Labour Mobilization In Emerging Markets: Learning from the Foxconn Suicides

In emerging markets, access to cheap labour is one of the most important competitive advantages. Unfortunately, discontent within the labour pool, showcased by the recent strikes at Honda’s Chinese parts manufacturing plant and suicides at Foxconn, has threatened the stability of labour markets in emerging countries including China, India, Russia, and Brazil. Over the last 3 years, many emerging markets have seen a significant rise in vigilance and dissatisfaction of manufacturing workers. Lower class workers, unwilling to accept long hours and low pay, often collectively demand compensation that is proportionate to national GDP and manufacturing revenues.

For years, organizations operating in emerging economies have been able to ignore such discontent, using a variety of tactics including psychological or physical threats to maintain order. Unfortunately, mass urbanization in rural locales, as well as increases in the number of migrant workers, has reduced the bargaining power of manufacturers, forcing many manufacturers to acknowledge worker concerns. Unfortunately, refusal by many manufacturers to take action has been a catalyst for much of the recent labour activity, significantly increasing friction between management and workers while encouraging mobilization.

One example of this is the 2008 strike in Hongquing, China. For years, governments in the region maintained strict labour control, restricting worker input and ignoring complaints regarding wages and working conditions. In November 2008, 9,000 taxi drivers went on strike for two days, demanding cheaper access to fuel and protesting working conditions. The strike shut down the 31 million person Sichuan province metropolis, embarrassing the unprepared Communist Party. In the months following, workers from the far western industrial county of Yongdeng, the southern resort city of Sanya, and the commercial center of Guangzhou, used similar tactics to address discontentment over wages and working conditions. Taxi drivers, teachers, factory workers and even auxiliary police officers began mounting protests, refusing to work until demands were met.

This activity, as well as the significant international media exposure the Foxconn suicides and Honda strike received, has begun to change how labour is viewed in emerging markets. The surge in labour activity, which has been followed in most cases by significant wage increases, has increased pressure on manufacturers, threatening to destroy the one competitive advantage that has sustained the growth in emerging markets to this point. As the cost of critical inputs rise, manufacturers have been forced to find other ways to meet cost and production targets. Some have accepted cost increases as a natural consequence of market competition, while others, facing limited options, have been forced to close their doors completely.

Despite these changes, employee bargaining power in emerging markets remains relatively weak. Long term solutions have been complicated by collusion between local authorities and manufacturers, and resistance to cost increases remains high. In a number of emerging economies, policymakers are attempting to increase incomes for all citizens using fixed wage legislation. Unsurprisingly, this type of legislation continues to be delayed, facing significant resistance. In the next article, I will explore the future outlook for labour in emerging markets, as well as the strategies organizations can use to reduce the risk of labour unrest.

Nathaniel Payne is a staff writer for Justmeans.com & CSR Digest, as well as the Manager of Graduate Programs for the Faculty of Education at Simon Fraser University. As a researcher, teaching assistant, and guest lecturer within the Faculty of Business at Simon Fraser University, Mr. Payne actively researches, writes, teaches, and speaks about emerging markets, banking, venture capital, financial risk, finance, investments, trade, retail strategy, the publishing industry, consumer behavior, advertising, organizational structure, business strategy, real-estate, cap & trade, micro-finance, ethics, and sustainability.