Saturday, October 09, 2021

Royal Mail Buys Canadian Trucking Firm to Expand GLS Arm

Anthony Palazzo
Fri, October 8, 2021,


(Bloomberg) -- Royal Mail Plc agreed to purchase Canada’s Mid-Nite Sun Transportation Ltd. for C$360 million ($287 million) to expand in North America.

The acquisition will add to earnings in the current fiscal year, Royal Mail said Friday in a statement. Mid-Nite Sun will become part of London-based Royal Mail’s GLS international freight and parcel arm, extending its reach in Canada.

Royal Mail, established by Henry VIII in the 16th century, is tapping into a market with about 5% annual growth amid a worldwide boom in online shopping. The deal allows family-owned Mid-Nite Sun, which operates as Rosenau Transport, to add parcel delivery to its main freight business. The Rosenau network will also tie into existing GLS routes on the U.S. west coast, extending its cross-border capacity.

Shares of Royal Mail advanced 0.8% to 416.9 pence as of 8:14 a.m. in London. The stock is up 23% this year amid a turnaround effort and higher demand for home delivery.

Rosenau Transport posted revenue of C$175.0 million and earnings before interest, taxes, depreciation and amortization of C$41.6 million in the 12 months through August. It has 24 owned facilities throughout four Canadian provinces.

Royal Mail said it expects the purchase to close on Dec. 1, subject to regulatory approval. It will be funded by cash and debt.
U.K. Job Recruiters See Strongest Wage Growth in 24 Years

Reed Landber


U.K. wage growth rose at its strongest pace on record in a survey of job recruiters, indicating strains from a shortage of workers are persisting.

The findings from the Recruitment & Employment Confederation and KPMG will add to inflationary pressures that are already ringing alarm bells at the Bank of England. They also indicates difficulty moving people off of furlough and into work following the pandemic, an issue the REC said government should address with more training programs.

Starting salaries for permanent workers rose at the strongest pace in 24 years of data collection in September, according to the REC survey released Friday. At the same time, the pool of available workers fell at near the sharpest rate on record.


“While higher salaries are good for job seekers, wage growth alone is unlikely to help sustain the economic recovery,” said Claire Warnes, head of education, skills and productivity at KPMG. “Many do not have the right skills to transfer to the sectors with most demand.”

The survey of 400 recruitment and employment consultants also showed:

Rising wages were seen in a diverse range of roles from logistics and food processing to white collar professions


Hiring activity rose sharply in September, slightly below the record rate in August

Temporary staff billing fell to the lowest in five months to a level that remained historically strong

Factors including “fewer EU workers and a lack of confidence among employees to switch roles due to the pandemic” all contributed to the decline in candidate numbers
Satellite captures rare weather phenomenon following volcanic eruption

By Maura Kelly, AccuWeather, Accuweather.com



A bullseye-shaped cloud was the product of a rising column of superheated ash and gases known as the eruption column on October 1 as part of the Cumbre Vieja volcano eruption on La Palma, one of the Canary Islands. Photo courtesy of NASA

Oct. 9 (UPI) -- The Cumbre Vieja volcano, located on the Spanish island of La Palma, has been erupting since the middle of September.

In addition to destructive lava flows and airport closures, the volcano produced a mesmerizing cloud formation during its eruption Monday.

On Thursday, the La Palma airport was closed for the second time in about two weeks as ash and dust accumulated on the runway.

The latest eruption forced the air above the volcano upwards. This was followed by circular ripples spreading out from the volcano, which could be seen on satellite and was caught on video by bystanders.

Meteorologists have given this weather phenomenon a name: gravity waves.


AccuWeather meteorologist Renee Duff explains that gravity waves occur when air is displaced from a calm state.

"As this air is pushed upward, it wants to sink back down in order to remain in a state of equilibrium," stated Duff. "It may take many up and down waves for this state to be reached."

In this case, the waves were made visible by clouds forming, as the air rose and became moist, creating the repeating pattern, like seeing the ripples in the water after dropping a stone in a pond.

Volcanic eruptions aren't the only mechanism that can create gravity waves.


"In the atmosphere, the 'stone' disrupting otherwise calm or stable conditions can be a severe thunderstorm, winds blowing over mountains or cold fronts," Duff said.

The gravity waves satellite photo wasn't the only impressive picture taken of the volcano from above. Planet Labs, Inc., which operates the largest earth observation fleet of imaging satellites, took a stunning closeup of the same day, in which not only the eruption is visible but also the lava which reached the coast last week.

Thousands of residents have been evacuated in the Canary Islands, located off the northwestern coast of Africa, since the Cumbre Vieja volcano began erupting Sept. 19. Hundreds of buildings and farms have been destroyed by rounds of lava, but one "miracle house" survived. The eruption came with dramatic footage of lava devouring a pool, filmed via drone.

On Saturday morning, the northern face of the volcano partially collapsed.


Volcano island flights resume after ash closed airport

Issued on: 09/10/2021 -
Two new lava flows emerged from the Cumbre Vieja volcano on Saturday
 Luismi Ortiz UME/AFP


Madrid (AFP)

Flights to and from La Palma in Spain's Canary Islands resumed Saturday after the airport reopened following a 48-hour closure due to volcanic ash, airlines and the airport authority said.

Clouds of thick ash from the volcano had shuttered the airport on Thursday morning for the second time since the September 19 eruption on La Palma, one of the Spanish islands off the northwestern coast of Morocco.

"La Palma airport is back in operation," Spain's AENA airport authority tweeted, with local Canaries airline Binter confirming it had resumed flights several hours later.

"Binter has resumed its flight schedule with the island of La Palma following an improvement in weather conditions and the ash cloud," an airline statement said.

Thick ash had forced the airport to close down on September 25 but although it reopened 24 hours later, it was three days before flights resumed.

It has been almost three weeks since La Cumbre Vieja began erupting, forcing 6,000 people from their homes as the lava scorched its way across 1,200 acres of land.

Earlier on Saturday, part of the volcano's cone collapsed, sending new rivers of lava pouring down the slopes towards an industrial zone.

"It seems part of the cone has collapsed... giving way to two different lava flows," volcanologist Stavros Meletlidis of Spain's National Geographic Institute told RNE radio.

He said one had opened a new path, while the other was following the path of an earlier flow "but with a higher volume of lava, looking like it will overspill the old flow at some point."

Miguel Ángel Morcuende, technical head of the Pevolca volcanic emergency committee said they were concerned about one of the flows that was approaching the Callejón de la Gata industrial estate, which includes warehouses and businesses.

"There is a large amount of lava there," he told reporters.

- Lava delta at risk of collapse -

Experts also said there was a risk that the lava delta, now stretching 80 acres (32 hectares) into the sea, could collapse as it reached the outer limits of the island's coastal shelf.

