Impact of Global Supply Chain and Macroeconomic Policy on Strikes and Living Standards in Vietnam

STRIKES AND LIVING STANDARDS IN VIETNAM: THE IMPACT OF GLOBAL SUPPLY CHAIN AND MACROECONOMIC POLICY Anita Chan University of Technology, Sydney Kaxton Siu Australian National University 1

The Vietnam Strike Wave Number of Strikes 900 799 762 800 700 600 541 500 424 387 400 310 300 200 147 139 125 100 89 71 100 0 Jan-Aug 2011 2003 2010 2000 2001 2002 2004 2005 2006 2007 2008 2009 2

Some New Observations about the Strikes in Vietnam Comparative perspective: Vietnam and China. Characteristics of Vietnamese workers more defiant than Chinese workers from Taiwanese investors observations. Periodization changing factors driving the strikes Government macroeconomic policy as an important factor. Perspective of Taiwanese investors. 3

Methodology 2 factory-gate surveys 2007 China and Vietnam footwear industry ; sample size = 2000 2010 China and Vietnam garment and Vietnam) industry ; sample size = 600 Documentation (VN and TW newspapers & blogs) Interviews with VN workers, TW managers and VN officials Official Statistics: VN Statistical Yearbooks, Vietnamese Household Living Standard Survey (VHLSS) 2002-2010, Urban Poverty Assessment (UPA) 2010 4

Definition of Strike The ILO's definition for strikes: A strike is a temporary work stoppage effected by one or more groups of workers with a view to enforcing or resisting demands or expressing grievances, or supporting other workers in their demands or grievances. Data collection varies from country to country Vietnam strike figures released without definition When workers withdraw their labor at one workplace that is counted as one strike 5

From Relative Labour Peace to a Strike Wave Pre-2006: Period of Relative Labour Peace 2006: The Year the Strike Wave Sets in Post-2006: Period of Labour Unrest 6

Pre-2006: Period of Relative Labour Peace 7

Fig. 1: Relationship between Number of Strikes and Official Minimum Wage (adjusted by CPI), Industrial Zones outside Ho Chi Minh City, 2000-Aug 2011 900 140 Minimum Wage, Adjusted Minimum Wage by CPI & CPI Food (Unit: Number of Strikes 799 800 762 120 700 100 600 541 80 500 424 10,000 VND) 387 400 60 310 300 40 200 147 139 125 100 20 89 71 100 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan-Aug 2011 Number of Strikes in VN Minimum Wage Minimum wage adjusted by CPI food Minimum Wage adjusted by CPI 8

Number of Foreign Enterprises and Number of Strikes, 2001-2010 8000 900 Number of Strikes Number of FEEs 800 7000 700 6000 600 5000 500 4000 400 3000 300 Number of Foreign Funded Enterprises (FEEs) 2000 200 1000 100 Number of Strikes 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9

Cumulative FDI 1988-210 of the Top 9 Investors 35000 Cumulative FDI since 1988 (Unit: Million USD) 30000 Korea Taiwan 25000 Singapore 20000 Japan Malaysia 15000 United States 10000 British Virgin Islands Hong Kong 5000 Netherland 0 France 2005 2006 2007 2008 2009 2010 10

Source: Based on census and survey data from the GSOV website: http://www.gso.gov.vn/default_en.aspx?tabid=479&idmid=5 (downloaded 1 May 2012). Enterprise Ownership Types 2008 2006 2007 2009 2010 N % N % N % N % N % Number of Foreign Funded Enterprises (FFEs) 4220 3.2 4961 3.2 5626 2.7 6546 2.6 7200 2.5 Number of Non-State Enterprises 123392 94.0 147316 94.6 196776 95.7 238932 96.0 280762 96.4 Number Enterprises of State 3706 2.8 3494 2.2 3287 1.6 3364 1.4 3283 1.1 Total Enterprises Number of 131318 100 155771 100 205689 100 248842 100 291299 100 11

Why Disproportionate Number of Strikes in Taiwanese (39%) and Korean (29%) Owned Factories? 1. These two nationals have become the biggest investors in Vietnam, which means their factories are likely to have a proportionally larger number of strikes. Taiwanese and Korean managers are notorious for their harsh and disciplinarian labor regimes in their offshore factories. The same when they go to China. The defiant character of the Vietnamese workers and their higher awareness against foreigners mistreatment. Lack of grievance procedure. Absence of or weakness of the Vietnamese workplace trade unions in FDI factories to act as a moderating player to assuage workers grievance mechanism. 2. 3. 4. 5. 12

Vietnamese Workers Rights Awareness from the Perspective of Taiwanese Investors The human rights awareness of Vietnamese workers is very high. In Taiwan when we served as army conscripts we had to obey blindly as if this was natural. But not here at all. That is why I think Taiwanese who are into shoemaking here have to face a lot of labor disturbances and strikes. Vietnamese workers readily stage mass protests. This is not just a problem at my factory; it is a problem for the entire society. 13

Vietnamese and Chinese Workers Attitudes towards Factory Trade Unions Do you think the trade union in your workplace represents workers interests? Vietnam 894 58 100 2 1054 (100%) China 100 203 672 33 1008 Yes No Don t know Missing Total (85%) (6%) (9%) (<1%) (10%) (20%) (67%) (3%) (100%) 14

Characteristics of Strikes in Vietnam Peaceful No open organizer Sympathetic press coverage Union and government officials negotiate on behalf of workers Repeated strikes in the same factory (e.g. Hue Phong) All players getting used to the strikes routinized strike pattern 15

