The Paradox of Globalization
& Economic Justice:
Solutions to Sweatshops and
other Global Labor
Challenges
Case Study: “Sweatshops?”
Agenda
Background on the global situation for
workers
Purpose of research
Process of research
Program findings in re: adidas-Salomon
Program findings in re: Nike
Future plans
An Imbalance of Power?
As developing countries seek to establish
export sectors, local mfrs compete w/one
another.
There is an oversupply of export factories that
allows US companies to move from one
supplier to another in search of the lowest
prices, quickest turnaround, highest quality and
best delivery terms, weighted according to the
priorities of the company.
(i.e. They have the power to dictate the price
at which they will buy goods!)
The Origins of Sweatshops
Earliest laws relating to working conditions:
enacted in 1802 in Great Britain and addressed the
health, safety, and morals of child textile workers.
First minimum wage law: enacted in 1894 in
New Zealand
The United States had no federal legislation
regulating wages and hours until 1938 with the
passage of the Fair Labor Standards Act
(establishing $.25 as a minimum wage for
workers).
The Origins of Sweatshops
The term "sweater" was not used until 1850, referring
to an employer who imposed monotonous work on its
employees at very low wages
The word "sweatshop" was used at the end of the
nineteenth century to describe a subcontracting system
in which the middlemen earned their profits from the
margin between the amount they received for a
contract and the amount they paid workers with whom
they subcontracted.
The margin was said to be "sweated" from the workers
on the basis of their low pay and long hours.
1
The Conditions of Sweatshops
Wages Issues:
Basic one-week necessities for a family of five in
Honduras cost approximately $22.75, while
workers expected to support that size family make
only approximately $24.27 per week, leaving $2.05
to cover costs of rent, transportation to work,
school, clothing and other expenses.
Workers at an Indonesian Nike plant were
originally enthusiastic about a 15% pay raise.
However, they estimated that their cost of living
had gone up anywhere from 100% to 300%.
The Conditions of Sweatshops
Health and Safety Issues:
Over the course of two years, one factory
reported deaths of 20,265 workers from
industrial accidents
In one plant, there were unhealthy working
conditions such as contaminated drinking
water supplies, intense heat with no air
conditioning system, poor ventilation, one
bathroom break allowed per day and,
workers standing in the direct sunlight as a
form of punishment
Economic Theory:
MIT economist Paul Krugman:
"[t]he overwhelming mainstream view among
economists is that growth of this kind of
employment [sweatshops] is tremendous good
news for the world's poor."
Harvard University economist Jeffrey Sachs:
His concern is "not that there are too many
sweatshops, but that there are too few."
The Conditions of Sweatshops
Human Rights Issues:
In Mexico, maquiladora operators oblige
women to undergo pregnancy testing as a
condition of work and women thought to be
pregnant are not hired.
This practice is mirrored in manufacturing
operations in El Salvador where women are
required to take company-provided birth
control pills on a daily basis - in the presence
of their supervisor - as a condition of
employment.
The Global Sweatshop:
How does it happen?
Example: US-based Mattel moved a large
segment of its production from Hong Kong to
Malaysia when labor costs rose in Hong Kong.
When they subsequently rose in Malaysia,
thirty percent of the Malaysian production was
contracted to India.
Current Environment
Markets don’t work.
They are a poor mechanism for establishing
appropriate boundaries between working
conditions, economic development, and cost
effective production.
The media is unfocused.
Insufficient attention has been paid to firms
who provide a healthy workplace where
workers are respected and treated with dignity.
2
Current Environment
What don’t they see?
The reality is that:
Many firms have either been spurred on by this
attention toward ameliorating workplace
conditions;
had begun the process at the time the media
uproar began;
or have always maintained superior standards
for the workplace.
Purpose of Research
How do firms resolve various labor
challenges presented by globalization?
To where can firms look for model
solutions?
Why should firms respond to media
attention?
Productivity
Employee morale
Lower training costs
Decreased attrition
Corporate reputation
Risk management
Consumer perception
Trust among
stakeholders
Worker commitment
and loyalty
Relationships with the
community
Social cohesion and
civil stability
Purpose of Research
The project seeks to document and explain the
operation of programs designed to address labor
problems associated with globalization.
The project does not seek to conduct systematic
investigations of the effectiveness of these
programs.