"Having reached the limit of the coastal shelf, if it continues to advance, its crust could collapse which could cause the abrupt release of gases, magmatic explosions and the generation of waves," said María José Blanco, the IGN's director in the Canary Islands, speaking at the same news briefing.

A costal or insular shelf is the underwater landmass surrounding an island, which extends from the shore to a depth of about 100 fathoms (about 180 metres or 600 feet) after which there is a sudden steep descent.

According to the latest snapshot from the EU's Copernicus satellite -- taken before the overnight events -- the lava had covered almost 1,200 acres (480.5 hectares) of land and destroyed 1,149 properties.

It has also destroyed huge swathes of banana plantations -- the chief cash crop on La Palma.

"New lava flows have mainly damaged agricultural areas now totalling 120 hectares of crops (300 acres), half of them bananas," Pevolca said on Friday.

Dozens more earthquakes took place overnight, including one with a magnitude of 4.3, the IGN said on Twitter.

© 2021 AFP

Amazon Delivery Partners DRIVERS 
Rage Against the Machines: 
‘We Were Treated Like Robots’









LONG READ 

Spencer Soper
Thu., October 7, 2021,

(Bloomberg) -- Three years ago, Amazon.com Inc. issued an invitation that seemed too good to pass up: Start your own company and earn as much as $300,000 a year delivering packages for the world’s largest online retailer.

The offer had strong appeal for would-be entrepreneurs. With an upfront investment of as little as $10,000, these new “delivery service partners” could have a fleet on the road in weeks. Amazon pledged to use its negotiating power to help the fledgling companies get better deals on vehicle insurance, classified ads and leases for its signature blue vans. Tens of thousands of people applied, eager to draft off of Amazon’s seemingly unstoppable growth. Today some 2,500 of these small businesses—captained by military vets, construction contractors, retired college professors—employ more than 150,000 drivers in the U.S. and around the world.

Ted Johnson was a typical recruit. He and his wife, Karen, moved from Illinois to New Hampshire, leased 80 vans and hired 160 drivers. A military veteran who served in Iraq and Afghanistan, Johnson was resourceful. He translated Amazon’s training materials into Spanish and hired non-English speakers to help address a labor shortage if Amazon was overwhelmed by demand. When his drivers had downtime, he paid them to make deliveries for a local food bank. Amazon was so impressed it sent him cameras to make a documentary about being a delivery partner.

But even as he congratulated himself on finding a second act he could call his own, Johnson, 56, was constantly torn between making money, meeting Amazon’s demands and treating his workers fairly. Ultimately, he was forced to shutter the business at a loss, the casualty of a system that Johnson said imposes unrealistic demands on the drivers who play a critical role in delivering packages to customers around the U.S.

Johnson blames the machines and algorithms that manage the operation and ensure delivery service partners hit their marks. Video cameras, telematics devices and smartphone apps monitor drivers’ every move. Software dictates how many packages a driver should be able to deliver in a 10-hour shift, a number that keeps creeping up and can be difficult to meet. The system is designed to maximize efficiency and discourage hazardous behavior, such as texting while driving. But the algorithms often get things wrong, several delivery owners said, dinging drivers for offenses they didn’t commit. These demerits affect the report cards the delivery contractors receive each week. The lower the score, the less Amazon pays them.

Bloomberg interviewed 15 delivery partners and two lawyers representing them in disputes with Amazon. Most spoke on condition of anonymity for fear of retaliation from the company, and almost all corroborated Johnson’s account of unrealistic delivery expectations, buggy software and a dismissive attitude toward their concerns. The working conditions are so tough and unforgiving, they say, that their drivers have been known to abandon their package-laden vans on the first day of work and disappear.

“We were treated like robots,” Johnson said. “They’re so data-driven they don’t know how to treat people with dignity and respect.”

Amazon uses machines to oversee much of its global operation, including the online marketplace, fulfillment centers and its Flex network of gig delivery drivers. The company argues that automating these businesses is the only way it can manage an enterprise of such daunting scale and complexity. But if error-prone algorithms have marginal consequences for Amazon, they can be catastrophic for a small business owner who suddenly sees his or her income reduced or cut off entirely. Amazon is willing to accept a certain amount of collateral damage. After all, there are always new recruits ready to take the place of those who don’t measure up.

A few weeks ago, the Seattle-based company cut loose about 100 delivery partners, according to people familiar with the situation. Online forums where owners congregate erupted with anger and fear. Some delivery firms wondered how many infractions they were away from their own curtphone call telling them they’d been terminated. Others discussed ways of persuading Amazon to take their concerns more seriously. That seems unrealistic. In a message sent last month and reviewed by Bloomberg, an executive warned delivery contractors that, with the holiday season looming, drivers would be expected to handle more packages than ever.

In a statement, Amazon spokeswoman Alexandra Miller said: “As we grow, we don’t always get it right, and we are committed to seeking feedback to continue improving the DSP and driver experience. This year, we made more investments than ever before in new technology, process improvements and rate increases for the DSP program—and much of the changes we made were based on the feedback and input from partners. The majority of DSPs consistently out-pace our marketed profit expectations for the program, and this year we invested $700 million to support DSP rate increases, sign-on and retention bonuses and recruiting costs.” About 90% of Amazon delivery drivers complete their routes within the designated time and the average route has about 250 packages, according to Amazon.

Not all delivery firm owners are dissatisfied. Franco Ramos, introduced to Bloomberg by Amazon, started a delivery business three years ago in Denver, following a career in management consulting. Ramos, 48, said the surveillance system isn’t perfect but that the mistakes are negligible. Profits, he said, have exceeded Amazon's projections of as much as $300,000 a year.

“This has been life-changing and I’ve made a shit-ton of money,” said Ramos, who employs about 60 drivers and plans to hire an additional 30 for the holidays. “This is not a difficult business. You don’t even need a sales team. There are just packages, and you deliver them.”

Amazon unveiled the delivery partner program in 2018 to help reduce its reliance on United Parcel Service Inc. and the U.S. Postal Service. Since then, the operation has helped the company weather the pandemic and more than double revenue to a projected $476 billion this year. Maintaining a healthy system of independent delivery contractors will be critical to helping Amazon manage costs and fulfill its commitment to speedy delivery. The program was loosely modeled on FedEx Corp.’s network of independent contractors. Like FedEx, Amazon doesn’t directly employ the drivers but takes a more hands-on approach, closely monitoring their performance and reserving the right to have them fired when it deems necessary.

Devices installed in vans and apps on the drivers’ phones monitor their delivery performance and driving habits. The data, which the delivery firms are contractually obligated to share with Amazon, is converted into weekly report cards that measure things like on-road safety, delivery completion rate and customer experience. The score determines what Amazon pays the delivery firm per package, typically ranging from 10 cents to 25 cents. While the company pays an average of $425 per route per day to cover things like driver’s wages, payroll taxes, van leases, insurance and fuel, it’s the per package rate that often determines whether or not owners like Ted Johnson make money.