Workers Repeated Strike Experience in Five Footwear FDI Factories, 2007 Number of strikes experienced by a worker in the same factory Number of workers (N = 686) 1 2 3 4 5 6 7 274 315 72 15 6 3 1 Percentage of workers 40% 46% 10% 2% 1% 0.5% 0.5% Table 2. Repeated strike experience of workers in five sampled Vietnamese footwear factories (N = 686) 16

Routinized Strike Pattern As strikes became common occurrences and widely reported in the press, all stake holders have gotten used to it. Workers have become accustomed to using strike as an effective bargaining tool to get what they want. Taiwanese investors have come to consider strikes as normal like having a meal at home. As one of them said, they have even developed an immune capacity against strikes. When calculating production cost, they have already factored in strike contingency cost. 17

Post-2006: Period of Labour Unrest 18

Fig. 1: Relationship between Number of Strikes and Official Minimum Wage (adjusted by CPI), Industrial Zones outside Ho Chi Minh City, 2000-Aug 2011 900 140 Minimum Wage, Adjusted Minimum Wage by CPI & CPI Food (Unit: Number of Strikes 799 800 762 120 700 100 600 541 80 500 424 10,000 VND) 387 400 60 310 300 40 200 147 139 125 100 20 89 71 100 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan-Aug 2011 Number of Strikes in VN Minimum Wage Minimum wage adjusted by CPI food Minimum Wage adjusted by CPI 19

State Policies & Macroeconomic Factors Legal minimum wage: Legal minimum wages set by the government to sell workers labor in the competitive global labour market Tension between lowest possible selling price as against lowest possible compensation to reproduce labour (physical survival). But the government couldn t strike the balance between the former and the latter. Thus, the legal minimum wage was set too low in favour of capital. Government cannot control inflation 20

The Two Standard of Living Surveys 2010 Garment For migrant workers VND 2,413,765 Industry Survey 2010 VHLSS For nation 3rd quintile VND 2,018,000 as a 4th quintile VND 2,727,300 whole 2010 UPA For migrant workers VND 2,162,000 Table 3. Comparison of average monthly income of migrant workers in the three surveys 21

Deterioration in living standard 16 14 12 10 8 6 4 2 0 Sugar, Molasse s, Milk, Cake, Candy, Candied fruits (kg) Rice and Rice equivale nce (kg) Wine, Beer (Litre) Meat (kg) Grease, Oil (kg) Shrimp, fish (kg) Egg (piece) Toufu (kg) Vegetab le (kg) Fruit (kg) 2002 2004 2006 2008 13.8 13.6 13 12.2 1.2 1.3 1.4 1.3 0.2 0.3 0.3 0.3 1.2 1.5 1.6 1.4 2 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.7 0.7 0.6 2.5 2.5 2.4 2.3 0.8 0.9 0.8 0.8 2.4 2.4 2.7 Consumption Amounts of Some Main Food Per Capita Per Month (3rd Income Quintile, Whole Country) 22

Deterioration in living standard Decrease in rice consumption not compensated for by other food items. Rice in Vietnam contributes 59% of the diet s calories (70% for Bangladesh, 65% for Cambodia, 50% for Indonesia). Before 1989 under the ration system, each person was entitled to 15 Kg of rice per month. In 2008 workers consumed 12.8 Kg per month. Economic boom has little trickle down effect on food consumption in the last decade. 23

Reports on Some Workers Going Hungry In 2011 a VGCL report said that 30% of workers were malnourished. Wages can only satisfy 60-70% of workers basic needs. Some workers try to remain physically inactive to conserve energy in the hope of staving off hunger. Eating rice brought from home in the countryside. Rural sector subsidizing urban industrial sector. Quite a lot of media report on factory lunches serving too small a quantity of food and workers going hungry. Never such reports in China. 24 24

The Government Rice Export Policy Government controls all rice exports in Vietnam (possibly much corruption in this area) Government continues to increase rice export even when price of domestic rice increases Government reneged its promise to lower rice export in 2008 Current flooding in Southeast Asia is likely to adversely affect rice prices and consumption severely 25

2011: Runaway double-digit inflation continues 130 Unit: % (Dec-10 as 100%) 125 120 115 110 105 CPI CPI Grain Food 100 Apr-11 Feb-11 Mar-11 Jan-11 Jul-11 Dec-10 May-11 Jun-11 CPI Foodstuff Fig. 7: Consumer Price Index, Whole Country, December 2010- July 2011 26

Conclusion and Prognosis (1) Taiwanese and Korean & other investors urging the VN government to suppress strikes and to enforce its own law on strikes, threatening capital flight Taiwanese investors trying to befriend the Vietnamese police. Vietnamese government continues to resist pressure to suppress strikes, instead it puts the blame back onto factory owners for violating the law and paying low wage. Vietnamese government provides lower standard and lax labour regulations but demands investors to comply. It seems the VN government has recently finally realized that basic wage has to be raised. Plan 25% to 35% increase since 2013. 27

Conclusion and Prognosis (2) Corporate Social Responsibility (CSR) and Global Production Chain Multinationals should also be held responsible. Production imperative overrides human right imperative Big brand companies do not ask suppliers to increase workers wage When wages have to go up with minimum wage increase big brand companies do not put in their fair share. CSR cannot solve the problem 28

Conclusion and Prognosis (3) Prognosis Can the Vietnamese government control inflation? If strikes turn violent, will the Vietnamese government suppress the strikes? Economic strike Political strike? Possible split within the trade union? 29