Handout 1a: Working Conditions in Sports Shoe Factories in China
Making Shoes for Nike and Reebok
Asia Monitor Resource Centre and Hong Kong Christian Industrial Committee
September 1st, 1997
Introduction
The last 30 years have seen tremendous changes in the production of sports shoes. When the costs of production began to rise in the United States and Europe, and workers organised and exercised collective bargaining power, sports shoe companies relocated their factories or sought subcontractors in Asia where wages were much lower and where systematic repression of labour movements promised a 'docile' workforce. Companies like Nike and Reebok began to subcontract to medium and small-scale companies in East Asia, particularly Taiwan and South Korea.
It is no accident that these two countries became the world's two largest shoe manufacturing countries at a time when political authoritarianism and repression of the workers' movement was at its height. However, once the independent labour movements began to gain strength, and workers successfully fought for higher wages and better working conditions, sports shoe production once again shifted overseas, this time moving to countries with still cheaper labour costs, such as Vietnam, Thailand, Indonesia and China. In these countries sports shoe multinationals made mega-profits by exploiting the massive gap between production costs (particularly labour costs) and the prices at which the shoes could be sold in the European and North American markets. Ironically, different brands of sports shoes are often produced in the same factory, side by side, despite ruthless market competition and the hundreds of millions of dollars spent on advertising in the United States and Europe.
Before the arrival of these sports shoe multinationals in China, the shoe industry was based on state-owned enterprises producing for the domestic market. However, since the 'opening up' of the economy after 1984, there was an influx of Hong Kong and Taiwanese capital into labour-intensive industries such as sports shoes. Hong Kong and Taiwanese companies established new factories in China, which often meant the partial or complete closure of factories back home. Some of these new investors in China formed joint ventures with state-owned enterprises or local governments, while others set up 100 percent foreign-owned factories.
China is now the biggest shoe producing country in the world, producing over one-third of the world's top brand-name sports shoes. In many ways it is an ideal setting for the sports shoe multinationals and their subcontractors. Massive unemployment, low wages, the lack of enforcement of labour laws and standards, repression of independent union organising, and the role of the state-run All China Federation of Trade Unions in supporting management, are combined with local governments whose policies and interests lie in attracting foreign capital and ensuring the best conditions for the accumulation of profit.
Companies like Nike and Reebok benefit in every way because they do not have to deal with production: they distance themselves through subcontracting, benefiting from low production costs without any direct lines of responsibility. Subcontracting also allows these sports shoe multinationals to respond quickly to changing styles and fashions, while passing on all of the uncertainty and insecurity to their subcontractors and ultimately to the workers themselves.
With little or no notice, the multinationals can change the order and demand a different style of shoe, forcing the subcontractor to make rapid changes in their production set-up. Everything must be done very quickly, forcing the workers to work hard and fast, and to put in excessive amounts of overtime if they want to keep their jobs.
Poor conditions in the factory are not simply the result of having a particularly harsh factory owner. It is actually the multinationals, not the subcontractors, that ultimately set the pace of production as well as the wages of the workers. If a subcontractor wants to stay in business, he must accept the timeline set by the multinational and accept the price the multinational is willing to pay per shoe. And when the multinationals squeeze the subcontrators, the subcontractors squeeze the workers.
Just this year, Andrew Young from Goodworks International was hired by Nike to monitor their factories in Vietnam, Indonesia and China. Mr. Young produced a report which backed Nike, stating that the company was doing a good job and giving a few recommendations as to how it could improve. Mr. Young himself, however, admitted that he had a hard time approaching ordinary workers. As a result, his report was shallow and lacked credibility. This report is an attempt to provide a more true-to-life picture of the conditions for shoe workers in China. (* Handout 2 addresses Andrew Young’s report)
Both Nike and Reebok argue that conditions in the factories have improved and that the Codes of Conduct that regulate their behavior are being enforced. This study proves, however, that this is not the case. In fact, compared with our research on the shoe factories in 1995, conditions today are even worse. This is especially true of work hours -the number of hours that workers are forced to work has actually increased in the past few years. All categories of the companies' Codes of Conduct- health and safety, freedom of association, wages and benefits, hours of work, overtime compensation, nondiscrimination, harassment and child laborer are being violated.