Amazon engineers have put heavy emphasis on “safety and compliance,” which is the first section on the weekly report card. Devices monitor speed, seat belt use, whether drivers have their eyes on the road, if they roll through stop signs and so forth. The problem, the delivery firms say, is that the software often detects unsafe driving when in fact the driver has done nothing wrong. False “distracted driving” alerts are a common occurrence and can be triggered by something as benign as a driver’s phone shaking when the van travels over rough terrain. Some smartphones are more likely to trigger alerts than others, and the delivery firms try to buy ones with the least sensitive sensors.

Amazon has been installing video cameras in delivery vans. They capture even more data and provide a video record of the driver in the cab and what’s happening on the road. Here, too, the algorithms sometimes misinterpret the data. “The camera will say someone was distracted, meaning they were on their phone, but we’ll go back to the video and they just sneezed,” one delivery partner said. “Or the camera says a driver ran a stop sign, but the video shows they made a right turn before they got to the stop sign.” In response to complaints about buggy cameras, Amazon in August introduced a feature letting delivery partners flag demerits that they think are mistakes. The company said it now reviews all of these and fixes scorecards when errors are confirmed.

These false positives add up and can seriously affect the weekly score card. Just a few mistakes, delivery partners say, can cost them $7,000 or more a week and mean the difference between turning a profit or losing money.

In a sense, Amazon has created a monitoring and rating system with mutually exclusive goals: delivering as many packages per hour as possible while doing so without causing accidents or breaking the law. The delivery contractors say the system’s architects have unreasonable expectations of how many packages a driver can deliver during a shift and fail to take into account how much real-world conditions vary from place to place. It takes much longer to deliver packages in a rural setting with gravel roads and long driveways during a snowstorm than it does in a manicured suburb on a flawless summer day.

Johnson said Amazon expected his drivers to deliver more than 30 packages an hour. His best drivers, whom he described as “industrial athletes,” could deliver about 25 packages an hour because terrain and weather slowed them down. When a driver couldn't finish in 10 hours, Johnson had to pick his poison. He could pay overtime that Amazon wouldn’t reimburse to complete the route or he could return undelivered packages to the station, which hurt his score and reduced how much Amazon would pay him.

Amazon’s engineering culture has hardwired executives to trust the software more than human beings, and when delivery firms try to dispute the algorithms’ errors, they say, the company takes note but typically declines to adjust their performance score. Johnson said he paid a lawyer to write letters to dispute the machine-generated grades, but said Amazon seldom over-rode an error and he gave up challenging false negatives. Another delivery partner said he has disputed false alerts about drivers not wearing a seat belt and showed Amazon video to prove the point but failed to persuade the company to correct his score card.

One delivery partner said a driver was bitten by a dog while making a delivery in a rural area with no cell reception. The driver sped to the hospital to have a deep puncture wound treated. The algorithm dinged the driver for speeding but Amazon declined to overturn the demerit, the delivery partner said. “They’ve made it increasingly difficult to dispute the computer-generated driver scorecard,” he said. “They know they can punish us with buggy software, and there’s nothing we can do.”

Leah Ranalli, 38, started her delivery business in Tucson, Arizona, three years ago and was invited by Amazon to speak for this story. Ranalli said she loves the freedom associated with being her own boss and said the money is far better than what she made running dialysis centers. She employs 90 drivers and has more than 40 vans.

Ranalli does have one gripe, saying that Amazon fails to differentiate between what a young athletic driver can do and what an older driver with bad knees can reasonably accomplish. And she echoed other delivery firms’ contention that the company fails to make allowances for rural areas with extreme weather.

One of her drivers is in his 20s, plays competitive soccer and runs from his van to doorsteps through much of his route. He wants to finish early so he can go home, she said, but then the algorithms see that and try to squeeze more packages on the next run.

“What Amazon needs to do is stop looking at everything from such a high level and have regional teams that understand regional concerns,” Ranalli said. “People in the ivory tower in Seattle don’t understand what drivers in the mud are experiencing or what the hiring market is like in Chicago. Unless they do that, there will be unrest.”

Amazon’s senior executives, including consumer and logistics chief Dave Clark, have been aware of such concerns since the program began, according to a person familiar with the matter. Rather than solve the issues, the person said, they kept pushing drivers to work harder and improve their metrics. Executives mostly had experience refining Amazon’s warehouses where weather, traffic jams and locked gates aren’t an issue, said the person, who requested anonymity to discuss an internal matter.

“The data would come in and say something had been planned for a 10-hour route and it took the driver 14 hours to complete,” this person said. “There were a few people on the team who were willing to dive in and try to figure out why. Was it weather, or a poor route, or a parade? No matter how much scrutiny you gave it and how many details you pointed out, the feeling at the top was ‘they’re just lazy, they’re not working hard enough.’”

Miller, the company spokesperson, disputed this characterization, saying: “Our leaders are proud of this program and regularly seek feedback from DSPs and drivers to measure to improve their experience. Anyone who says otherwise is speaking out of self-interest to discredit the program. The biggest challenge in developing a driver network is building great teams who understand their communities, and we think local small business owners do that best—they tap into their community to hire and develop great drivers, while the Delivery Service Partner program supports them with logistics experience, technology and services that help their business thrive.”

Tensions between Amazon and the delivery contractors began escalating earlier this year when they discovered that they could be terminated with no explanation. Many who saw their agreements extended for an additional year were angered that Amazon reduced their overall number of routes while adding new delivery partners with whom they’d be competing. They suspect Amazon would prefer to spread the work around to a greater number of smaller businesses so it can control and replace them more easily.

Johnson got a call from Amazon in February and was expecting congratulations for delivering so many packages during the holiday shopping season. Instead, he was told his contract wasn’t being renewed and that Amazon was under no obligation to tell him why. Johnson was gutted. Then he learned that a business that cost as little $10,000 to launch would cost a lot more to shut down. Johnson said he lost about $100,000 to pay for various costs, including covering damage to the leased vans because he said the algorithms underestimated the beating the vehicles would take—a common complaint among delivery firms.

Two delivery partners in Portland, Oregon, hit their breaking point in June and stopped making deliveries. Their attorney, Tom Rask, has since heard from several other firms and is helping them consider legal options. Amazon requires delivery contractors to agree to resolve all disputes through binding arbitration, a secretive process that precludes class-action lawsuits in public courts. Amazon offers delivery partners $10,000 to go away quietly as part of a separation agreement, one of which was reviewed by Bloomberg. Other delivery partners were able to negotiate bigger settlements of about $100,000, according to people familiar with the matter.

