From Iron Rice Bowl to Informalization: Markets, Workers, and the State in a Changing China

Chapter 5. Enterprise Reform and Wage Movements in Chinese Oil Fields and Refineries

Chapter 5 Enterprise Reform and Wage Movements in Chinese Oil Fields and Refineries Kun-Chin Lin As Mary Gallagher, Ching Kwan Lee, and Sarosh Kuruvilla (chap. 1 in this volume) point out,there has been a qualitative transformation in labor relations in China since the mid-1990s. The state has led a process of deconstructing socialist labor relations to facilitate the commodification of state-owned productive assets and human resources.The structure and ownership of firms were redrawn with corporatization, privatization, and market liberalization while workers were forced to reckon with the end of their iron rice bowl tenure. This chapter examines the impact of state-led organizational restructuring in the state-owned oil and petrochemical industries that are so central to the rapid economic development of China. My focus is on understanding the movements in wages in this industry. Comparing wage scales before and after the 1998–1999 restructuring of the Chinese oil and petrochemical industries, I show how a pattern of relatively stable increases and narrow wage gaps among employees in the first decade and a half of reform rapidly gave way to a dramatic escalation of wage differentials after restructuring took place. Restructuring has not yet led to a free-market determination of wages. Instead, political imperatives continue to place constraints on price-setting in state-owned enterprises (SOEs).The central government, to reduce exposure to loss-making operations and unsustainable labor forces, sold off most nonstrategic SOEs or devolved them to local authorities.The retained enterprises were placed under asset management companies,and their corporate governance and organizational structures were transformed through restructuring plans that aimed to carve out a profitable core of assets and workforce from the blackbox operation of the past.The end result was the creation of a core-periphery 84 Lin divide in the industry, with stable employment at the core and temporary and informal employment in the larger periphery. How can we best understand and explain these changes? I propose a network organizational approach to map out the constituent parts of an oil field or refinery and their forms of resource exchange,which shape the state-appointed managers’ degree of freedom to direct state-owned capital to meet labor demands .The sociological analysis of interorganizational networks puts forth the notion of centrality as a measure of socioeconomic power of certain nodes of dense connectivity in the network.1 As applied to the case study presented here, centrality describes the network characteristic of decision-making units that coordinate high transaction volumes, gather resources from formal and informal ties, and exercise a high degree of flexibility in directing the exchange relations in the administrative and corporate networks in large state-owned conglomerates. I focus on financial and labor centralities. Financial centrality refers to the concentration of financial resources for wage payments, where they are deposited,pooled,and augmented;labor centrality refers to the organizational locus of chronic overstaffing or low productivity of workers. The organizational locations of these two centralities strongly shape the interactions of internal and external labor markets, which impose constraints on the overall wage-payment bill and wage-scale adjustments. Prior to 1998, the petroleum administrative bureaus (PABs) that oversaw the oil fields or refineries and a wide range of related work units represented the loci for the overlap of both financial and labor centralities—a condition that enabled managers to harness resources to support wage inflations and sustain workforce expansion. The asset restructuring of 1998–1999 established an institutional divide between capital-intensive core subsidiaries and labor-intensive noncore firms within each production site of the national oil corporations (NOCs) and, thus, radically reshaped interfirm network relations. Financial centrality has since been moved up to the corporate headquarters in Beijing, whereas labor centrality has been devolved and concentrated in the noncore parts. As a result, the burden of cost reduction has fallen squarely on the noncore while the core leveraged profitability to justify wage hikes for employees. I point out the inherent risks in this arrangement from the instability of network relations, posing enduring problems for location-specific labor market formation and sector-specific industrial governance. Discontinuous Change in Wages in the Chinese Oil Industry According to Christopher Erickson and Sarosh Kuruvilla, a transformation in labor relations involves changes in the “deep structure,” defined as “basic Enterprise Reform andWage Movements 85 principles” of labor relations that may include “attitudes toward and definitions of property rights in the...