Moreover, most workers do not even know that there is a Code of Conduct which the factory is supposed to abide by. They are unaware of their rights as workers and have no ways to channel their complaints and opinions. The strikes and demonstrations in the shoe factories throughout Asia are a reflection of these pent-up grievances. It is clear that in the case of Nike and Reebok, their internal monitoring systems have failed miserably.
China presents a particularly difficult situation to monitor due to the prevailing political system and the absence of independent non-governmental organizations, such as independent trade unions and human rights organizations. There is only one recognised union in China, The All China Federation of Trade Unions (ACFTU), and it rarely confronts management to uphold workers rights. ACFTU is a government-controlled union, and since local governments are intimately involved in local businesses, union officers tend to favor managers over workers.
There are no authentic independent non-governmental organisations or trades unions and any attempts at genuine union organising are harshly repressed. In Shenzhen, two independent trade unionists were charged with subversion in July 1996 because they had disseminated pamphlets on workers' rights. This repression of independent organizing sends a signal to management that China's Labour Law and its regulations will not be enforced and that workers' rights do not have to be respected. It is clear that in this context, management has absolute power. It is also clear that in this context, monitoring systems as they presently exist are virtually unworkable.
Research Methodology and Limitations
This report was produced by two non-governmental organizations in Hong Kong: the Asia Monitor Resource Centre and the Hong Kong Christian Industrial Committee. During 1995 and again in 1997, we examined workers' rights and working conditions in the factories of five major subcontractors producing sports shoes in China: Yue Yuen, Nority International, KTP Holdings and Wellco. These factories produce shoes for Nike and Reebok. The first two are Taiwanese companies with factories in southern China, while KTP Holdings is a Hong Kong-based company and Wellco is a South Korean-owned company.
All the factories are located in Pearl River Delta in southern China. Most workers in the Pearl River Delta are peasant workers (mingong) who come from rural areas of other provinces, and 90 percent of them are women age 17 to 23.
While we have monitored conditions in the shoe factories over the past three years, our latest research was conducted in June and July 1997. We conducted detailed interviews with 10 workers in each factory, held discussions with dozens of other workers, and included our own observations. Here we present our findings.
Interviews with workers
Before presenting the case studies, it is important to put the interviews with workers in these factories in context. The shoe workers, most of whom are recent migrants to the city, generally have a low level of education. These jobs are usually their first factory jobs and they are unaware of their legal rights as workers.
For example, workers often had a difficult time answering questions about overtime because it is hard for them to distinguish between a "normal work day" and overtime. When hired, the workers were told they had to work 12 hours a day. According to the Chinese Labour Law, the work day should only be eight hours long, and the four extra hours of work should be counted as overtime. However, the factories set the "normal" work day as 12 hours, and then add additional overtime work. Therefore, if a worker works a 15-hour day, she will usually say she worked three hours of overtime, when she really worked seven overtime hours.
Also, it is important to take into account that the interviews were conducted in June and early July, which workers told us are generally not peak season in the shoe factories. This means that while the work shifts reported here are already grueling, it is probable that during other months, when there is more work to be done, the workers work even longer hours and are given even fewer days off per month.
With respect to wages, one of the difficulties we encountered is that some workers are paid a set rate, while others are paid piece rate. Moreover, most workers are not even given their pay stubs, making it difficult for them to understand what hours they were paid and at what rate.
Several of the questions we asked refer to health and safety issues in the workplace. Most workers felt they did not need any protective clothing. However, it is important to understand that the workers may not be aware that they need protective clothing. They are accustomed to working without such things as gloves and face masks.
Many workers did not consider the chemicals in their factories to be hazardous, but this is often a reflection of their lack of understanding about health and safety issues. One chemical, benzene, which is used in China as a glue in making sports shoes, can cause anemia and leukemia and is so toxic that it has been banned in the United States and many European countries. But the factories do not inform the workers of the contents of poisonous substances, so workers have no way of knowing the degree of harm done to their bodies.
Another issue we questioned workers about is whether they were forced to pay a deposit upon being hired at the factory, which is not legal. Many workers answered that they did not pay a deposit. However, in most cases, workers were simply not paid for the first month of work, which amounts to a deposit. Though the factory promises that these deposits will at some point be returned to them, this is often not the case. Workers also answered that they were allowed to make complaints to supervisors or a complaints box, but most workers have never made complaints themselves because they are afraid of the consequences.