The pushback in Portland emboldened other delivery partners and fueled complaints in online discussion groups, including a platform shared with Amazon. Driver burnout and retention were of particular concern, with one delivery partner saying he typically lost 75% of his drivers within months of hiring them. The delivery firms suggested raising wages for their drivers, who make about $18 an hour on average—considerably less than their counterparts at UPS and USPS. Amazon urged them to stop screening applicants for marijuana and make that explicit in job advertisements—a suggestion that didn’t fly with some firms afraid of potential legal exposure in the event of an accident.

In August, Parisa Sadrzadeh, Amazon’s delivery service director, tried to quell the unrest with a 2,200-word message to delivery partners. The 10-year Amazon veteran, who began her career working on Kindle tablets before moving to logistics, highlighted $96 million Amazon dedicated to improving compensation, $12 million on marketing and recruitment and the creation of a team to assist with hiring. In the same missive, however, Sadrzadeh warned that vans would be packed with even more packages and that the delivery jobs would become even more physically demanding since drivers would spend more time walking up driveways and less time driving around.

“We’ve seen a growing number of posts around concerns over driver workload, questioning the data we use to determine what ‘good’ looks like, and asking to see more change,” she wrote. “I have multiple facets of my team whose only jobs are to gather and analyze insights from drivers and DSPs across the network, and we look at this data consistently and frequently.”

Counseling patience, she warned that “unconstructive negativity and complaints add noise to the platform and detract from the experience of the partners who want to learn, connect and ensure their voices and experiences are heard.” She shared some encouraging metrics, including that Amazon increased driver wages and that attrition had dropped in the previous six months.

Many delivery partners didn’t buy it. Days later, about 100 convened in Las Vegas. They were there for a meet-and-greet session organized by Amazon that had been canceled thanks to a spike in Covid-19 cases and figured they might as well show up anyway to discuss their souring relations with the company. Driver turnover was top of mind and, once again, the algorithms came in for criticism—sending drivers down dirt roads in downpours, for instance, where they would become mired in the mud and incur costly towing bills. On top of the relentless pressure from the machines, their employees were earning fast-food industry wages.

It was during the Vegas summit that the delivery contractors learned Amazon had terminated about 100 of their counterparts. Panic ensued. Some suggested forming an association so they could negotiate with Amazon on issues like compensation and metrics with one voice. Others afraid Amazon was recruiting new contractors to compete with them, discussed ways of selling their businesses and getting out. In late September, drivers working for a contractor in Long Island whose contract wasn’t renewed blocked an Amazon delivery station with their vans, took their keys and walked off, making it impossible for other drivers to pick up their packages.

One proprietor from a southern state who was terminated said he lost about $80,000. He said his drivers were frequently penalized for spinning their tires trying to negotiate a steep grade or get a van through mud, which the sensors flagged as abrupt acceleration. “It was not a pleasant experience,” he said. “It was constant mayhem, and when you try to address anything with Amazon, they just hold over your head that they can replace you in a heartbeat.”

Johnson, for his part, now works as a substitute teacher. He doesn’t miss the long days, revolving door of drivers or battles trying to overturn machine-generated scores. “I’d pick being in the shit in Afghanistan or Iraq any day over this because of the way they treat us,” he said. “They say work hard and make history, but Amazon is a culture of fear and anxiety.”

Most Read from Bloomberg Businessweek
USA
A growing worry for charities: 
AND DEMOCRATS
Tax havens for the rich
By HALELUYA HADERO
today

In this Jan. 12, 2021 file photo, sun shines on state Capitol in Pierre, S.D. The “Pandora Papers” investigation revealed how the rich and powerful have been shielding their wealth in offshore accounts, including in trust-friendly states like South Dakota. As these so-called “dynasty trusts” are increasingly becoming known as tax havens for wealthy Americans and foreigners, some experts worry it could spell bad news for charities. (Erin Bormett//The Argus Leader via AP)

A spotlight that has been thrown on how many of the rich and powerful shield their wealth is also intensifying a fear among philanthropy experts: That the tax havens being used by the wealthy will increasingly siphon money away from charitable causes.

Wealthy Americans have long sought to use charitable contributions to reduce their tax burdens. But the “Pandora Papers” report, issued Sunday by the International Consortium of Investigative Journalists, revealed how world leaders, billionaires and others have stashed trillions of dollars out of the reach of governments by using shell companies and offshore accounts, which are considered legal.

One maneuver described in the report, a “dynasty trust,” can exist in perpetuity in states like South Dakota. Using these trusts, Americans can legally shield themselves from estate and other taxes — and thereby remove a major incentive for charitable giving.

When the wealth of an American individual or couple exceeds a threshold — $11.7 million or $23.4 million, respectively — each dollar value above that level, once bequeathed, is subject to a federal estate tax of up to 40% for each generation.

But a carefully crafted dynasty trust helps succeeding generations avoid those taxes. And the longer the trusts last, the longer the user can avoid taxes and the longer he or she may lack a financial incentive to donate to a charity.

Experts note some Americans are also legally able to avoid state income taxes on revenue generated by their assets by setting up trusts in states that don’t levy income taxes. One of them is South Dakota, which also doesn’t have its own estate, capital gains or inheritance tax, thereby making it an especially attractive destination to park wealth.

“There’s every reason to think that the ultimate effect of this type of wealth being put into these vehicles will also be a long-term loss in revenue for charitable organizations,” said Ray Madoff, a professor at Boston College Law School who teaches philanthropy policy and taxes. “The impact on the charitable sector, I would say, is probably already underway, but will grow over time.”

Tax policy, after all, consistently affects charitable giving. After the tax law changes pushed through Congress by President Donald Trump in 2017, charitable donations dropped 1.3% in 2018 compared with the prior year, the Treasury Department reported. Normally, such donations tend to grow at roughly the same pace as the nation’s gross domestic product, which climbed 5.2% that year.

As the Biden administration promotes its plans to raise taxes on wealthy Americans, it is building into its estimates the consideration that many people who would be affected by the tax increases would donate more to charities to lower their tax burden. But for many wealthy individuals, trusts like those outlined in the “Pandora Papers” would reduce their tax burden without the charitable giving.

Trusts allow one person, a grantor, to transfer assets to a trustee who then manages and directs them for a third beneficiary. In such states as South Dakota, Alaska and Nevada, though, the person who transfers assets could name themselves the beneficiary of a trust. These so called “self-settled trusts” can shield assets from creditors and further reduce tax burdens by moving the assets out of the taxable estate, said Mitchell Gans, a professor at Hofstra University who specializes in tax law.

South Dakota also deploys strict privacy laws to keep trusts out of the public eye. It is a feature that wealth advisors use as they appeal to potential clients with prospects of growing multi-generational wealth. According to the investigative report, the state’s trust assets have skyrocketed to $360 billion during the past decade alone.

For charities, it’s difficult to know what the long-term consequences of the trusts will be. Officials at numerous philanthropies and lobbying organizations declined to comment on the impact of the “Pandora Papers” revelations on charitable giving because, they said, they lack data on how widespread the use of these tax havens is.

