The Strategies and Motives of Government in Strikes

----A Case Study of Company G

Ruojing Wang1

Abstract: Since 2010, a series of strikes broke out around the country, while dealing with these strikes, most local governments processed these labor disputes with neutral attitude and mainly coordinated between employers and workers. Despite of this basic principle, the extent and strategies of administrative intervention varied in different areas. The governments of Guangdong, Dalian and Shenzhen did not directly intervene in the strike, but stood third-party position and created a platform to promote consultation between employers and employees. While Jiangsu government is actively and directly involved in the strike and negotiations process, it had become the communication intermediary between employers and strike workers and ultimately quelled labor conflicts. This paper uses the case of a Taiwan-funded enterprise (Company G) in City S of Jiangsu Province to analyze the strategic choice and behavioral logic behind the local governments’ handling in strikes. This paper holds the opinion that municipal government of City S took such an aggressive intervention strategy is mainly because of two factors: on one hand, local government intends to achieve the balance of three objectives: efficiency, equality even under the pressure from both employers and strike workers; on the other hand, the local government is affected by the traditional administrative methods which has gradually formed informal institutionalized behavior.Key words: Strike; Government Intervention; Strategic Choice; Local Tradition

1. IntroductionThe word "strike" has become one of the most important keywords in the Chinese labor relations since 2010. Strikes broke out all over the Pearl River Delta, Yangtze River Delta and the Bohai Rim Economic Belt in recent years. Compared with the past labor movements, workers, employers and governments were much calmer and their attitudes and behaviors were relatively peaceful. The collective actions of workers were showing restraint and rational characteristics, for example, their activities were within the scope of the plant without any ultra behavior. Meanwhile, some local governments also changed their attitudes towards strikes2. They now regard strike as economic disputes between employer and employees rather than political incidents. Local governments encouraged employers and employees to resolve conflicts through collective wage negotiations, not traditional "stability maintenance” method. However, from practices all around, both sides had not yet achieved independent coordination and the local government continues to play a

1 Ruojing Wang, PhD student in Renmin University of China (E-mail: wangruojing8733@163.com).2 Eg. Guangdong government regarded strikes as economic disputes between employers and workers and encouraged district government and trade union to participate and use collective bargaining to solve problem.

leading role in mediation process, sometimes they even used executive power to intervene. Overall speaking, governments of all levels are dealing with strikes base on the principle of encouraging self-coordination between employers and workers by creating workplace consultation platform. However, despite of this basic principle, the extent and strategies of administrative intervention varied in different areas. For example, governments of Guangdong and Dalian did not directly intervene in the strike, but stood third-party position. They set rules, mediated between both sides and encouraged trade unions to bring both sides to the bargaining table to resolve the issue3. In the end, the two parties reached a compromise that successfully subside the labor conflicts. In addition, there are a number of independent social organizations, who acted as the fourth party, also contributed to the consensus by way of coordinated intervention. For example, a law firm in Shenzhen successfully intervened and promoted collective bargaining in Guanxing watch bracelet factory. The strike workers authorized lawyers to represent them and the company had been officially notified about the collective bargaining demand and the lawyers fully participated in the negotiation process4. The three local governments above played the role of the third party in the whole event, although there were some administrative means, the degree of government intervention was limited and trade unions and lawyers played a greater. The most significant difference lies in Jiangsu province. The local governments there were actively and directly involved in the strike and had become the communication intermediary between employers and strike workers which ultimately quelled labor conflicts.

In fact, scholars have been giving explanations about governments’ intervention in the strike, mostly referred to their role, purpose, manner and behavior. Chang Kai believes that the government in handling the strike must adhere to the principle of "treat rationally and solve legally" and make the right judgment for the nature of the strike and maintain a neutral attitude (Chang, 2012). Cai Yongshun persists that the government facing mass incidents have a few major tasks: maintaining social stability, implementing policies and safeguarding the government’s image while its strategies can generally classified into two types, namely repression and tolerance (Cai, 2008). Wu Tong mentioned in his article about the relationship between state and workers’ resistance that in the War of Resistance Against Japan, in China, a country where state occupies the dominant position, the social space of workers is still very limited while the state has endless capabilities and resources to coordinate the interests of different parties, prevent the expansion of conflicts and maintain social stability (Wu, 2010). Chen Feng did a research in DLDA District and found that when faced with large-scale strike, the government was very careful. Although they encouraged collective negotiations, when necessary, they would take the means of repression and their primary goal is to maintain political and social stability. However, now more and more strikes broke out because of interest disputes which the existing legal framework unable to deal with, so the government had to use the non-institutionalized mediation

3 http://auto.163.com/11/0302/10/6U4QVFK800084JTI.html4从冠星厂事件看工资集体谈判.中国工人，2012 年第 5 期

ways to address such kind of strikes in order to quell the dispute as soon as possible. And the direct involvement of the government is crucial to resolve conflicts quickly (Chen, 2010).

