November 20, 2006
Chinese Factories Flout Workplace Rules
Americans are looking for inexpensive goods and delivering what consumers want has led most retail and brand manufacturing businesses overseas to countries such as China where labor is cheap.
While inexpensive goods are taken for granted by many in the U.S., the basic American sense of fair play has led many to question whether there was an unjustifiable expense being paid by the very same factory workers making the clothing, consumer electronics and other products imported into this country every day.
The call to protect the rights of workers overseas was heard by domestic companies such as Wal-Mart that took direct action to address the treatment of factory workers.
Secrets, Lies, and Sweatshops, the cover story of the Nov. 27 issue of BusinessWeek, reports that in spite of the efforts of Wal-Mart and others, factories in China flout codes of conduct with a variety schemes, such as carrying two sets of books to avoid being caught by inspectors.
An unidentified compliance manager for a major multinational who spoke to the publication said only about 20 percent of Chinese companies were paying workers their legal wage while ninety-five percent flouted regulations regarding employee work hours.
American companies doing business in China are aware that codes of conduct are being ignored.
“We’ve come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn’t per se lead to sustainable improvements,” says Hannah Jones, vice-president for corporate responsibility for Nike Inc. “We still have the same core problems.”
Zhi Qiao Garments Co. manufactures goods for Nike. The company’s general manager, Peter Wang, said it is unfair to lay all the blame on factory bosses. “Any improvement you make costs more money… The price [Nike pays] never increases one penny, but compliance with labor codes definitely raises costs.”
Ron Chang, the general manager of another Nike supplier, Shoetown Footwear Co., echoes Mr. Wang. “We can’t ask Nike to increase our price,” he said. “How can we afford to pay the higher salary?”
To keep Nike’s business, Mr. Chang said his company has had to reduce its profit margins from 30 percent to five percent over an 18-year period.
Discussion Questions: There’s plenty of blame to go around when discussing conditions faced by workers in overseas markets such as China. What’s the
answer to the problem?
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As I view this problem, I think that with the ever growing and ever fiercer battle of the major companies and retailers to keep US/Western consumers in the USA and Europe spending our money with them, they have been looking these last years to source their products always cheaper and cheaper. Not only to offer them at lower prices to ” our type ” of consumers, but at the same time (and mainly???) to maximize their own profits. But they (and we all) should beware, because the newer and younger generations in the US and Europe seem not to be so interested anymore in this traditional pattern of over-consumption.
Moreover, in the next decade(s) our (US and EU) world-hegemony on consuming and spending will go down quicker and quicker, and the new consumers will be found in the BRIC -group of countries (Brazil, Russia, India and China). In those countries, consumerism will flourish in the very near future and this to an unprecedented scale !!! Think of that….
China is the world’s largest open-air prison. And it’s not the only country whose factory workers are often treated inhumanely. There are 2 major solutions: (1) let conditions continue for the next 20 years until the labor market gets so tight that employers need to treat their workers decently and (2) frequent surprise visits (from multiple inspectors, not the same ones each time) combined with the willingness to switch away from unconscionable suppliers. About the latter: while it’s true that decent treatment costs money, even relatively high Third World wages are certainly only a small fraction of American wages. So Nike, Wal-Mart, The Gap, Target, etc. could certainly afford to pay law-abiding suppliers. Is that last few cents on a pair of $150 shoes really worth hurting people?
You are never going to solve the problem. This de facto slavery is so ingrained in China’s culture that it is simply a normal way to conduct business–the same as bribery is in the Middle East.
There are companies like Wal-Mart that are trying to police these factories. But there are so many of them, it would be virtually impossible to keep an eye on them all the time. You could refuse to carry goods from Chinese companies that don’t adhere to imposed human rights issues. However, without the merchandise, most retailers would lose half their Christmas sales.
It’s time for the World Trade Organization to get some teeth and for U.S. trade representatives to make human rights a centerpiece of any trade deal–not overlook it for the sake of expediency. China is building a capitalist economy. They can’t do it without labor. Eventually that labor will unite and throw off the shackles of servitude tightened by one of the world’s most oppressive regimes.
Meanwhile, everyone in corporate America is talking about corporate social responsibility. It’s the basis of industry meetings, it’s written into annual reports to stockholders and, increasingly, consumers are holding companies accountable for the actions of their suppliers.
Maybe it’s time to walk the talk!