But some studies suggest there might be some impact. According to a recent study by the consulting firm CCS Fundraising, 25% of donors cited the tax deduction as a motivation for their charitable giving. A joint study from Bank of America and the Indiana University Lilly Family School of Philanthropy found that 22% of the wealthy donors surveyed would reduce their donations if tax deductions for charitable giving were eliminated. The same study found that 51% of wealthy donors said they sometimes contribute to charity to receive a tax benefit.

Patrick Rooney, a professor of economics and philanthropic studies at Indiana University, said he believes that dynasty trusts will undermine philanthropic donations. Removing incentives for charitable contributions, he said, essentially raises the price of giving. On the other hand, Rooney noted, lower taxes could drive donors to contribute more to the causes they care about on their own terms.

“Most high-net-worth households are donors to different types of charities for different reasons,” he said. “So we would expect some of these folks, even though they’re trying to evade taxes, (to) also have some philanthropic impulses. But we won’t know that for a while.”

Chuck Collins, director of the Inequality and the Common Good program at the progressive think tank Institute for Policy Studies, said that many wealthy Americans view their philanthropy as part of their wealth preservation technique. Still, he noted, some who are charitably inclined might nevertheless want to avoid taxes.

“I think that’s probably a pretty big category (of people),” he said.

___

AP Business Writer Glenn Gamboa contributed to this report.

___

The Associated Press receives support from the Lilly Endowment for coverage of philanthropy and nonprofits. The AP is solely responsible for all content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.
Global tax deal seeks to end havens, criticized for 'no teeth'

Leigh Thomas
Fri, October 8, 2021

 Ministerial Council Meeting, in Paris

By Leigh Thomas

PARIS (Reuters) -A group of 136 countries on Friday set a minimum global tax rate of 15% for big companies and sought to make it harder for them to avoid taxation in a landmark deal that U.S. President Joe Biden said levelled the playing field.

The deal aims to end a four-decade-long "race to the bottom" by setting a floor for countries that have sought to attract investment and jobs by taxing multinational companies lightly, effectively allowing them to shop around for low tax rates.

The 15% floor agreed to is, however, well below a corporate tax rate which averages around 23.5% in industrialised countries.

Some developing countries that had wanted a higher rate said their interests had been sidelined to accommodate richer nations, while NGOs criticized the deal's many exemptions, with Oxfam saying it effectively had "no teeth."

The accord also promises to be a tough sell 
 in Washington, where a group of Republican U.S. senators sent a letter to Treasury Secretary Janet Yellen saying they had serious concerns.

 https://www.reuters.com/world/us/after-eu-tax-win-yellen-will-try-sell-us-republicans-global-tax-deal-2021-07-14

Negotiations have been going on for four years, with the deal finally agreed when Ireland, Estonia and Hungary dropped their opposition and signed up.

The deal aims to stop large firms booking profits in low-tax countries such as Ireland regardless of where their clients are, an issue that has become ever more pressing with the growth of 'Big Tech' giants that can easily do business across borders.

"Establishing, for the first time in history, a strong global minimum tax will finally even the playing field for American workers and taxpayers, along with the rest of the world," Biden said in a statement.

Out of the 140 countries involved, 136 supported the deal, with Kenya, Nigeria, Pakistan and Sri Lanka abstaining for now.

The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the talks, said that the deal would cover 90% of the global economy.


"We have taken another important step towards more tax justice," German Finance Minister Olaf Scholz said in a statement emailed to Reuters.

"We now have a clear path to a fairer tax system, where large global players pay their fair share wherever they do business," his British counterpart Rishi Sunak said.

But with the ink barely dry, some countries were already raising concerns about implementing the deal. The Swiss finance ministry demanded
that the interests of small economies be taken into account and said that the 2023 implementation date was impossible.

In the United States, meanwhile, Republican senators said they were concerned the Biden administration was considering circumventing the need to obtain the Senate's authority to implement treaties.

Under the Constitution, the Senate must ratify any treaty with a two-thirds majority, or 67 votes. Biden's fellow Democrats control only 50 seats in the 100-member chamber. And Republicans in recent years have been overwhelmingly hostile to treaties and have backed cuts in corporate taxes.

The reaction to the deal from U.S. markets was muted, with investors focused instead on the latest payrolls data. Some of the Big Tech companies, often cited by critics for seeking to lower taxes through operations overseas, welcomed the accord.

"We are pleased to see an emerging international consensus," said Nick Clegg, Facebook Inc vice president of global affairs. "Facebook has long called for reform of the global tax rules, and we recognise this could mean paying more tax, and in different places."

An Amazon.com Inc spokesperson said the company supports the "progress towards a consensus-based solution for international tax harmonization, and we look forward to their continued technical work."

Analysts at Morgan Stanley said that tech hardware, some media services, and healthcare appeared to be the most exposed to a 15% minimum tax rate.

'INCREASED PROSPERITY'

 https://www.reuters.com/business/finance/what-is-global-minimum-tax-deal-what-will-it-mean-2021-10-08

Central to the agreement is a minimum corporate tax rate of 15% and allowing governments to tax a greater share of foreign multinationals' profits.

Yellen hailed it as a victory for American families as well as international business.

"We've turned tireless negotiations into decades of increased prosperity – for both America and the world. Today's agreement represents a once-in-a-generation accomplishment for economic diplomacy," Yellen said in a statement.

The OECD said that the minimum rate would see countries collect around $150 billion in new revenues annually while taxing rights on more than $125 billion of profit would be shifted to countries where big multinationals earn their income.

Ireland, Estonia and Hungary, all low tax countries, dropped their objections this week as a compromise emerged on a deduction from the minimum rate for multinationals with real physical business activities abroad.

















'NO TEETH'


However, many developing countries have said their interests have been ignored and that wealthy nations were likely to continue dividing up 
the spoils of foreign direct investment.

Argentine Economy Minister Martin Guzman said on Thursday that the proposals forced developing countries to choose between "something bad and something worse".

Campaign groups such as Oxfam said that the deal would not end tax havens.

"The tax devil is in the details, including a complex web of exemptions," Oxfam tax policy lead Susana Ruiz said in a statement.

"At the last minute a colossal 10-year grace period was slapped onto the global corporate tax of 15%, and additional loopholes leave it with practically no teeth," Ruiz added.

Companies with real assets and payrolls in a country can ensure some of their income avoids the new minimum tax rate. The level of the exemption tapers over a 10-year period.

The OECD said that the deal would next go to the Group of 20 economic powers to formally endorse at a finance ministers' meeting in Washington on Oct. 13 and then on to a G20 leaders summit at the end of the month in Rome for final approval.

Countries that back the deal are supposed to bring it onto their law books next year so that it can take effect from 2023, which many officials have said is extremely tight.

French Finance Minister Bruno Le Maire said Paris would use its European Union presidency during the first half of 2022 to translate the agreement into law across the 27-nation bloc.