Co-researchers/contributors: Rich Wokutch, Denis Arnold,
Tara Radin, Sandra Waddock, Charlie Bodwell, Jill Murray,
Jonathan London, Sandra Rahman, Michael Santoro, Larry
French
Research Process
We conducted a review of each program to
include, where appropriate, information relating
to:
the program’s establishment
approval process
implementation process
Training
continued assessment
exit strategy
Programs studied (LPH):
adidas-Salomon:
Child Labor Programs
Health and Safety Programs
Nike:
After-Hours Education Programs
Microloan Programs
Cultural Sensitivity Programs
3
adidas-Salomon: Overview
Founded in 1925
Contracts with c. 570 factories worldwide
7 footwear and 60 apparel in Vietnam
Been sourcing for 30 yrs. In Asia
As a result of their leverage in the footwear
factories, a-S recognizes that “outsourcing
supply does not mean outsourcing social
responsibility.”
SoE Management Team
29 people from 13 countries
Recently produced, “Our World: Social
and Environmental Report 2000”
Standards of Engagement (SoE)
Published in 1988
Patterned after ILO conventions and reflects attention
to:
forced labor, child labor
Discrimination, wages and benefits
hours of work, health and safety
freedom of association and collective bargaining
disciplinary practices
environmental requirements
community involvement
Self-Sustainability
Main initiative is to create environment
where SoE are not necessary.
Inspiration and Vision Setting:
Idea Generation/Inception
Program 1:
Health, Safety and
Environment Partnerships Prince of Wales Business
Leaders Forum
The program evidences how competitor
partnerships can create a better environment
for all.
A need for nationwide amelioration of
health and safety standards was recognized
in Vietnam.
IBLF (PoW) approached Nike and adidas.
4
Stakeholders
Factories with MNE contracts were required
to increase standards.
Therefore, program focused on factories
who were not currently engaged in contracts
with multinationals
Project Activities
Education: first phase was to educate regarding
what each factory was currently doing and where
the problems existed.
Ameliorations: recognizing the financial
pressures on the factories, next phase was to
identify low-cost solutions for health and safety
challenges
Training: Final phase involved developing and
implementing training programs along “best
practices” lines for all factories involved.
Program 2: Responding to
the Challenge of Child
Labor in Supplier Factories
Motivation for Involvement
Executive Commitment: From adidas’
perspective, interest in the project was stimulated
by Husselbee’s commitment to working toward
social sustainability in the countries within which
adidas operated.
adidas’ Level of Commitment: adidas’
involvement was approved to the extent of two
days a week by one adidas representative
Nike Commitment: Nike contributed financial
resources of approximately 25,000 British pounds
each and meeting time of its representatives.
What they found
The conditions were “much worse than in MNEcontracted factories. It was like HSE standards from
the 1920s! Long-term planning just didn’t seem to
exist.”
Benzene was standing in open cans, with nearby workers
exposed to dangerous fumes and the potential for easy
spillage
Toluene-based substances instead of the now-standard
water-based substances
Unsafe, out-dated machinery, among other imminently
dangerous conditions.
Inspiration and Vision Setting:
Idea Generation/Inception
On first-time audit of potential new source, adidas
found 250 youth workers out of 2500 workers at a
factory.
However, while the SoE division was contemplating
its response, several dozen child workers were
immediately terminated!
adidas SoE staff now knew that something must be
done — and quickly — to avoid losing contact with
other youth workers, forcing these kids to consider
alternatives far worse than the work environment they
were forced to leave.
5
Solution: Required that the supplier –
Because of the sheer number of youth involved,
supplier established an education program on-site
for both 14-15 yrs (school) and 16-17 yrs (life
skills).
Education program is paid for by the supplier up
to the age of compulsory education.
During this time, the supplier continues to pay the
average monthly wage for the worker until they
finish school in order to make up for any lost
income that the worker’s family would have.
Solution, continued.
Also, the supplier agrees to provide a job for
the worker once the worker has completed
their compulsory education.
If the worker will not agree to participate in the
education program, the supplier can terminate
the worker.
Solution, continued.
Part of the motivation behind this standard is
that, if a supplier chooses to use children as
laborers and that supplier is caught, they must
pay the child plus send them to school; so it is
a negative incentive.
All paid for by supplier.
Nike: Overview
Founded in 1964 by Phil Knight as Blue
Ribbon Sports.