This reminds me a little bit of the minister who visits the house of ill repute on Saturday night so he can eliminate the bad thoughts from his mind and deliver an invocation against evil and loose morals on Sunday. Is there an American company doing business in China, or Africa or Latin America or Eastern Europe that really believes they are getting a better cost and that those workers are well and fairly compensated? Do people outsource jobs because they are interested in quality of life issues or rather because they’re looking for better margins? Yes, Chinese workers are underpaid but the only way to change the system is to boycott Chinese suppliers not providing decent wages and humane working conditions. It works for American Apparel, but I’m not sure it would work for Nike. You can’t be half committed to human rights. Either you fully support them or you don’t. Anything in between is self-justifying hypocrisy.
My crystal ball, as cloudy as it may be, tells me nothing is going change, only the protesting rhetoric may continue to increase. The complaints are valid, the expectations for correction are illusive.
In a philosophical sense, consider the sorry situation in this context: If there is a human being in China or somewhere else who is freer and being treated more fairly than me, then I shall become his economic slave. However, if I am freer than another, he will then become my economic slave. Thus, equality is the necessary condition for economic freedom and fairness for such freedom outside of equality only creates privilege.
That privilege, if that is the appropriate and correct reference, accrues to American companies demanding low cost manufacturing; to retailers who protest but still continue to do business with culprits; to the overseas companies forcing unfair wages on their workers; and insatiable consumers gobbling up the products that result from this paradoxical phenomenon. As Pogo would reminds us, “We saw the enemy, it is us.”
The problem is simple to solve for manufacturers and retailers sending this work overseas. Don’t simply show up from time-to-time. Assign an inspector to work on-site all year long at each factory producing goods for your company. It might cost U.S. companies more, but compliance and taking care of people is what is really important, isn’t it? ;o)
Retailveteran may be on to something.
Have an inspector, or one better, eliminate the sub-contractors and own (within government controls) the plant. Find out what the going labor rate is and pay at or near the top.
Then you could argue that your workers are among the highest paid in that industry over there.
American firms who rushed offshore are now pretending to be shocked (shocked, I tell you!) to discover that their Chinese “manufacturing partners” are not upholding any kind of standards. Bed down with dogs, get up with fleas, as our grandmas said.
There need to be at least two revolutions, neither of which do I believe will ever happen. First, the importers of Chinese goods (not just Americans) need to refuse to purchase them any longer even at the cost of paying more for the same products to be made in their own countries. Secondly, the people working in factories for unacceptable wages and unacceptable conditions need to lay down their tools. Forget globalisation, treat each country as an island and start all over again trading on the proverbial level playing field.
Maybe it’s the legacy of the missionary tradition in Christian religions or the need to control systems, but Western countries find the need to move the rest of the world to follow established principles that are generally agreed upon by Western countries. “Rules of fair play” differ according the philosophical tradition of a country. Until the question of who has the right and/or authority to impose their rules of fair play on another country, the issue of what behavior is appropriate and how is it to be enforced will continue to be debated.
This problem is more intractable than the responses here indicate: having frequent inspections just drives the abuses underground. A factory that is compliant with inspections can just outsource some or most of the work to real sweatshop with children in chains on the assembly line or whatnot.
And if we were to not do business with a Chinese factory at all, then those workers will be completely unemployed instead of employed at a bad job, not to mention putting yourself at a competitive disadvantage. Not an ideal situation.
A partial solution can be derived by working with the factory to share the expenses in question: paying for fire exits, adequate lighting and ventilation, those kinds of physical assets that play a role. More difficult is the problem of payroll – even if you pay a higher price on the product, there’s no guarantees the money actually reaches the worker’s hands.
A nearly-full solution can be derived by foreign ownership of a Chinese factory, but this still has problems, in that state and local government officials can cause huge difficulties, or that they limit the amount of ownership foreign companies can have. Plus, this is such a capital-intensive approach that the cost savings are minimal, and that puts us back at square one with searching for lower costs.
Anyone who says this problem has a cut-and-dried solution either hasn’t had to face it in real life, or they put themselves out of business while claiming the moral high ground.
I haven’t read the full BW article, so I don’t know how bad the problem is being portrayed. I am sure it is very bad in some places and less severe in others, as the off and on stories (e.g. Nike sweatshop news of a decade ago) seem to indicate.
Just to take a bit of a different tack than most of the other responses, I think it’s important to recognize that one viewer’s “sweat shop” is the only job available in many places.