(Reporting by Leigh Thomas; Additional reporting by Christian Kraemer in Berlin, Elizabeth Piper and Mark John in London and David Lawder and Patricia Zengerle in Washington; Megan Davies in New York and Chavi Mehta in Bangalore; Editing by Alexander Smith and Rosalba O'Brien)

More than 130 countries reach deal on corporate minimum tax


In this June 7, 2017 file photo, the Organisation for Economic Co-operation and Development (OECD) headquarters is pictured in Paris, France. Nearly 140 countries have agreed on a tentative deal that would make sweeping changes to how big, multinational companies are taxed in order to deter them from stashing their profits in offshore tax havens where they pay little or no tax. The agreement announced Friday foresees countries enacting a global minimum corporate tax of 15% on the biggest, internationally active companies. (AP Photo/Francois Mori, File)


FRANKFURT, Germany (AP) — More than 130 countries have agreed on sweeping changes to how big global companies are taxed, including a 15% minimum corporate rate designed to deter multinationals from stashing profits in low-tax countries.

The deal announced Friday is an attempt to address the ways globalization and digitalization have changed the world economy. It would allow countries to tax some of the earnings of companies located elsewhere that make money through online retailing, web advertising and other activities.

U.S. President Joe Biden has been one of the driving forces behind the agreement as governments around the world seek to boost revenue following the COVID-19 pandemic.

The agreement among 136 countries representing 90% of the global economy was announced by the Paris-based Organization for Cooperation and Economic Development, which hosted the talks that led to it. The OECD said that the minimum tax would reap some $150 billion for governments.

“Today’s agreement represents a once-in-a-generation accomplishment for economic diplomacy,” U.S. Treasury Secretary Janet Yellen said in a statement. She said it would end a “race to the bottom” in which countries outbid each other with lower tax rates.

“Rather than competing on our ability to offer low corporate rates,” she said, “America will now compete on the skills of our workers and our capacity to innovate, which is a race we can win.”

The deal faces several hurdles before it can take effect. U.S. approval of related tax legislation proposed by Biden will be key, especially since the U.S. is home to many of the biggest multinational companies. A rejection by Congress would cast uncertainty over the entire project.

The big U.S. tech companies like Google and Amazon have supported the OECD negotiations. One reason is that countries would agree to withdraw individual digital services taxes they have imposed on them in return for the right to tax a part of their earnings under the global scheme.

That means the companies would deal with just the one international tax regime, not a multitude of different ones depending on the country.

“This accord opens the way to a true tax revolution for the 21st century,” said French Finance Minister Bruno Le Maire. “Finally the digital giants will pay their just share in taxes in the countries — including France — where they produce.”

On Thursday, Ireland announced that it would join the agreement, ditching a low-tax policy that has led companies like Google and Facebook to base their European operations there.

Although the Irish agreement was a step forward for the deal, developing countries have raised objections and Nigeria, Kenya, Pakistan and Sri Lanka have indicated they will not sign up.

Anti-poverty and tax fairness advocates have said the bulk of new revenue would go to wealthier countries and offer less to developing countries that are more dependent on corporate taxes. The G-24 group of developing countries said that without a bigger share of revenue from reallocated profits, the deal would be “sub-optimal” and “not sustainable even in the short run.”

The deal will be taken up by the Group of 20 finance ministers next week, and then by G-20 leaders for final approval at a summit in Rome at the end of October.

Countries would sign up to a diplomatic agreement to implement the tax on companies that have no physical presence in a country but earn profits there, such as through digital services. That provision would affect around 100 global firms.

The second part of the deal, the global minimum of at least 15%, would apply to companies with more than 750 billion euros ($864 billion) in revenue and be passed into domestic law by countries according to model rules developed at the OECD. A top-up provision would mean tax avoided overseas would have to be paid at home. So long as at least the major headquarters countries implement the minimum tax, the deal would have most of its desired effect.

___

Kirka reported from London.

Ireland, Hungary agree to drop opposition to global tax overhaul



Irish finance minister Paschal Donohoe speaks to reporters in Slovenia on September 10.
 Photo by Igor Kupljenik/EPA-EFE

Oct. 8 (UPI) -- A global treaty to impose a minimum global tax rate of 15% on large multinational companies took a step closer to approval Friday when Hungary joined Ireland and Estonia in dropping opposition to the agreement.

deal is expected to be announced Friday at a meeting overseen by the Paris-based Organization for Economic Cooperation and Development.


The treaty involves more than 130 nations and would be the most substantial overhaul to the global tax system in a century. The new tax system could begin in 2023.

Finance officials from the Group of 20 major economies announced their approval of the plan in July and the OECD has been pushing for an agreement for about a decade.

Ireland agreed to drop its opposition to the treaty after language was revised to remove a stipulation that minimum tax rates should be "at least 15%."

"We have secured the removal of 'at least' in the text," Irish Finance Minster Paschal Donohoe said, according to CNN. "This will provide the critical certainty for government and industry and will provide the long-term stability and certainty to business in the context of investment decisions."

The change allows smaller Irish companies with less than $867 million in annual revenue to continue paying a corporate tax rate of 12.5%. That reduced rate lured many companies like Facebook, Apple and Google to headquarter their European operations in Ireland.

The 15% rate would apply to more than 1,500 Ireland-based multinational companies.

Hungary, which has attracted investment with a 9% corporate tax rate, agreed to join the deal after securing an exemption that would allow multinational companies to reduce profits subject to the tax over a period of 10 years.

The deal is subject to U.S. congressional approval, where Republicans have voiced some opposition. President Joe Biden's administration is supportive of the change.

"It's a once-in-a-generation opportunity to make the international tax system fairer," U.S. Secretary of State Anthony Blinken said in a statement this week.

OECD Secretary-General Mathias Cormann said he's "quietly optimistic" that an agreement will be finalized before the G20 Leaders' Summit in Rome on Oct. 30.

Japan Becomes First G-7 Nation to Factor ESG Into Investments

Yuko Takeo and Grace Huang
Thu, October 7, 2021,



(Bloomberg) -- Japan will introduce environmental, social and governance considerations for foreign reserves held by the finance ministry, reflecting a need to seriously tackle climate change in order to achieve the country’s 2050 carbon neutral goal.

The decision to include ESG as a factor for foreign asset holdings is a first for a Group of Seven nation, Finance Minister Shunichi Suzuki said Friday. The ministry didn’t disclose the amount of funds that will be affected.

“Globally there are various climate measures being introduced ahead of the United Nations climate change conference,” said Suzuki, speaking to reporters in Tokyo. “There’s increasing interest in ESG from institutional investors.”

Instead of shifting the existing portfolio, ESG will become a new factor to be considered for all new foreign asset investments, the Finance Ministry said in a statement. It said investment into ESG bonds will likely increase as the ESG bond market expands.
Most big UK banks still have a gender pay gap of over 30%

REUTERS/TOBY MELVILLE
Are they walking the walk?


