In order to read the protected PDFs, they need to use a supported reader such as Adobe acrobat.
https://office365itpros.com/2020/07/13/reading-pdfs-protected-sensitivity-labels-edge-browser/
If you are opening the PDF on mobile, you need to use the AIP viewer app: https://learn.microsoft.com/en-us/azure/information-protection/rms-client/mobile-app-faq
If you are saving as a PDF, the PDF is a new document, and you need Export rights to be able to generate it. So the code is to inherit the label is not there. There is an open feature request for this here: https://office365.uservoice.com/forums/928576-microsoft-information-protection-mip/suggestions/31916344-inherit-the-classification-label-during-export-ope