The impact of the new labor law in China: new hiring strategies for foreign firms?

Abstract

China's new labor law transforms the formal work relationship to standards that are similar to many modern European countries. If it is consistently enforced, it could mean higher inflation, a dual labor market and higher inequalities for China, and new strategies for foreign investors.

Costly Labor Adjustment: Effects of China's Employment Regulations

“…From this table, the new labor law moves China from a fairly deregulated market to one that could be considered as restrictive as some of the most protective European economies, and much more restrictive than the United States. Allard and Garot (2010) draw particular attention to the increased severance payments, noting that they are now comparable to those found in rigid OECD labor markets, such as Spain and Portugal. From the World Bank, the value of the "Difficulty of firing index" for China rose more than 20% between 2005 and 2009.…”

“…These effects are likely to be most severe during an economic downturn, such as that of late 2008 and 2009. 1 Table 1 in Allard and Garot (2010) compares the scores of different countries on the Employment Protection legislation indicator, which was developed by the OECD to gauge the strictness of labor laws. From this table, the new labor law moves China from a fairly deregulated market to one that could be considered as restrictive as some of the most protective European economies, and much more restrictive than the United States.…”

Costly Labor Adjustment: General Equilibrium Effects of China's Employment Regulations

“…2 In January 2008, China adopted a new labor law intended to enhance workers' rights. Table 1 in Allard and Garot (2010) compares the scores of different countries on the Employment Protection legislation indicator, which was developed by the OECD to gauge the strictness of labor laws. From this table, the new labor law moves China from a fairly deregulated market to one that could be considered as restrictive as some of the most protective European economies, and much more restrictive than the United States.…”

Costly Labour Adjustment: General Equilibrium Effects of China's Employment Regulations and Financial Reforms

“…In January 2008, China adopted a new labour law intended to enhance workers’ rights. Table 1 in Allard and Garot () compares the scores of different countries on the employment protection legislation indicator, developed by the OECD to gauge the strictness of labour laws. From that table, the new law moves China from a fairly deregulated labour market to one as restrictive as some of the most protective European economies and much more restrictive than the United States…”