NIKE: THE SWEATSHOP DEBATE EXECUTIVE SUMMARY
The removal of trade barriers and improvement of free trade between U.S. and many developing countries like China, Taiwan, Indonesia etc is making more and more American companies to move their production facilities to those countries. Once these American companies launch their facilities in those countries, it becomes easy and tempting for them to exploit the workers comparatively at lower costs.
Nike is a multinational corporation that manufacturers shoes in places like China, Indonesia, Vietnam and other developing countries. Nike manufacturers these shoes in these countries on contract basis. Although Nike does not own any manufacturing facilities in those countries, but it is accused of producing its goods where the workers are exploited. As a result of these problems faced by Nike, it has assured to improve the working conditions in those facilities. Nike has been in the news by number of agencies and organisations who complain about the low wages, long hour shifts and enforcing child labor in those countries. In contrast, Nike contracts many sport stars, who are reaping in multimillion dollars to promote Nike goods. Nike has admitted of manufacturing its goods in countries which are in developing phase, have cheap labor and lack human rights and union movement. Because of these practices, Nike had made huge margins by the workers who are paid mere 20 cents an hour. Nike's success is not only based on its campaigns and advertisements but also of the tears of tortured workers and child labor.
The original challenge for Nike is to enforce their codes of conduct and use their power to ensure that their workers receive basic human and labor rights. Although these sweatshops are beyond the reach of U.S. law, they are not beyond the giant American companies with factories abroad.
1.0 RESPONSIBILITY OF THE COMPANY
In my opinion, Nike should be held responsible and also accounts for the working conditions that prevail in the factories that it sub-contracts. Nike should not only take the positive aspects of cheap labour in the foreign countries but also take responsibility of the employees working in those countries. Nike as global organisation should realise its goals to the consumers worldwide. Nike should take the example of Coca Cola industries in India. Recently Coca Cola was in the news for using pesticides as preservatives in the cold drinks. Coca cola after the inspecting their manufacturing facilities, it ensured that all of their manufacturing facilities should follow the same standard of water purification done across the world. At the same time Coca Cola also ensures that its employees are getting minimum wages and the better working conditions in the factories. This makes Coca Cola socially responsible for its employees in the respective countries.
Even though Nike is technically away from those responsibilities, it is clear that it should take control of its sub-contractors who exploit the workers in the foreign countries. If Nike could have made any changes to the working conditions or the wages as part of the arrangement, it would have benefited and passed to those workers. Nike as a corporate giant concentrates on improving the value of its shareholders. The workers in these under developed countries were happy, eager to work and accept the conditions that were provided by the sub-contractors of Nike. The main reason behind this is that the wages that they get are far more superior or equal to the wages got from other companies. This denotes that the conditions that are considered illegal in developed countries are perfectly legal in some developing countries where the production is done. If the company quits because of the protests held by many organisations, the ultimate losers will the workers.
2.0 LABOR STANDARDS
There needs to be combination of the standards that prevail in U.S. and the other developing countries where Nike has its manufacturing facilities. If Nike is forced to follow the standards that prevail in United States, it might not benefit from the low cost labor and environmental advantages of manufacturing of shoes. On the other hand, if Nike adopts the standards prevailing in foreign country where it manufactures it shoes then it may not be able to agree with some of the Human Rights related issues that a global player should follow. Therefore, it is very important in the Nike's perspective to combine the standards of United States and Foreign countries to ensure that all the workers get at least the minimum wages in the respective country. It should also ensure better working conditions for the workers and the minimum age limit of the workers should be followed strictly. Nike, in doing so may benefit from the public relations rather than wasting money creating some defensive PR strategies.
3.0 NIKE IN INDONESIA
The daily wage rate varies in different countries and is fixed by labor laws in that country. When Nike began its operations in Indonesia in 1996, Nike was not even paying the minimum wage to its workers. The other facts related to Nike is that it would file a petition to the Indonesian government year after year for reduction in the daily wages as it would be hard to pay the subjected wages to the workers. A wage of $2.28 a day was fixed by Indonesian government itself, covering 70% of the basic needs of a person. The daily wage rate also varies by the city the worker lives in, skill set of each worker, experience of the workers and the essential commodity prices in that city.
Another problem that the Indonesian workers face is that the several factories pay a apprentice wage for the new workers, which is below the minimum wage fixed by the government. This problem mainly occur with the female workers, justifying that women need several months to get trained in manufacturing the shoes. But almost all the time, they are trained for few hours to few days and are put directly on the production facility. This apprentice wage is simple ways of cheating the workers.
In 1999, the Indonesian government announced the increasing of minimum wage to $26/month. For the first time in this year, Nike has initiated to increase its minimum wage of the factories workers in Indonesia higher than the government allocated wage. The new wage structure was $30/month and a bonus of up to $37.50/month. This is certainly a step forward in the wage structure but far below the wages required to maintain a average family. Majority of worker in Indonesia are teenagers and unmarried young women from ages 17 to 30. The average target for the workers is 4.3 pairs of shoes a day and only gets $2.50 as a daily wage in Indonesia. The wage required for a single person to cover the basic needs is around $38/month as released by Global Exchange and the living wage a family requires is double the single person wage which is $76/month.Yet Nike pays the minimum wage to the workers who produce shoes that sell for $100. This makes the daily wages of workers in factories manufacturing Nike shoes are paid more than the farmers in the same region. Nike should be criticized, if Nike's sub-contractors are not obeying by the rules and following the minimum wages for the type of skill and working conditions the workers work in. On the other hand , Nike should not be criticized if they pay the minimum wages set by a group of workers depending on their skill and working condition. And it is not correct to compare the wages for another group of workers like farmers. This is because farmers as a whole may be under some other rules and subject to other loan allowances from the government. Thus it is not fair to compare the wages of different set of workers.