Crack in China's `iron rice bowl'. No more guaranteed employment, Peking says, in bid to boost productivity in factories

China has taken the most definite step so far toward smashing the ``iron rice bowl'' system of permanent employment for workers at state enterprises, a mainstay of Chinese socialism since 1949. As of Oct. 1, new workers for state industries will be hired on a fixed-term contract basis, and new rules on worker discipline will take effect.

The reform marks the nationwide adoption of a more market-oriented labor system that parallels economic reforms for agricultural workers, who last year completed the shift to a contract system for food production. The reform also extends an experiment with contract labor implemented in selected areas since 1980.

In the rural areas, abolishing communes and adopting the contract system has increased productivity and greatly expanded food supplies. Peking hopes similar results will follow for industry by strengthening the hand of factory managers who will be able to dismiss workers or refuse to renew contracts.

``The old system had a useful role in helping people find jobs and in the country's economic construction as a whole, but now it has proven an obstacle to vitalizing enterprises and tapping worker's abilities,'' said Zhao Dongwan, minister of labor and personnel, when announcing the decision earlier this month.

Under the new rules, workers will be recruited through advertising and examinations. After three to six months of probation, they will negotiate a contract with their employers, according to the official New China News Agency. In areas where the contract system is already in effect, workers have signed contracts for three to five years and may renew their contracts if both parties agree. The regulations provide that workers' children will no longer automatically fill positions left vacant by their parents.

Additional regulations have also been issued stipulating the grounds for firing employees. These include refusal to accept a routine job transfer and wasting materials and, for service industries, arrogance toward customers and quarreling to the point of losing a sale. These rules are designed to relieve the low level of service in China's shops and restaurants and improve industrial efficiency and management control over workers.

Unemployment insurance will be introduced -- offering 50 to 75 percent of original wages to dismissed workers for a maximum of two years. A pension fund will be set up for retired contract workers. Only new workers will be affected by the change, and the 67 million workers now employed by the state will continue to enjoy the benefits of a guaranteed job.

Demobilized soldiers are one exception to the reform. Chinese leaders are committed to demobilizing 1 million military personnel by next year, and the ex-servicemen have been promised permanent, lifetime employment. Finding them jobs and integrating them into civilian life has been a challenge to local governments.

The labor reform follows several years of experiments with contract labor, particularly in Shenzhen, one of China's special economic zones. Since 1979, some 3.6 million workers have been hired on the contract system -- 5 percent of the state labor force. Carrying out the new rules will require strong efforts by the authorities, because the rules will gradually end the Maoist practice of giving state industry the responsibility for maintaining a national welfare system.

The introduction of the new system will ``certainly meet with difficulties and obstacles,'' said Minister Zhao, who emphasized that it was an essential part of the country's economic reform program.