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Into the Crucible
China seeks to help retrenched workers find new opportunities
By Ji Jing & Yu Shujun | NO. 20 MAY 19, 2016

Miners check and repair equipment at the Xinyuan coal mine belonging to the Yangquan Coal Industry Group Co. Ltd. in Shanxi Province on February 7 (XINHUA)

"Why did I quit a leisurely job deemed as an 'iron rice bowl' by many?" wrote a former employee of the Wuhan Iron and Steel (Group) Corp. (WISCO), one of the country's largest steelmakers, on his microblog on May 2. Using the nickname Duomaguo to pen his post, he explained why he chose to quit his job at WISCO several months ago, despite having had an "iron rice bowl"—a secure job at an administrative post in a state-owned company—for over two years.

"Because it's not an 'iron rice bowl' any more. The steel industry is undergoing drastic changes and WISCO is no exception. Also I cannot accept living the same way all my life," he wrote.

"The experiences I had at WISCO are unforgettable. However, it's time to say goodbye." He has since found a new job at an emigration company. "The payment matches my ability and work intensity."

Duomaguo is considered to be lucky, compared to his former WISCO colleagues who work at steelmaking posts.

The likelihood of layoffs is hanging like the sword of Damocles over millions of workers as China seeks to slash overcapacity in traditional industries, in order to shift its engine from investment to domestic consumption, services and innovation.

The Chinese Government announced in February that an estimated 1.8 million workers from the coal and steel industries would be relocated in order to address industrial overcapacity.

In March, Ma Guoqiang, President of WISCO, told the People's Daily that WISCO's steelmaking business would need only 30,000 employees if the de-capacity reform goes through. The company currently has 80,000 employees.

Sun Jin, Director of the Publicity Department of WISCO, told Beijing Review that this doesn't mean the company will shed 50,000 workers. "If a newspaper finds that there are too many reporters and dispatches some to do proofreading or part-time distribution—all the while continuing to hand out social insurance and living subsidies—can it be said that the newspaper has laid off its reporters?"

Even so, resettling millions of workers still poses a challenge for the Chinese Government as it directly affects the interests of the workers, the implementation of the supply-side structural reform and overall stability of society. The process may not be smooth, but the government is determined to tackle the issue properly to minimize the impact of the de-capacity measures on families and society.

While the Central Government has set aside 100 billion yuan ($15.4 billion) to help relocate those affected, some analysts have questioned whether that will be enough to soften the blow. Premier Li Keqiang said in March that the fund can be increased if necessary and local governments should handle their responsibilities accordingly.

A government guideline was also issued on April 7 jointly by the Ministry of Human Resources and Social Security (MOHRSS) and six other ministries, outlining a range of measures to relocate those to be laid off in the coal and steel sectors.

On his visit to the MOHRSS on May 6, Premier Li said that while the steel and coal sectors are reducing capacity, the government must provide job trainings and policy support to avoid large-scale job losses. "We do not allow 'zero-employment families,'" he said.

WISCO workers check information at a job fair organized exclusively for them on March 19. Recruiters looked to fill over 120,000 positions in more than 330 companies at the fair (XINHUA)

An inevitable trend

"The latest [reform] plan is not a sign that China is about to be swamped by a wave of unemployed workers," wrote Cui Ernan, an analyst at financial services company Gavekal Dragonomics.

In a note published on March 10, Cui claimed that "China's job market has been adjusting to the end of the housing boom for two years already, and while this adjustment is hardly pleasant, it is also manageable."

Cui also said that the loss of 1.8 million more workers was "less a radical departure than the evolution of an existing trend."

Philip Moscoso, professor at the IESE Business School in Spain, told Beijing Review that "the good thing is that the government has recognized the problem."

Moscoso explained that what China is undergoing is a trend that has happened in most other countries as well. "You have an economy that starts to develop and at some point you move from a more heavy industrial base output to [an economy which is] more value-added, hi-tech, knowledge-intensive, and heading toward more service-based business," he said. "If you put it in the overall picture, that's a natural thing."

Lin Yueqin, Director of International Department II at China Social Sciences under the Chinese Academy of Social Sciences, echoed similar views as Moscoso and Cui's on China's economic development over time.

"This is a process that China has to go through in the long term. Once the economy transforms to one that is innovative, environment-friendly, low-carbon and centered on hi-tech industries and consumption, society will be much more stable," Lin told Beijing Review.