The workers had minimal knowledge of trade unions and collective bargaining. Factories either have no union or the government-controlled trade union (ACFTU), as independent unions are not allowed. When an ACFTU branch did exist at a factory, it did so little for the workers that many were unaware of its presence.
Finally, we must add in the element of fear and mistrust. Even though the interviewers were careful to explain what the questionnaires were all about, many workers were afraid and distrustful of people who came to ask so many questions. As difficult as their jobs are, the workers do not want to lose them and logically feared that giving information about factory conditions might put them at risk of being fired.
Wellco Factory, A Nike Subcontractor
Wellco Factory, in Dongguan, Chang'an is a Korean-invested factory contracted by Nike. Eight thousand workers are employed there, though most of these workers have not signed any contract with the factory, or do not know if they have. The ratio of women to men is seven to one. Most are migrant workers coming from all over China. The men and women do some of the same jobs, though in the sewing department, all the workers are women. They are all very young, between 18 and 25, and many have been employed at the factory for just a few months.
The workers work 11 hours a day, in violation of both Chinese labour law and the Nike Code of Conduct.1 In addition to this arduous schedule, all must work overtime. If they refuse they can be fined $1.20 - $3.61(10-30Rmb) or docked the entire day's pay. Several of the workers mentioned that they did not realise that they would be forced to work overtime when they were hired. The overtime of 2-4 hours (on top of the 11 hour work day) violates China's Labour Law, which allows for only 36 hours of overtime per month. The Labour Law and Nike's Code of Conduct both clearly state that coerced labour is not acceptable, yet workers in Wellco are forced to work long hours or they will be subject to termination.
Workers only get 2-4 days off every month. This violates both China's Labour Law and Nike's Code, which states that workers are entitled to at least one day of rest every week. After working at the factory for one year, workers are given an annual leave of five days, and after two years this becomes seven days.
The workers are given a quota to complete in the working day. However, the quota is very harsh, and often cannot be fulfilled in a day's work. When this happens, the worker must participate in "prolonged work" for which there is no pay.
The wages at the Wellco factory violate minimum wage laws. Generally the workers are given $30-$42 (250-350 Rmb) per month before overtime, while the minimum wage in Dongguan state is $42 (350Rmb) per month. Overtime is also paid in violation of the law. Minimum overtime pay is $0.36 (2.99Rmb) per hour of overtime, but Wellco workers make $0.19-$0.33 (1.6-2.7Rmb) per hour of overtime. After all the deductions are made for housing, meals and other items, one month's pay--including overtime--becomes only $36.14-$72.29 (300 to 600Rmb).
The workers were unclear about the safety regulations in their workplace, and whether or not the factory abided by the standards set by law. The fire prevention and safety equipment in the factory seem up to standard: there are extinguishers, exits and fire drills. Many of the workers thought that they needed safety equipment. Gloves and masks are provided to some workers but not all, leaving many without protection.
Many workers noted that there have been a variety of accidents at the factory. Seven workers lost their fingers in the machines, many workers fainted due to heat and fumes, and we were told that one worker in the factory had died from inhaling poisonous chemicals. Several of the workers complained of dizziness, skin irritations, headaches and dyspnea and said that their co-workers also have these problems. Many workers felt that the managers did not care about their safety; they were simply interested in "churning out shoes".
The working conditions at the factory appear dangerous to the health of the workers. There is dust in the workplace which the workers rate "serious" and must inhale everyday. There is noise pollution, heat and congestion in the factory, and there are fumes from the glues used. Nike's Code of Conduct states that employers should provide a "safe and healthy working environment to prevent accidents and injury to health arising out of... the operation of employer facilities." Clearly this section of the Code is not enforced.
When the workers were first hired, they had to pay a deposit. However, many of them misunderstood this when they were being hired, and now realise that it is very difficult to reclaim this deposit. They must wait one year or until they leave the factory, and in this case, they must leave under favourable conditions.
While working, the workers are not allowed to talk to their co-workers, and if they disobey this rule, they are warned and then fined $1.20-$3.61 (10-30Rmb). Most of the workers interviewed said that they had been yelled at by their supervisors, and said that as punishment, the workers' identification cards can be confiscated.