When I was working on the supply side, I would talk with other North American suppliers about the “China situation” and sometimes joke, “Where is Jimmy Hoffa when we need him?” But here we are a few years later, and the idea is not so farfetched. Unfortunately, instead of independent and competing organizations, the labor union in China is the party-controlled All-China Federation of Trade Unions. Still, even great progress can start in tiny steps.

It’s not news that China is the global workshop. It’s also well known that this meteoric rise came on the back of the Chinese worker. These individuals toil for small wages, with little to no security, in the hopes of making a bit more than they could have on the farm. Many arrive at a factory with the intention of staying a few years. They live in onsite dormitories supplied by their employer, separated from their families for months or longer. They typically save or send their earnings to their families. For those of us with regular day jobs, their living conditions and work experience are hard to identify with.

Things are about to change. In 2007, China ratified two statutes to help to protect workers’ rights. The Labor Contract and Employment Promotion laws have emerged from the back rooms and went into effect Jan. 1. According to a report from Foreign Policy in Focus (fpif.org/fpitxt/3824), the new laws came under striong opposition from companies like Wal-Mart, Google, UPS, Microsoft, Nike, AT&T and Intel (acting through the American Chamber of Commerce) to block passage. There were a number of revisions to the statute based on input from organizations like AmCham representing foreign corporations.

International companies lobbied forcefully against many of the proposals, claiming they would fuel rising labor costs that have already crept steadily higher over the past five years. These companies were also concerned over the possibility that China would become a more difficult place to do business if they were forced to be more cognizant of employees’ rights and consult with state unions before layoffs. Such issues weren’t given much thought when companies dealt with workers individually, not collectively.

The thrust of this statute is the labor contract system. Under Chinese law, contracts have long been required to protect employees, but the government looked the other way while many companies ignored them. The new statute complicates noncompliance with standard contract provisions, even for migrant employees, and the government has indicated enforcement will occur. Certain reports state the new statutes will have the power to enable change in labor-management relations and improve Chinese workers’ standing. Foxconn, for one, has already acknowledged them, issuing a statement in December that it will extend contracts to workers.

There are a number of employee protections incorporated into the statutes, including new limits on probationary periods and reducing the time employers can pay employees (lower) probationary salaries. There are also a number of age discrimination protections, including the right to severance pay and protection from termination for aging workers.

What the new laws don’t do is provide Chinese workers with what many would consider fundamental protections. Chinese workers still lack the right to form independent unions, or strike. In the past, the All-China Federation of Trade Union has played only a minor role in employee negotiations, rarely pressing for higher wages or enhanced benefits. It is hoped that it will be more pro-worker in future dealings because defusing worker unrest and improving social stability are certainly at the root of these labor law changes.

It is possible that these new labor laws will help with a number of related labor issues that technologies companies face when operating in China. The turnover rate for employees is among highest in the world. Large companies have entire departments whose sole purpose is new employee orientation and training. The more specialized the job, the more arduous the task. It is anticipated that employees with hard contracts and longer contractual tenure may ease this burden, a win-win for workers and their employers.

Fair warning for those companies taking the shotgun approach, blasting low-cost bodies at the opportunities, without much in the way of organized marketing, business development or sales planning: it’s time to rethink your model. Labor costs are going to rise. The best people will command long-term contracts. The key to success may rest in a company’s ability to recruit and retain the best employees and reward them appropriately. Sound vaguely familiar?

A few notes as we move into 2008. A warm welcome our new associate editor, Phil Buonpastore. Phil comes to us with a degree in electronics engineering technology and experience as an applications engineer for machine vision equipment. And Eric Bogatin fans take note: The Signal Doctor is taking a sabbatical, but promises a technical article or two in the upcoming months.