The Labor Contract Law can better protect the rights of workers
and offers an opportunity for enterprises and local governments to
change their growth models, says an article in the overseas edition
of People's Daily. The following is an excerpt:
The Labor Contract Law contains a few new rules such as overtime
work must be paid and internship should not last more than six
months. The new law strengthens the protection of workers and
hopefully will become an efficient legal tool for workers to
protect their rights.
But different views have cropped up following the promulgation
of the law. Some enterprises fear that an increase in labor costs
will weaken the competitiveness of their products. Some local
governments said it would affect their efforts in attracting
overseas investment and thus lose their low-cost advantage. Others
believe the law sets standards too high. Some said that rising
labor costs may reduce employment and therefore is harmful to
workers since China's labor supply hugely exceeds demand.
We say labor costs will increase in the short term if the law
can be fully implemented. The increase, however, will be very small
and will not harm enterprises because the new law is simply a
refinement of the Labor Law.
From another aspect, the cost increase could become an
opportunity for enterprises. If they realize that competitiveness
cannot be built only on low labor costs, they may spare no efforts
on technological innovation to raise productivity. The new law may
exert pressure on those enterprises and local governments who rely
on fast growth through low wages. It may prompt them to change
their growth models.
Those who believe that only low costs can attract overseas
investment have a lopsided view. Low costs can attract investors,
but this attraction is usually not always reliable.
(China Daily July 30, 2007)