Factory Automation = The Doom of Workers’ Bargaining Power?

Dongguan City has become a manufacturing powerhouse since China launched its economic reform. In the past two decades, the demographic dividend brought by the migrant workers has supported China's crown of “world's factory” and Dongguan City played an irreplaceable role in the process.

As the labour costs shoot up, factory automation is seen as an alternative solution for labour intensive industries. In 2014, Dongguan City Government launched a factory automation policy, namely the Administration Method of Designated Fund on Automation. Between 2014 and 2016, the government would provide 200 million yuan to subsidize 1,000 to 1,500 projects for factory automation annually. The aim is to decrease the number of workers, improve efficiency, upgrade industries and promote work safety.

So what happened to workers after three years of automation? Wong Yu, a postdoctoral researcher in HKUST shares with us her insights. Since 2014, she has been studying the impact of Dongguan's automation policy, interviewed managers and workers in those affected factories and wrote “From Demographic Dividend to Robotic Dividend: the Technological Development and Workers' Bargaining Power in South China”. HKCTU is honoured to have her to speak with us in this issue of the Quarterly.

Postdoctoral Researcher Wong Yu

The number of migrant workers entering cities has been growing, from 250 million in 2011 to 270 million in 2014, despite the government and media's claim of labour shortage in order to rationalize their automation policy. By blaming labour shortage and introducing automation to upgrade industries as a national policy, the government is trying to address the soaring labour costs and restrict workers' bargaining power.

After automation, the labour intensive factories would be filled with machines and operated by a few workers. According to Wong's research, depending on the production lines, the replacement rate could reach 67% to 85%. In other words, many workers would lose their jobs. Between September 2014 and December 2015, Dongguan Government supported some 1,200 projects and cut the workforce of 71,000 workers, a worrying trend for workers.

Surprisingly, unemployment induced by automation has not met with large-scale resistance. Most workers accept it as the “natural trend”. Those “stay” in the factories are either senior and highly qualified workers, or new workers who are specialised in operating the machines. During the process, their labour conditions have been improved. For many factories with high staff turnover, automation is a solution for them to replace the missing workers. After the automation, workers would be paid by hours, instead of piece rate.

Wong wrote about a failed strike in her paper, regarding a factory used to produce wooden doors. After its industrial upgrade and automation in 2008, it produced high-end fire-proof doors. Automation replaced the technical skills of senior workers and endangered their bargaining power, namely the annual salary increase. The failed strike made workers realize that technological development is indeed a threat to them and the employer, like many other employers, threatened workers with dismissals. The strike did not help the workers to improve their labour conditions, instead, they were fined by the employer as a form of retaliation.

China, the world's factory has experienced significant changes in the last decade: factory relocations and closures, large-scale of unemployment, automation of factories caused waves of unemployment. As a whole, the economy is transforming from manufacturing to service-oriented, workers might change from stable manufacturing jobs to informal service sectors. All these factors would all change the power struggle between staekholders in labour relations and their bargaining power.