But the government should not meddle with the actual contents of labor contracts-- such as wages, benefits and working hours. The employers and the employees should decide these matters by themselves.
EO: So, in regulating labor, the government should actually not do that much.
Wang: The fundamental jobs of the government are very few. As long as the health of workers is not bein harmed, the government should not intervene. For example, if someone would like to work 60 hours per week and can manage it without any health problems, this is completely acceptable. So there is no need for the government to limit the working hours within 40 hours a week. However, if the work hours extend to 75 hours and test the boundaries of a person’s tolerance, the government should intervene.
The idea is that government should not replace the businesses’ roles to make decisions on how to employ and whom to employ.
EO: if the government makes businesses be responsible for fairness, what would the result be?
Wang: businesses’ key issue is productivity. Inefficient businesses will reduce benefits or close their doors entirely, the latter of which would only lead to higher unemployment. On the other hand, highly efficient businesses will provide more jobs and better benefits. And businesses pay taxes to the government, without which the government cannot make income adjustments and maintain equality in society.
China learned much during the times of the planned economy. Lifelong employment, low wages, and high benefits killed workers’ learning initiative. During working hours they would rest, but after work, they were hardworking towards their own personal side jobs.
EO: what countries learned lessons from it?
Wang: Germany and India. Germany issued a law called co-determination which demanded the businesses’ decisions, arrangements and work conditions should be decided and agreed both by the employees and the employers. Under this law, the businesses could not fire any workers unless it was agreed to by the latter. Generally speaking, the workers could not be fired after they were 40 years old. Eventually, Germany’s labor market lacked of competitive strength, hurting the economy.
The Industrial Disputes Act (IDA) of India, passed in 1947, set the form of mediation between employers and employees. The law also states that when a business wants to fire more than 100 employees, it needs government approval. Businesses in India found it difficult to fire workers after the law came into effect.
EO: How do businesses react when the government tries to protect benefits with legislation? How is the economy affected?
Wang: There are a few kinds of reactions to this. First, businesses may not fire workers because it’s too difficult. Countries with these kinds of laws—Germany, Italy, France, India and some parts of Canada—bear higher unemployment rates, around nine and ten percent. This does not include workers leaving these countries and those not registered, so the true number may be twice the unemployment rate. However, the countries without these kinds of laws have rates of four or five percent.
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