That doesn’t excuse abusive conditions, especially in a high growth market like China, but it also says we should at least consider the perspective of the dynamics of that country. We can’t assume the 21st century, Western working conditions can or should prevail in developing countries. They didn’t here when we were a developing country.
Consistently, the U.S. consumer prefers the lower price of the offshore goods to the higher price of the domestic goods. Is it possible to enforce better labor conditions overseas? To a degree, yes – having some sort of clear standards, and regular inspections as one respondent mentioned, can go a long way.
But even that only works if you don’t push too far above local standards, and you don’t have competitors who are less concerned, and can then beat you on price. Nike can force changes because there is only one Nike, with brand power. But can the widget manufacturer?
So, the real answer is that the foreign governments themselves must pass and enforce reasonable regulations. Why don’t they? (1) Because some of the rules just wouldn’t seem consistent with where they are in terms of their social/industrial evolution – we can’t just impose our will; (2) because they fear, rightly so, that this is likely to reduce manufacturing work and jobs to some degree.
This will all be solved at some point by a variety of forces. It will just take longer than we may wish, but we just need to look at our own history to understand that.
Odd that China does not seem to stick their nose into how US companies treat US workers who make products exported to China? I’m sure, due to cultural differences, they would find just as much fault with us. Seems like all the complaining comes from the U.S. Maybe we should hear from the Chinese workers their opinions. Are they complaining? Perhaps we should not be so judgmental thinking that our work culture is so superior that it should be adopted by other countries. That could be why so many foreign countries are mad at us.
What we view as inhumane, Chinese workers view as normal. Otherwise they would not put up with it.
There may or may not be workplace rule abuse in China. I haven’t been there to perform an audit myself and there’s apparently no other way to find out. There are no facts on this issue in America. Only spin, pro or con.
Wow – what an important topic! All the points are good and logical but one comment stands out for me. It was from Len Lewis and it was about Corporate Social Responsibility (CSR). We just completed large Global Packaging Study and another large multiclient study on Sustainability and Sustainable Packaging. The world is getting flatter and technology is getting better. The new word that continues to pop up wherever I go is TRANSPARENCY! That means that no one is going to continue to get away with much and that is a good thing. Our research says that CSR is good and triple bottom line thinking (financial, social, environmental) is right and we are moving in the right direction. Yes it is going to take a while but I really believe that TRANPARENCY and CSR will help us all do the right things in the future.
There is no simple answer. In the retail world, there is no significant increase in productivity that accompanies better treatment of the employees, so there is no traditional economic reason to provide better treatment. There are humanitarian reasons, but those are too easily subverted by the almighty dollar, especially when several parties (US retailer, US government, Chinese manufacturer, Chinese government, etc) have the same opportunity to cut corners and increase their share of the pie.
Similarly, there will always be consumers who are willing to pay more for products made under ‘acceptable’ working conditions, but they are nowhere near a majority and rarely a viable market (…not to mention the fact that they can sometimes be “fooled” by companies advertising products made under proper conditions).
Everyone needs to demand better. Only then will the process change. And it will change slowly.
As we search for the cheapest labor rates and move our production from one country to the next, we will eventually even out the playing field. How many generations will it take? This is the real question.
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As I view this problem, I think that with the ever growing and ever fiercer battle of the major companies and retailers to keep US/Western consumers in the USA and Europe spending our money with them, they have been looking these last years to source their products always cheaper and cheaper. Not only to offer them at lower prices to ” our type ” of consumers, but at the same time (and mainly???) to maximize their own profits. But they (and we all) should beware, because the newer and younger generations in the US and Europe seem not to be so interested anymore in this traditional pattern of over-consumption.
Moreover, in the next decade(s) our (US and EU) world-hegemony on consuming and spending will go down quicker and quicker, and the new consumers will be found in the BRIC -group of countries (Brazil, Russia, India and China). In those countries, consumerism will flourish in the very near future and this to an unprecedented scale !!! Think of that….
China is the world’s largest open-air prison. And it’s not the only country whose factory workers are often treated inhumanely. There are 2 major solutions: (1) let conditions continue for the next 20 years until the labor market gets so tight that employers need to treat their workers decently and (2) frequent surprise visits (from multiple inspectors, not the same ones each time) combined with the willingness to switch away from unconscionable suppliers. About the latter: while it’s true that decent treatment costs money, even relatively high Third World wages are certainly only a small fraction of American wages. So Nike, Wal-Mart, The Gap, Target, etc. could certainly afford to pay law-abiding suppliers. Is that last few cents on a pair of $150 shoes really worth hurting people?
