Just as IBM massively increases its bet on China, the Middle Kingdom today signaled it might attempt to pacify unions and labor with severe new restrictions on employer flexibility. The giant employment and wealth boom of the last 28 years owes much to the flexible labor laws that were first instituted in the Free Zones and then spread across much of the nation. When employers know they can fire a worker, they are much more likely to hire him in the first place. Thus the largest mass migration in human history with some 250 million peasants leaving the countryside for new and better jobs — jobs, remember! — in the Free Zones along the Coast.
But Beijing is worried about the so-called income gap and says it is shifting focus from Development & Growth to Development with more “Social” considerations. Let’s hope this is mostly a political move and that the practice of leaving discretion of (un)enforcement in the hands of local leaders continues. Otherwise the law could be quite onerous:
“You could hire a sales manager, give him a quota and he doesn’t sell anything, and you couldn’t get rid of him,” Mr. Lauffs said. “It’s not easy to get rid of someone now, but under these rules it would be impossible.”
The law is still in draft form and would not go into effect until May 2007, so there’s still time to avoid one of China’s first bad large-scale economic policies of the past few decades.