We explore how labor unrest, as a shock to local social stability, prompts state-owned enterprises (SOEs) to adopt socially responsible hiring practices at the cost of productivity. The impact is more pronounced when labor unrest occurs in the industries of the exposed SOEs, local fiscal budgets are strong, governing mayors have better incentives, and local private sectors experience slower growth. While SOEs gain more fiscal benefits, these do not fully offset the associated costs. In contrast, non-SOEs do not respond to labor unrest, and their performance remains unchanged. Various tests address the selection effects of labor unrest. Macro-level results indicate that SOEs can help mitigate the negative economic and social impact of labor unrest.