By Cassie Werber
Reporter
Published October 8, 2021

When the UK’s annual gender pay gap numbers come out there’s always the possibility of a dramatic change showing up in the data. Companies are by now well aware of the problem with paying women less than men, and they many make plenty of noise about trying to solve it.

But when it comes to banking—which, of any sector, surely has the resources to make a change—the startlingly large gender pay gaps just don’t seem to be going away.

HSBC Bank Plc, an entity which employs 2,000 people in the UK and includes HSBC’s global banking and markets business, has the biggest gender pay gap, at 54% in 2020-21, meaning that women earn just 46 pence for every £1 men earn. That’s actually an improvement from 2018-19, when the gap stood at 61%.

HSBC says the disparity comes from the high proportion of senior men in this business: Its top quartile in that division is 91% male to 9% female. Addressing that disparity is presumably a prerequisite for fixing the pay disparity.

HSBC UK, meanwhile, which contains the company’s UK retail banking operations and employs upwards of 20,000 people, has a less pronounced gap, but still over 30%. That’s about where the rest of the UK’s big banks fall, with Barclays leading the way towards parity with a gap of 24%.

The bigger picture on gender pay-gap data


Gender pay gap reporting has been mandatory in the UK since 2017 for every employer with more than 250 employees. At a national level, the gap is much smaller than it is for the banks, and shrinking: For full-time employees the average gap was 7.4% in April 2020, according to the UK Office for National Statistics, down from 9% the previous year.

Mandatory pay-gap reporting is certainly helping the situation, according to a recent report from Kings College London and the Fawcett Society, which compared pay-gap data gathering efforts across Europe. But the report said the UK’s system was toothless in comparison to other countries, like Spain, which do more to compel companies to fix the issue. In the UK, while larger companies have to report gaps, they’re under no obligation to deal with them.
The UK is now a laggard on narrowing the gender pay gap

From its “groundbreaking” beginnings, the UK has begun to lag behind other countries that are now “going further, faster,” said professor Rosie Campbell, director of the Global Institute for Women’s Leadership at King’s College London, in a statement. Campbell also noted that the pandemic had affected women in the workplace disproportionately. Mandatory reporting was frozen in 2020 and delayed this year from April until October to allow companies time to catch up. By the deadline, some companies had not yet reported, while others with workers on furlough had to account for that in the numbers they submitted.

By next year, when the full impact of women leaving the workforce will likely be more evident in the data, companies may need to work even harder than before to narrow pay gaps. And at that point, the numbers won’t even take into account the extent to which women who were working before the pandemic are now outside the workforce completely.
H2 STILL MEANS INFERNAL COMBUSTION
Hyundai Joins Shell's 'Project Neptune' For Hydrogen Infrastructure Development

Shivani Kumaresan
Fri, October 8, 2021

Hyundai Motor Company (OTC: HYMTF) announced Hyundai Motor North America (HMNA) has partnered with Equilon Enterprises LLC (Shell Hydrogen) to encourage the growth of hydrogen refueling infrastructure in California.

The agreement, known as Project Neptune, supports Shell Hydrogen's construction of 48 additional and two upgraded hydrogen refueling stations across California beginning in 2021.

As its part, Hyundai has committed to fueling cell vehicle sales growth, supporting the expanding hydrogen infrastructure.

The new hydrogen stations will be partially funded by public funds from the California Energy Commission (CEC).

In March 2021, Hyundai signed a new five-year Global Business Cooperation Agreement with Royal Dutch Shell plc (OTC: RYDAF) to expand collaboration on clean energy solutions.



The future of China's work culture

Elliott Zaagman
Sat, October 9, 2021,

In a late-August ruling, China’s supreme court declared one of the country’s most infamous work practices illegal.

Known as “996,” the term is shorthand for a work schedule spanning from 9AM to 9PM, six days per week. Though popularized by the country’s soaring tech firms, often evoking images of hip urban startup employees with stock option plans hustling before being made millionaires by an IPO or funding round, “996” has evolved in how it is understood and applied by employers and employees, as well as how it is viewed by regulators.

Indeed, while the August 26 Supreme Court decision and issuance of guidelines from the Ministry of Human Resources will impact tech firms and their well-educated, well-compensated employees, the case itself dealt with a worker much further down the digital economy hierarchy: a logistics worker making a salary of 8,000RMB (roughly $1,240) per month, which is just slightly below the average of the country’s 37 largest cities.


China’s regulators appear to be sending a message to employers and employees alike that the rules which define their relationship must change. As is the case with many things in China these days, what the country’s leaders are asking for will require a change not just in action, but also in the philosophies, psychologies, and incentive structures at the core of Chinese society. What this change will look like is only starting to come into form.

Hungry like the wolf (culture)

Photo by VCG/VCG via Getty Images

Whether as a result of the intense work culture that has defined many Chinese companies, or as the pacesetting example that many have emulated, there is perhaps no better case study of the spirit, the benefits, and the potential toxicity of a 996 work culture than that of Huawei.

Known for its “wolf culture,” the Shenzhen-based telecoms behemoth became defined by its intensity. Depending on who you ask, the description can be interpreted in multiple ways. In a more generous interpretation, it is seen as a sort of kinship, of team members moving in coordinated packs in pursuit of a shared goal. For others, it can mean something far more brutal. “In Huawei, ‘wolf culture’ means you kill or be killed,” explained a former Huawei employee who I interviewed for an article on the company in 2017. “I think the idea is that if you have everyone in the company competing fiercely with one another, the company will be better at fighting and competing with external threats.”

Regardless of how its employees came to characterize it, the intensity central to Huawei’s culture also helped shape its success. In contrast to its European competitors Ericsson and Nokia who have been criticized for their cumbersome bureaucracy and perceived complacency, Huawei’s willingness to win and deliver projects regardless of seemingly any obstacle made them favorites of telecommunications network providers across the world.

Though juiced by cheap financing from the Chinese state and lucrative contracts in its domestic market that allowed it to subsidize its overseas business, there is also a competitive logic to the extreme zeal that has characterized the firm’s culture, and which also helps to explain why other Chinese firms adopted such spirit in the form of “996.”

While now considered cutting-edge innovators in some areas, Huawei and other Chinese firms experienced a constant struggle to overcome deficits in technological sophistication in comparison to their foreign peers in their early days. Without holding an advantage through unique or advanced tech, they achieved an edge through cost, speed, and a flexibility in circumventing the obstacles to doing business that can be particularly tricky in the developing world.

“What Chinese tech companies seem to really understand is the value that execution can have over product,” explains Skander Garroum, a German entrepreneur who has founded startups both in China and Silicon Valley. “The U.S.-centric tech narrative is so often one of a genius who creates a great product, and due to an open internet and open economy, it scales simply due to its obvious superiority. But in China and other developing markets, [there] are more obstacles, less openness, and scaling is a question not simply of how good a product is, but how well a team executes, and how hard they work.”