Based in Beaverton, Oregon
Has more than 22,000 employees and over 700
contracted suppliers in about 52 countries
throughout the world, employing more than
550,000 workers on any given day.
Nike Programs
Nike: Asia
Over 400 of these suppliers are located in Asia.
Nike has been in Vietnam through factory
partners since 1995
Nike currently employs more than 43,000
workers making 22 million shoes annually and
exporting apparel totaling over $450 million.
Nike production accounts for 8% of Vietnam’s
manufactured exports and 32% of its footwear
exports.
6
Program 1: After Hours
Education Program
Inspiration and Vision Setting:
Idea Generation/Inception
Established at the behest of the owner of a
Korean-owned supplier located in Vietnam.
Determined that the best program would be:
one that balanced worker interest, slots
available and the nature of the educational need
One that was coordinated in partnership with
the Ministry of Education to ensure GED
compliance where desired by the students
Nike Perspective
Nike currently participates in the after hours
education program by funding 50% of the
cost of the program to each supplier.
By investing matching funds ranging on
average from $15,000 to $20,000 per
supplier, Nike “can touch 300 people for a
lifetime.”
Integration, Establishment and
Implementation
Hires teachers and rents classrooms in local
educational facilities near the factories.
Program covers the expenses of each
student including books and other supplies
and a meal allowance.
All Nike footwear suppliers in Vietnam
have active education programs.
Factory Perspective
One of the factory owners involved in this program
identifies the program as a foundation for personal
development
“We would like to be able to promote from within and can
only do that once these workers have additional educations.”
In fact, this owner has already promoted several Vietnamese
workers to line management positions upon completion of
the education program.
He and his firm “ want to go beyond compliance, both for the
business relationship with Nike as well as for its own impact
on the workers and our organization. To achieve our profits,
we have to address the employees from an emotional
perspective, as well.”
7
Program 2: The Nike Jobs
and Microenterprise
Program
Nike Perspective
Though there is no direct financial gain for
Nike,
“the mircoloan program helps to create a more
healthy community, which then provides other
sources of income in the community, better
workers, and additional sources of support for
the families of current workers, raising the
whole village’s standard of living” (Nike’s
Chris Helzer)
Additional Components
The borrowers must submit a business plan and go
through basic business training and health
seminars before the plans and loans are approved.
The business plan must include a provision for
saving a part of the money earned and miniclasses are available to borrowers regarding good
saving habits.
An additional component of the program requires
children of borrowers to remain in school.
Inspiration and Vision Setting:
Idea Generation/Inception
Beginning in 1998, established a microenterprise loan
program to provide some support for women in the
communities surrounding its suppliers.
The inspiration or vision for the program originated in
Vietnam and was later expanded to include Thailand
and Indonesia.
The purpose of the program is to allow women a
chance to build small businesses that will ultimately
boost their family's economic well-being, as well as
contribute to the community's overall development.
Answering a challenge
Nike has a global prohibition against any sourcing of
their production outside a standard factory at all.
However, this might have the impact of discriminating
against women who, for social and cultural reasons,
have either chosen not to work or are not allowed to
work outside of the home.
Therefore, by prohibiting any outsourcing, these
women may not have any financial means to protect
their rights in other areas.
The microloan program can provide this financial
stability without outsourcing Nike manufacturing.
Current Status
Those receiving the loans included groups of
women who team together to borrow funding:
to raise small livestock
to produce incense sticks and other basic manufactured
items (garments), or
to tend to rice fields in the production of rice paper for
spring rolls.
More than 2,300 rural women and former workers
have received funds to help them in creating small
businesses and, in Vietnam specifically, there have
been no defaults on the loans.
8
Current Status
There have been approximately 3200 loans in place
with the average loan standing at approximately $65
Maximum loan = 1 million Vietnamese Dong (~ $75 US) and
the minimum loan = 500,000 VND (~ $37 US).
Total Nike investment to date has been approximately
3.5 billion VND ($244,755 US) which includes an
administrative fee paid to Friendship Bridge.
Usually women will borrow the minimum amount for
their first loan and increase the amounts for subsequent
loans.
Additional Programs Nike Cultural Diversity Training (Vietnam)
Dow Responsible Care Program (Thailand)
Pro-child Institute Partnerships (Brazil)
Levi’s (Guatemala)
Chiquita (Costa Rica)
Aventis (Bangladesh)
9