Lin explained that this is a process every country needs to undergo. "The government, enterprises and individual workers all need to adapt to the changes brought about by technological advancement," he said.

"China should learn from countries such as Russia and the United States in terms of providing social relief and training for workers laid off in the process of industrial restructuring in order to help them secure reemployment and relevant job information."

"However, if the government cannot properly handle laid-off workers, small-scale protests may happen," Lin said. "These are normal and the restructuring shouldn't stop for these obstacles."

Yu Yong (left), Chairman of the Hesteel Group based in Hebei Province, and the Serbian Minister of Economy Zeljko Sertic display the purchase contract of a Serbian steel factory by Hesteel on April 18 (XINHUA)

Migrant jobs

Workers from north China's Shanxi and Hebei are likely to be affected the most by the government plan to cut excess industrial capacity, since the two provinces are the country's largest coal and steel producers, respectively.

On April 21, Hebei's provincial authorities told journalists that up to 150,000 steel workers will be laid off throughout the region.

Song Limin, Deputy Chief of the Hebei Provincial Development and Reform Commission, told a press conference in Handan that "we estimate that 100,000 workers will need to be resettled in five years."

Citing a lack of diversified economies in these regions, Cui stated that it will be difficult for laid-off workers to find similar jobs locally. "So one of the main solutions for workers shed from excess-capacity sectors is to relocate to a coastal province where they are more likely to find a decent job."

Even if they were to migrate to other areas of the country, how would that affect the provinces they've left behind? Lin explained the consequences to Beijing Review.

In the long term, Lin claimed that "the huge transition will create greater development opportunities as these provinces can directly transform from high-pollution industries to those centered around the Internet and environmental protection."

Workers lacking skills will still have to be laid off in provinces over-reliant on resource industries, but Lin said that those who remain will primarily be competent workers. Therefore, "the efficiency of production will improve and their salaries and consumption ability may improve as well."

Song said that some enterprises will not go bankrupt after eliminating overcapacity but will continue to provide job opportunities through mergers and acquisitions.

The service industry, which accounts for more than half of China's GDP, is considered a reliable source of job creation.

Lin argued that those who are laid off will find jobs in the service sector after receiving training and some may even start their own businesses.

"After two or three years' adjustment, the overall income level may increase," said Lin.

Industrialized welfare

The government's April 7 guideline has outlined four measures to resettle those to be laid off: relocation within the company, retraining, early retirement, and social security subsidies to those having difficulty finding new jobs.

In addition to the help given to redundant staff, support will be offered to firms who create new jobs by adopting the "Internet Plus" strategy, developing new industrial fields and products, and expanding domestic and overseas market, said the document.

A "back-to-work" program should be created so that workers receive training and career guidance for free. The program will also open channels for those who want to start their own businesses, giving them access to government support.

The guideline also said that the government will also arrange special job fairs for those to be resettled, and can provide living allowances for those who will be retrained.

Local authorities are required to enhance trans-regional cooperation to relocate redundant workers to regions with employment opportunities.

"The Hebei Provincial Government is mulling over specific measures for resettling workers. We have already taken a series of measures including transferring them to other positions," said Song. "We will mainly reallocate workers in the service industry after offering them relevant training."

WISCO has already proceeded with the relocation process. Larry Wu, who works at WISCO but asked to use a pseudonym, told Beijing Review that WISCO began its first round of layoffs in December 2015, when 6,000 workers approaching their retirement ages were let go.

The cuts were not made in terms of job position, but on the basis of age—men who were older than 55 and women between 45-50 were among those affected.

"In order to ensure the living standard of workers who have been laid off, WISCO will give them economic subsidies," he said. "Before they meet the national official retirement age (60 for men and 55 for women), WISCO will not only pay social insurance but also give them living expenses—up to 2,500 yuan ($385)—every month until they reach the official retirement age."

Li Jianguo, who retired from WISCO's Marketing Department one year ago, told Beijing Review that employees in the sectors to be affected by the reforms are facing a mental process of adjustment and adaptation.

Even so, he said, "As the national strength becomes consolidated, the government and enterprises have taken enough measures to make sure that everyone gets through this process and finds their own place."

Copyedited by Bryan Michael Galvan

Comments to jijing@bjreview.com

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