years in a Tiexi factory.

The root of the problem lies in the move to reform. China may be the workshop to the world, but in the process of turning out cheaper goods, it is purging state workers from sunset industries.

The reform of the bloated state sector began in earnest after the 15th Communist Party Congress in 1997. Tens of millions of workers lost their jobs with state-owned companies, many of them in cities across northeast China , the country's rust belt. The 16th party congress that opens in Beijing on Friday is expected to see the elevation of a crop of new faces to top party positions as aging leaders retire. A key policy concern will be how to balance the drive for continued economic reforms with demands to stanch unemployment.

If that challenge isn't met, the result could be more frequent strikes and increasing social disorder. Workers with grievances are no longer just getting mad; they are organizing. For the first time in recent history, workers in the first half of this year launched a series of apparently coordinated strikes and demonstrations in several old industrial centers ranging from the northeast to the southwest. Analysts say that the protests petered out only because authorities were told to settle them quietly before they could mar the party congress. That tactic worked for a while, but new worker protests have flared in two northeastern provinces in the week leading up to the congress, according to the Hong Kong-based Information Center for Human Rights and Democracy.

There are no recent official statistics on labor disputes, strikes and protests. In 1995, the government labor arbitration committee dealt with 23,000 cases. This had jumped by 1999 to 120,000. Labor researcher Trini Leung estimates the figure for 2002 could come close to 200,000. Official figures on the numbers of unemployed are highly unreliable, and analysts say unemployment is seriously underreported. Labor Minister Zhang Zuoji said on Oct. 25 that since 1998, a total of 26.11 million workers had been laid off, and he claimed that 17.26 million had since been re-employed.

In the early days of dismissals, it was relatively easy to find new jobs. No longer. The Development Research Centre, which is linked to the State Council, China 's cabinet, puts urban unemployment at 10%, and warns it could rise to 15% in the next few years. The DRC and Asian Development Bank estimate that there are 37 million urban poor, 12% of the urban population.

World Trade Organization membership and growing competition have brought new pressures. The employment situation is "very grim," Minister Zhang told lawmakers, adding that, with population growth, the number of new entrants to China 's work force will peak sometime between now and 2005.

A World Bank report estimated at the end of last year that China needs to create almost 100 million jobs over the next decade to absorb laid-off workers and migrants.

As more state industries trim staff, it is becoming harder for workers to find new jobs. "The re-employment rate has declined gradually year after year, from 50% in 1998 to 42% in 1999, 35% in 2000, 30% in 2001 and 9% in the first half of this year," Zhao Xiaojian, a vice minister for labor and social security, told the financial magazine Caijing in September.

Despair over unemployment angers many, and official corruption helps to fuel their rage, especially when it involves unpaid wages or being cheated out of promises made to them when they were laid off. It is no coincidence that the two provinces with the highest wage arrears in the country, Liaoning and Heilongjiang, were rocked by unrest this year. More than $1 billion in back pay was owed to state workers in those provinces by 2001, according to John Chen, a labor researcher writing in the China Labour Bulletin in August.

Rather than being organized by a few intellectuals or political activists, the protests were -- to the party's alarm -- about bread-and-butter issues and had large-scale support. "The mass workers' protests which took place in the spring of 2002 were all economically driven, and the organizing was workplace-based," Ms. Leung said in June in the Bulletin, which is published in Hong Kong.

The government responded with a mixture of iron fist -- smashing protests and arresting leaders -- and velvet glove -- short-term payoffs and rapidly expanding a basic welfare system. Twenty million people now receive the government-distributed Minimum Living Standard Allowance, up from 2.8 million in 1999. The allowance, given to households with an income below a locally set poverty line, varies in size -- in Shenyang, it is $36 a month.

It is viewed as the last line of defense against urban poverty and will probably have to keep growing, particularly in the northeast wastelands, in a bid to keep some kind of lid on simmering unrest. The government focuses its relief efforts on officially registered urban dwellers. But compounding the potential for instability, large migrant populations of rural workers are an increasingly permanent feature of Chinese cities.

Meanwhile, few laid-off workers pay much attention to the party congress. For them, as for most ordinary Chinese, the event held twice a decade has no relevance, and they care little for speculation about leaders such as President Jiang Zemin and his presumed successor, Vice President Hu Jintao.

"It doesn't matter whether Jiang steps down or goes up," says laid-off factory worker Mr. Xu, drawing on a cheap Jiqing cigarette. "There will be no change."