You are never going to solve the problem. This de facto slavery is so ingrained in China’s culture that it is simply a normal way to conduct business–the same as bribery is in the Middle East.
There are companies like Wal-Mart that are trying to police these factories. But there are so many of them, it would be virtually impossible to keep an eye on them all the time. You could refuse to carry goods from Chinese companies that don’t adhere to imposed human rights issues. However, without the merchandise, most retailers would lose half their Christmas sales.
It’s time for the World Trade Organization to get some teeth and for U.S. trade representatives to make human rights a centerpiece of any trade deal–not overlook it for the sake of expediency. China is building a capitalist economy. They can’t do it without labor. Eventually that labor will unite and throw off the shackles of servitude tightened by one of the world’s most oppressive regimes.
Meanwhile, everyone in corporate America is talking about corporate social responsibility. It’s the basis of industry meetings, it’s written into annual reports to stockholders and, increasingly, consumers are holding companies accountable for the actions of their suppliers.
Maybe it’s time to walk the talk!
This reminds me a little bit of the minister who visits the house of ill repute on Saturday night so he can eliminate the bad thoughts from his mind and deliver an invocation against evil and loose morals on Sunday. Is there an American company doing business in China, or Africa or Latin America or Eastern Europe that really believes they are getting a better cost and that those workers are well and fairly compensated? Do people outsource jobs because they are interested in quality of life issues or rather because they’re looking for better margins? Yes, Chinese workers are underpaid but the only way to change the system is to boycott Chinese suppliers not providing decent wages and humane working conditions. It works for American Apparel, but I’m not sure it would work for Nike. You can’t be half committed to human rights. Either you fully support them or you don’t. Anything in between is self-justifying hypocrisy.
My crystal ball, as cloudy as it may be, tells me nothing is going change, only the protesting rhetoric may continue to increase. The complaints are valid, the expectations for correction are illusive.
In a philosophical sense, consider the sorry situation in this context: If there is a human being in China or somewhere else who is freer and being treated more fairly than me, then I shall become his economic slave. However, if I am freer than another, he will then become my economic slave. Thus, equality is the necessary condition for economic freedom and fairness for such freedom outside of equality only creates privilege.
That privilege, if that is the appropriate and correct reference, accrues to American companies demanding low cost manufacturing; to retailers who protest but still continue to do business with culprits; to the overseas companies forcing unfair wages on their workers; and insatiable consumers gobbling up the products that result from this paradoxical phenomenon. As Pogo would reminds us, “We saw the enemy, it is us.”
The problem is simple to solve for manufacturers and retailers sending this work overseas. Don’t simply show up from time-to-time. Assign an inspector to work on-site all year long at each factory producing goods for your company. It might cost U.S. companies more, but compliance and taking care of people is what is really important, isn’t it? ;o)
Retailveteran may be on to something.
Have an inspector, or one better, eliminate the sub-contractors and own (within government controls) the plant. Find out what the going labor rate is and pay at or near the top.
Then you could argue that your workers are among the highest paid in that industry over there.
American firms who rushed offshore are now pretending to be shocked (shocked, I tell you!) to discover that their Chinese “manufacturing partners” are not upholding any kind of standards. Bed down with dogs, get up with fleas, as our grandmas said.
There need to be at least two revolutions, neither of which do I believe will ever happen. First, the importers of Chinese goods (not just Americans) need to refuse to purchase them any longer even at the cost of paying more for the same products to be made in their own countries. Secondly, the people working in factories for unacceptable wages and unacceptable conditions need to lay down their tools. Forget globalisation, treat each country as an island and start all over again trading on the proverbial level playing field.
Maybe it’s the legacy of the missionary tradition in Christian religions or the need to control systems, but Western countries find the need to move the rest of the world to follow established principles that are generally agreed upon by Western countries. “Rules of fair play” differ according the philosophical tradition of a country. Until the question of who has the right and/or authority to impose their rules of fair play on another country, the issue of what behavior is appropriate and how is it to be enforced will continue to be debated.
This problem is more intractable than the responses here indicate: having frequent inspections just drives the abuses underground. A factory that is compliant with inspections can just outsource some or most of the work to real sweatshop with children in chains on the assembly line or whatnot.