All above researches are consistent with the basic principle about the government's handling of the strike and agree that under current political system, government has unparalleled importance in resolving labor conflicts because of its public credibility and strong political image. However, these studies have not systematically illustrated the behavioral logic and its underlying causes behind governments’ intervention in the strike. And existing research results cannot interpret the different strategies Jiangsu and other governments used to deal with strikes. There is no denying that the Jiangsu government intervention mode may not be unique, however, this kind of mode which the government acts as a direct communication intermediary to defuse strike worth analyzing. Honestly speaking, this mode not only does not comply with Western collective bargaining mechanism, but is also contrary to the successful experience of other local governments.

Therefore, this paper used the labor conflict in a Taiwan-funded enterprise (Company G), Jiangsu Province to study the attitude and behavior change of the government in the entire process from the outbreak to reconciliation consensus, trying to explore what kind of behavioral logic made up government’s decision.

2. Theoretical FrameworkThis paper argues that in order to understand the involvement of the Chinese government in strike, two basic questions need to be answered first: why the government has to intervene and how to intervene. Western labor relations theories about governments’ roles and behaviors supplement as indispensible tools to our analysis under Chinese context.

2.1 Maintain dynamic balance: government's role in the strikeState/government5 is one of the important subjects in the industrial relations system and it plays an important role in the adjustment of labor relations. State is not only a subject of industrial relations, but also shaping industrial relations. It is prerequisite to the operation of industrial relations (Mann, 1986). On the premise of this, Sturmthal pointed out that the entire industrial relations system are directly or indirectly dominated by the government in most parts of the world (Sturmthal , 1973). Hyman (Hyman, 2008) and Taylor et al (Taylor et al., 2003) both have given their own classifications about the role of the government in the context of labor relations. All these studies stressed the importance of government’s role and function in the regulation of labor relations from theoretical point of view. But they were still more inclined to description and lack of a high degree refinement.

5 Because of the length limit, this article doesn’t elaborate how to understand the differences between state and government under Chinese context. And the analysis object of this paper is government, so it mainly uses “government”.

Out of numerous studies, Offe made a more theoretical generalization for the operation principle of government in labor relations that government has to achieve the balance of three elements: economic efficiency (Accumulation), social stability (Pacification) and legitimacy (Legitimation). On one hand, the government intends to encourage economic growth, improve productivity and increase competition; On the other hand, it has to maintain the integrity of the national territory, to maintain social order and to defuse or suppress conflicts. At the same time, it has to pursue social justice in its governing process, for example, protect the workplace citizenship, give workers a say, in order to maintain its political recognition and gather the support from citizens (Offe, 1984). The interesting is that his view coincides with Budd, whose triangular theory of labor relations also pointed out the importance of the balance among efficiency, equity and voice (Budd, 2007). So it is likely that the reason of government’s regulation of labor relations acts is to achieve this balance.

However, it is extremely difficult to maintain these three goals in equilibrium because they are usually conflicting. Hyman in his studies fully utilized the concept of contradiction to explain this situation that although the government strives to achieve all of these three goals, its efforts are not necessarily effective. The opposition, even contradiction, will definitely exist between different policy objectives, thus form the internal relations of government and industry relations. In addition, the governments occupied a variety of resources and they have their own interests’ orientation and value standards, thus prefer the policies which can bring benefits for themselves. As a result, the three goals of the government are always in a continuous dynamic equilibrium and there is never a "best solution".

Therefore, theoretically speaking, governments’ intervention in the strike is largely due to the consideration of these three goals. Harmonious labor relation is an important indicator of the nice investment environment and resolving labor conflicts is conducive to the socio-economic environment, which not only ensures the economic efficiency, but also quells the conflict, promotes social stability. More over government designs effective means to achieve a certain degree of social equity and guarantees the basic rights of work class. However, whether this theory can be applied to the Chinese government under the market economy environment is still a question which needs to be answered from other theoretical resources.