While such narratives are often hyperbolic renditions of the truth, the willingness to out-work rivals is a badge of honor many Chinese companies carry. For ride-hailing company Didi Chuxing, its famed victory over Uber in their mid-2010s battle for the Chinese market was a result of a myriad of factors. Yet to ask many who were involved, the answer is often that they simply executed better on a local level and were willing to fight harder until Uber deemed it to be simply not worth continuing the fight.

Self-defined by their work ethic and hunger, many firms have actively sought out individuals without a privileged background, but who aspire to move above their station in life. Huawei, for example, is known to target its recruiting efforts on young, skilled people from fourth- or fifth-tier cities looking for their ‘first pot of gold’ (第一桶金 dìyī tǒng jīn), using a phrase meaning the first opportunity that a person receives to make a lot of money, or to move into the middle class.

As China grew and its firms rose to global prominence, the dream of the first pot of gold was indeed achievable for many, and generous compensation often accompanied the demanding work hours. For longtime Huawei employees enrolled in the company’s share scheme, annual dividends have been known to surpass hundreds of thousands and even millions of dollars for individual employees, in many cases eclipsing employees’ salaries. It was hard work, but hard work that paid off.



A system set up for employer exploitation

Known for its infamously hard-driving work culture, it can be counterintuitive to learn that the laws on the books in China are quite protective of the rights of workers. In practice, however, these rules have rarely been enforced.

Though technically mandating overtime pay for anything surpassing a standard 5-day/40-hour work week, employers are known to avail themselves of a plethora of formal and informal methods for evading their legal obligations.

In the case of Huawei, this is known to come in the form of a “striver pledge,” a supposedly “voluntary” agreement signed by new employees in which they forego their rights to overtime pay and paid time off. Though Huawei has gained attention for such an approach, similar methods seem to be commonplace, and often for companies who do not offer Huawei’s perks and paths for advancement.

“For our [blue-collar staff], our contracts stipulate that all overtime pay is already included in their monthly salaries,” explained one career-long HR manager who has worked for both domestic and foreign firms in China. “It’s not a good thing, but it is pretty standard throughout China as far as I know.”


Another method for circumventing labor law is through crafting performance metrics that give overwhelming power to management. “It is common for companies in China to take the Western performance-management concept of ‘deliverables,’ but to extend it to extremes,” said a female executive who formerly headed human resources for two large Sino-European joint ventures and who like many interviewees for this piece, requested anonymity to speak freely about a sensitive policy issue. “The ‘deliverables,’ however, will often be impossible to reach. This puts more power in the hands of the manager to determine if they deem the ‘effort’ of the employee to be satisfactory.” The executive added that she has discouraged such practices throughout her career, and that they were more common with local Chinese firms than with multinationals. With such a dynamic in place, it is not difficult to imagine the myriad forms of exploitation that could potentially occur.


For those who have chosen to take on the system, they have often found themselves not only to be at odds with their employer, but with the state as well. Independent labor unions are functionally illegal in China, and the state-run All-China Federation of Trade Unions has historically been inconsistent in aiding workers in labor disputes.

In 2019, former 13-year Huawei employee Li Hongyuan was jailed for 241 days over charges that he had blackmailed the company while negotiating an exit package. Though eventually freed, as prosecutors failed to find sufficient evidence of wrongdoing on his part, news of his lengthy detention was a source of considerable online outrage.


Popular frustration over labor issues in nominally socialist China seems to have been on the rise in recent years. In 2018, security at the elite Peking University cracked down on protests by the school’s Marxist Society, which itself had been protesting the crackdown on labor activists in southern China. The GitHub repository “996.ICU” became a popular online forum for tech workers frustrated with their companies’ brutal workplace practices to vent and bring attention to the worst-behaving companies. For burnt-out young people across China, the trend of "lying flat" (tǎngpíng 躺平), which rejects the pressure and ambition that so defined earlier generations, has gained sufficient popularity that the government has lambasted the movement in major newspapers.

 THE SOLUTION TO 996



Schrödinger’s working hours: Written laws and unwritten norms


Compounded by a need to reduce pressure on families and boost a dwindling birth rate, authorities are now looking to change the unwritten rules of the game that have long dictated labor relations in China.

In response to the August 26 ruling, many companies acted quickly to change official policies. Yet for many firms and industries, the question that looms larger is one of culture and expectations.

TikTok parent company ByteDance, which previously was known to officially conduct a six-day work week, brought an end to the policy. However, this was not entirely welcomed by employees, who in exchange for reduced work days saw commensurate reductions in their pay.

“For many of us, we know what we’re agreeing to when we work for internet companies,” explained a woman surnamed Zhou who has worked for several such firms in China. “We know we might have to work hard, but we also get a chance to make more money,” she said. “If we wanted something different, we would have decided to work for other companies,” adding that she can understand why some ByteDance employees would be upset at the reduced hours and pay.

In the eyes of some China tech workers, increased pressure on companies to comply with government’s stricter expectations around working hours may just mean more informal working hours, for which they are not directly compensated. “Nothing has changed for me or my team as far as I know,” shared one employee of a popular U.S.-listed Chinese internet company. “I work on the weekends, and will work over my holiday [the National Day holiday of October 1]. Just because it’s officially a day off doesn’t mean that business stops,” adding that they “of course” do not receive overtime pay for their extra working hours.

The idea that “business doesn’t stop” is what leaves some in doubt about whether any government regulation will have any positive impact on the condition of tech workers. “ByteDance is cutting back official hours and pay, but if nothing else changes, it doesn’t really matter,” shared Zhou bluntly. “People still want to keep their jobs and get promoted, so of course they will work as much as they can … or move to a company that will pay them more to do it.”

Yet for those who are higher up the management ladder, there is a much stronger inclination to take recent government mandates seriously, both in the letter and spirit of the law. “Companies have to show that they are taking action on this, and if they don’t, they risk being made an example of by authorities,” said the Sino-European corporate HR executive. “HR departments should be conducting company-wide audits and getting a clear picture of what kind of hours people are working,” adding that, “the most likely outcome will probably be to hire more people, who will each work shorter hours, at least in the short term.”

What most do seem to agree on is the broader trend: as Xi Jinping speaks of “common prosperity” and puts the country’s corporate titans on notice, it appears as though the go-go years of China’s gilded age are coming to a close. How far the government will go in enforcing its desired changes is yet to be determined, however. For the first time in a long time, Beijing is signaling to the country’s corporate community that it will no longer tip the scales overwhelmingly in favor of business over labor. The question now is to what degree the balance of those scales will be adjusted.

China roundup: Beijing wants tech giants to shoulder more social responsibilities