And if we were to not do business with a Chinese factory at all, then those workers will be completely unemployed instead of employed at a bad job, not to mention putting yourself at a competitive disadvantage. Not an ideal situation.
A partial solution can be derived by working with the factory to share the expenses in question: paying for fire exits, adequate lighting and ventilation, those kinds of physical assets that play a role. More difficult is the problem of payroll – even if you pay a higher price on the product, there’s no guarantees the money actually reaches the worker’s hands.
A nearly-full solution can be derived by foreign ownership of a Chinese factory, but this still has problems, in that state and local government officials can cause huge difficulties, or that they limit the amount of ownership foreign companies can have. Plus, this is such a capital-intensive approach that the cost savings are minimal, and that puts us back at square one with searching for lower costs.
Anyone who says this problem has a cut-and-dried solution either hasn’t had to face it in real life, or they put themselves out of business while claiming the moral high ground.
I haven’t read the full BW article, so I don’t know how bad the problem is being portrayed. I am sure it is very bad in some places and less severe in others, as the off and on stories (e.g. Nike sweatshop news of a decade ago) seem to indicate.
Just to take a bit of a different tack than most of the other responses, I think it’s important to recognize that one viewer’s “sweat shop” is the only job available in many places.
That doesn’t excuse abusive conditions, especially in a high growth market like China, but it also says we should at least consider the perspective of the dynamics of that country. We can’t assume the 21st century, Western working conditions can or should prevail in developing countries. They didn’t here when we were a developing country.
Consistently, the U.S. consumer prefers the lower price of the offshore goods to the higher price of the domestic goods. Is it possible to enforce better labor conditions overseas? To a degree, yes – having some sort of clear standards, and regular inspections as one respondent mentioned, can go a long way.
But even that only works if you don’t push too far above local standards, and you don’t have competitors who are less concerned, and can then beat you on price. Nike can force changes because there is only one Nike, with brand power. But can the widget manufacturer?
So, the real answer is that the foreign governments themselves must pass and enforce reasonable regulations. Why don’t they? (1) Because some of the rules just wouldn’t seem consistent with where they are in terms of their social/industrial evolution – we can’t just impose our will; (2) because they fear, rightly so, that this is likely to reduce manufacturing work and jobs to some degree.
This will all be solved at some point by a variety of forces. It will just take longer than we may wish, but we just need to look at our own history to understand that.
Odd that China does not seem to stick their nose into how US companies treat US workers who make products exported to China? I’m sure, due to cultural differences, they would find just as much fault with us. Seems like all the complaining comes from the U.S. Maybe we should hear from the Chinese workers their opinions. Are they complaining? Perhaps we should not be so judgmental thinking that our work culture is so superior that it should be adopted by other countries. That could be why so many foreign countries are mad at us.
What we view as inhumane, Chinese workers view as normal. Otherwise they would not put up with it.
There may or may not be workplace rule abuse in China. I haven’t been there to perform an audit myself and there’s apparently no other way to find out. There are no facts on this issue in America. Only spin, pro or con.
Wow – what an important topic! All the points are good and logical but one comment stands out for me. It was from Len Lewis and it was about Corporate Social Responsibility (CSR). We just completed large Global Packaging Study and another large multiclient study on Sustainability and Sustainable Packaging. The world is getting flatter and technology is getting better. The new word that continues to pop up wherever I go is TRANSPARENCY! That means that no one is going to continue to get away with much and that is a good thing. Our research says that CSR is good and triple bottom line thinking (financial, social, environmental) is right and we are moving in the right direction. Yes it is going to take a while but I really believe that TRANPARENCY and CSR will help us all do the right things in the future.
There is no simple answer. In the retail world, there is no significant increase in productivity that accompanies better treatment of the employees, so there is no traditional economic reason to provide better treatment. There are humanitarian reasons, but those are too easily subverted by the almighty dollar, especially when several parties (US retailer, US government, Chinese manufacturer, Chinese government, etc) have the same opportunity to cut corners and increase their share of the pie.
Similarly, there will always be consumers who are willing to pay more for products made under ‘acceptable’ working conditions, but they are nowhere near a majority and rarely a viable market (…not to mention the fact that they can sometimes be “fooled” by companies advertising products made under proper conditions).
Everyone needs to demand better. Only then will the process change. And it will change slowly.
As we search for the cheapest labor rates and move our production from one country to the next, we will eventually even out the playing field. How many generations will it take? This is the real question.