2.2 Maintain the sustainable development of the market economy: revelation of regulation theory Regulation theory, originated in France, is a genre of Western Marxism and is used for the analysis of conditions and requirements required by general reproduction of capitalist society. Marx understands "reproduction" as a way of the production, distribution and accumulation and constantly rebuilding of capitalist production and class relations. Regulation school replaced “reproduction” with “adjustment” on the basis of the Marxist doctrine. "Adjustment" pointed out that the practice activities of the individual and collective participants, as well as social, economic and political

organizations’ regularity activities are the main components of the reconstruction and transformation of the social formation6. In other words, the regulation theory is a theoretical paradigm focuses on how capitalist operate and continue. The scholars of this school believe that the answer is embedded in the social relations. On one hand, it is embodied in tangible or intangible rules; on the other hand, it reflects the conflicts among the members of society7.

As an analysis tool, regulation theory put forward several important concepts: First, industrial paradigm. This concept refers to the technology and the division of labor during the labor process, mainly refers to the degree of the social division of labor. In other words, this is about the rules of production essentially. Second, accumulation regime, which means the regime to maintain the stability of economic production and consumption balance at the macroeconomic level. The third one is mode of regulation and the fourth is model of development8. Regulation school believes that a stable accumulation regime needs external political and social mechanisms to regulate, namely the mode of regulation. This mode is basically used for analysis at the middle level between micro-and macro-social system, which integrates institution, traditions, forms of organization, social networks and types of behavior. They make people follow the rules and establish institutional reproduction mode, thus to maintain an accumulation regime stable. When the industrial paradigm, accumulation regime and mode of regulation complements to each other and be able to maintain a very long period of stable development of capitalism, it formed a development model9.

A long-term stable development model requires co-ordination between different levels. When industrial paradigm, accumulation regime and regulation mode reach a relative balance, the development model will obtain potential for a certain period. However, this stability is not continuous. When the coherence between the various levels disappeared, the balance is broken and capitalist production becomes unstable and disorderly and this state will sustain until a new equilibrium achieves. State plays an important role in the process of acquiring new balance, because the state system is the result of compromises and its output is variety of rules, which prevent the state end up in constant struggle (Hu, 2005).

2.3 A discussion about the applicability of Western theories under Chinese contextIn short, the Regulation School studies how to realize capitalism's self-healing through regulatory content and regulatory process. Accumulation regime can be regarded as the state's pursuit of efficiency and its eagerness to establish a stable and efficient mode of economic growth, while industrial paradigm somehow reflects the power contrast of capital and labor, which is an indicator of equity. And regulation mode is all kinds of policies and rules formulated and implemented by the 6 George Steinmetz, Regulation Theory, Post-Marxism, and the New Social Movements, Comparative Studies in Society and History, Vol. 36, No. 1 (Jan., 1994), pp. 176-2127 See above.8 Bruce Kaufman (Editor), Theoretical Perspectives on Work and the Employment Relationship, DigitalCommons@ILR: http://digitalcommons.ilr.cornell.edu/books/169 胡海峰.对法国调节学派及其理论的分析.教学与研究，2005 年第 3 期

government in order to not only balance efficiency and equity, but also establish and maintain the legitimacy of the state. When equity, efficiency and stability cannot achieve balance, which also means that the accumulation regime, industrial paradigm and regulation mode no longer match, as a result, the development model is in crisis. As the most important decision-maker in this case, it is necessary for the government to amend regulation mode by revising rules. Regulation school’s researches mainly focus on capitalist mode of production and relations of production after World War II, especially in-depth research on Fordist mode of production. And their analysis objects are mostly market economy countries in West Europe. However, regulation theory is overly metaphysical and lack of outstanding empirical research (Muller-Jentch, 2004). So under Chinese context, is it possible to identify its regulation mode?

Socialist market economy with Chinese characteristics has a very different formation path with western capitalist market economy. Chinese economic reform is a top-down policy and political reform lagging behind, so the Chinese governments regard economic growth as their primary task, productivity, GDP and other economic indicators are the most important criterions for the performance evaluation of local governments’ officials. In order to attract investment, local government policy is often tilted to the employers and take company’s side when comes to labor disputes. In addition, after the 1990s, the Chinese government has gradually formed the rule concept of "stability overwhelms everything". Since then, the local governments often adopt "stability maintenance" measures to deal with the labor conflicts and ensuring social stability becomes the government's top priority (Wu, 2010). It is obvious that local governments in China are actually facing the difficulty of balance between efficiency and stability as well, but it is the result of a "top-down" political mechanism. Of course, at the same time of ensuring economic development and providing various preferential policies to foster enterprises to improve efficiency at the same time, local governments also adhering to the central government’s guidelines about social equity, for example, "establish harmonious Industrial Relations" and "safeguard workers’ interests”, which reflects that the government actually fight for legitimacy between employers and employees. So, under Chinese context, when local governments deal with labor issues, they have to face the balance of efficiency, stability and equity (implied legitimacy). Local governments used to emphasize on efficiency and stability while neglect equity (detrimental legitimacy), which led to the imbalance of these three objectives and caused social conflicts. The case of Company G shows that once labor conflict broke out, the government was instantly caught in a “balance crisis”. The following part analyzes how local government solved this “balance crisis”.

