In order to make a decision on any issue you need all the available information. The new China Labor Law has not actually come into effect yet but the data is coming in, and creating a picture of conflict and hope.

Feedback

The first piece of news, courtesy of CSR Asia, is that the Otis Elevator Company, has recently been accused of attempting to circumvent the new law. According to reports on Sina dot com Otis has allegedly requested employees to sign new contracts which cause them to forfeit benefits under the new law. It's not the only company to be cited for this but it is the only one that has been specifically targeted by Sina. A local company, Huawei, was also found to be doing this earlier on in 2007 but that issue seems to have generated much less interest.

The action by Otis is not necessarily the smartest thing to do when some of China's legal eagles are looking for carcasses to pick at. Or should I say visible targets with deep pockets that can be mined for gold. Compensation gold.

It reminds me of the old joke about the guy who gets hits by a car and tells his friend that 'Yeah, it's hurts, and compensation is setting in'. A culture of entitlement may not be upon us but the signs are that the times are a' changin'.

Meanwhile other elements in the legal profession are risking life and limb to ensure that the provisions of the law that protect workers are actually implemented. Stereotypes always run the risk of being shot down so kudos to the lawyers with the 'right attitude'.

Drawback

Rumors of a pullout by Taiwanese companies abound but much of this may be part of the usual bargaining that you see in any situation where some group is going to lose out. China's top legislators seem to be happy enough to force companies who do not comply with even the current laws to find another place to operate. They feel they have the choices, and in that respect they may just be right.

On the other hand, if these companies really are struggling at present, as they claim they are, the new law may be the straw that breaks the camel's back. A cut in employment is only a good thing if Foreign Direct Investment(FDI) continues to arrive, China's internal markets continue to expand, and the factories that are lost are just sweatshops. Replacing them with electronics and car assembly may cause a temporary loss of jobs but the longer term benefits are huge. Certainly worth the short term pain.

Having said this, however, we are not ready for the scenario where jobs are lost in large numbers. Even a less drastic scenario, where lazy workers are emboldened to hang on desperately to their positions, is not a tenable position for a country that must deliver continuous economic growth and development, or risk the consequences of a failure to satisfy rising expectations.

Pushback

Separately, the Dongguang labor bureau has issued a modified version of the national Labor Law. According to the China Herald, the differences are significant:

The article concludes that we are likely to see more such modifications in the future, and that this is likely to muddy the waters. Not only do I agree, I would suggest that we may see a response from the central government as it tries to put a finger in this particular dyke.

With dissimilar results from the classic story.