Labor law is already having effect - expert

Auret van Heerden, president and CEO of the Fair Labor Association, notes already positive effects of the just-adopted labor contract law, he says in an interview with Newsweek.

Implementation and enforcement are traditionally the weakest points of labor law in China. But I've never seen a law attract so much public attention. At the factory level people are talking about it everywhere. One of the things about the law is it doesn't rely on outside labor enforcement. Once you've got a written contract, there are all sorts of avenues open to a worker: the labor department, labor tribunals, or through other grievance mechanisms. So what you're seeing here is a change of approach where the government is saying, "We'll create a proper contract between workers and employers and give workers the means of enforcing their own contracts." The effect has been immediate. There have already been strikes about it; there have been employers who have panicked about the commitment the law would require, so they've tried to lay off or outsource workers.

While Van Heerden sees an upward price-pressure for the companies in China, it is not a dramatic 40 percent caused by the labor law as some of the enterprises have suggested.

The cost pressures are tremendous. There's no doubt about it. I just don't think the law alone is leading to a 40 percent jump. It's a series of pressures. For the low-cost assembly business, some of them will have to move [out of China], definitely. But I don't think the Chinese government is that concerned. They want to promote high value-added production, and they don't think China's economic future lies in low-cost assembly. They want to see businesses move up the value chain.