3. Case Review and AnalysisCompany G is a Taiwan-funded enterprise, located in the Development Zone of City S, mainly engaged in electronic components production. Company G has 1957 employees, nearly 1,000 of them were dispatch workers and another 146 were leftover workers from original state-owned enterprise before its privatization restructuring.

The strike broke out on October 16th, 2011 and defused on October 31st, over 1,000 workers involved in the strike. This paper described this strike process in two parts: One is the interaction between the government and the employer and the interaction between the government and strikes through the whole process from disputes emerged to compromise achieved; the other one is how government achieved balance of efficiency, equity and stability under different kinds of pressure contrast.

3.1 Case ReviewIn early October 2011, the district government of Developing Zone in City S issued a decree called “Withdraw from City”, which requires certain factories with low-technology and high pollution to move out of urban areas, Company G was one of them. The board of directors therefore considered re-locating of the factory to Fuzhou, but had not yet made a final decision. However, when employees heard of re-location possibility, they worried that the company might transfer the property, so they initiated a strike on October 16th and even blocked the factory gate with the purpose of preventing means of production transfer. Because of the shutdown, orders were delayed and the company had to change from water transportation to air transportation which caused an average daily loss 100 million dollars. After a few days, corporate board figured that the cost was too high and determined to relocation and liquidation immediately. The company proposed a compensation package which offered additional compensation of 30 million RMB in total besides statutory compensation. But strike workers were not satisfied with the proposal and asked for higher standard. The local government realized that the possibility of reconciliation was very slim, so government’s labor department demanded district trade union to enter Company G to collect strike workers perspectives and aspirations and report to employer and government duly. District trade union collected a total of 136 pieces of opinion and the first and foremost one is “What is the nature of company’s shut down behavior? Is it a government action?” Faced to this kind of question, the local government had taken an evasive attitude and was even keener to orientate this incident as a conflict between labor and management conflicts. They insisted that employer and workers were the principal parts while government acted as supervisor and trade union as participants.

Workers’ compensation demand had been unable to obtain the consent of employer and the strike soon upgraded, workers began to come out of the factory gate, but did not block the road and affect the traffic. Local government immediately took action by contacting public security and within 45 minutes all of the workers were forced back into the factory. Then local government started to pressure the company to raise its compensation package to 70 million RMB. At the same time, district government, trade unions and employer gathered together to watch surveillance video in order to find strike leaders and paid visits to strike workers at their respective houses overnight. The main contents of these conversations were that the company had taken workers’ interests into account and the compensation package had been doubled to its limit. The officials also cautioned that road blocking was illegal. After a night's

persuasion, the following day the number of workers gathered around the factory gate substantially reduced, only workers with special appeals remained there. District government continuously organized 6 recruitments inside factory and all job positions offered were the same with Company G. On the first day, 14 people signed the termination agreement and these workers were arranged by government in advance. On the second day, fifty or sixty workers signed the agreement. And on the third day, local government announced that those who signed agreement before October 31st would be awarded 10,000 RMB. Finally on 31st, every single one had signed the termination agreement and received compensation of 70,000 RMB to 80,000 RMB in average.

3.2 Case StudyThroughout the whole process of Company G’s strike, the local government changed its attitude, preference and strategy according to different stages.

Phase I: Emphasize on efficiency – require Company G to relocate its factoryCity S is situated in the Yangtze River Delta area, with Shanghai's hinterland effect, its economy has been developing rapidly since the reform and opening up in 1980s. Under such economic and social background, S City, Wuxi, Shanghai and other places in the Yangtze River Delta area have issued decrees called “Withdraw from City” in order to eliminate heavy pollution companies and low-tech manufacturing enterprises. These governments’ goal is to optimize the industrial structure and realize the transformation and upgrading of industries. As W, the chief of the labor department in S City, said, "The primary task in our city is not attracting investment, but attracting talents. We are determined to accomplish the process of structural adjustment as soon as possible and our goal is industry transformation and upgrading”10. So at first stage, the local government stressed efficiency and asked Company G to relocate its factory which led to strike.

Phase II: Emphasize on equity (implied legitimacy) - shirk its responsibility to other partiesWhen the strike broke out, local government was questioned by strike workers about the nature of factory’s relocation and government denied its responsibility by claiming relocation was not administrative action and targeted this event as labor dispute, in order to avoid conflict with workers and maintain the government’s public image and legitimacy. The district labor department instructed local trade union to march into factory first to listen to workers’ aspirations. The trade union undertook the work of collecting information. District labor department had lots of experience in dealing with labor conflicts a lot of experience, Deputy Director C said, "The administration department shouldn’t rush to the science immediately which would only direct bluster against government. The best the best way is to resort to trade union"11.

Phase III: Emphasize on stability- fully involved in the strike10 Interview record (code: 20111108-002)11 Interview record (code: 20111108-002)

When the strike continued to intensify and began to spread outside the workplace, the government had to directly participate in the process of collective bargaining to ensure social stability. On one hand, pressured the employer to double the amount of compensation, on the other hand, persuaded workers to return to work through both soft and hard ways. The government eventually prompted the two parties to reach a consensus and quelled the conflict.

Equity, efficiency and stability had been contradicting with each other in the entire sequence of events and the government had to constantly adjust its strategy preference under different pressure contrast of employer and works to maintain these three goals as balanced as possible. However, the employer and strike workers hadn’t have a face-to-face exchange during the whole negotiation and the government has become the communication mediatory between the two sides. The government bargained with the employer and strike workers respectively and was the most critical and indispensible participant.

Government’s desire to achieve a balance among the three objectives is the main cause of its strong intervention in the strike, but during interviews with officials from labor dispute department of City S government, we found that some of the local administrative traditions also played an important role. Deputy Director C mentioned that, “Once enterprises conflict with workers, the management will contact with local government immediately and seek its help to resolve the dispute”12. This has something to do with City S’ policy-orientation in the past. It used to defuse disputes in favor of employ in order to attract investment for economic development. So the employers trusted local government’s executive interpretation and attitude more than procedural laws and regulations. They hadn’t been accustomed to the autonomy collective bargaining with workers' representatives.

In addition, several officials mentioned many times in their interviews that South Jiangsu has its unique cultural traditions and economic characteristics. “Jiangsu economy is a local economy, while Guangdong's economy is the duckweed economy "," Jiangsu economy is based on township and village enterprises, most workers are from country-side and labor conflicts are not as intense as in Guangdong”, "Because of the local culture, people are not keen to struggle and resist. They are more subtle and conservative and they prefer to deal with things more rationally and softly. Besides, the employers are more likely to make concessions"13. The impact of cultural differences on local government’s administration reform mainly reflected in three dimensions: the personality structure (the personal level), the social ethics (the social level) and governance philosophy (the administrative level) three levels of government. And the differences in governance philosophy epitomized in different preference in governance methods, in other words, sorting the allocation methods (government, market and society)14. It can be easy seen from the interviews that the 12 Interview record (code: 20111108-002)13 Interview record (code: 20111108-001)14 陈庆云，鄞益奋.文化差异：地方行政改革研究的新视角.中国行政管理，2008 年第 8 期

influence of Wu Yue culture on City S municipal government’s administrative philosophy and executive method. Local government is more inclined to implement the allocation of social resources trough administrative method and follow traditional governance culture with the characteristics of centralization, mechanism and rule-based.

4. Conclusion and DiscussionChina's labor dispute settlement mechanism has important political implications15. To sum up the analysis of local government’s intervention behavior, strategy and principle throughout Company G strike, the strategic choice logic of the governments’ involvement in strike can be affected by two factors, which generalized the duality characteristic of the intervention model. Specifically speaking, one is strategic intervention; the other is conventional intervention. The so-called strategic intervention means government’s intervention in strike out of the desire to achieve the balance of the three objectives (efficiency, equity and stability) and the government would constantly adjust its preference according to different pressure contrast exerted by employers and strike workers. Conventional intervention means that local government relies on tradition to form informal institution16. Municipal government S used its customary administration method to achieve balance of efficiency, equity and stability, actively intervened in defusing the unrest. Governance philosophy influenced by the local culture can explain local governments’ differences of intervention in the strike to some extent.

At present, the parties of labor relations are immature and the government has strong advantages in resources, so the municipal government of City S can rely on traditional and non-institutionalized rules to quickly resolve the current series of strikes. In short term, it can solve the problem and achieve the balance of efficiency, equity and stability. However, in accordance with Regulation School theory, if the accumulation regime, industrial paradigm and regulation mode does not match, the regulation has to be revised to realize a sustainable development. S government’s non-institutionalized intervention is lack of stability in the long run, because equity without institution won’t last long and efficiency and stability problems will come out. Market economy is developing deeply and the accumulation regime continues to change, in order to maintain long-term stable development model, local governments need to gradually shift its rule concept and draw up formal rules and systems, especially establish a mechanism to deal with the interest disputes in order to defuse strike.

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