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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.

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 hoursthe number of hours that workers are forced to work has actually increased in the past few years. All categories of the companies' Codes of Conducthealth and safety, freedom of association, wages and benefits, hours of work, overtime compensation, nondiscrimination, harassment and child laborare 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.

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.

Several workers recalled incidents of corporal abuse, but more common is punishment through fines. There was one case of a worker being fired because she had stayed up working overtime until 3am and then did not come to work the next day. There were other examples of dismissals without cause, such as workers fired for being "too old" (i.e. over 25) or for becoming pregnant. In the Chinese Labour Law, women are supposed to be protected in such circumstances. They are to be treated well when they are pregnant and given maternity leave. None of this is done in Wellco. Instead, pregnant women are treated with disrespect and are unjustly terminated.

Most of the workers at Wellco factory did not know that there was a Code of Conduct which the factory should be using. Several workers said they had heard of the Code, but that the factory simply didn't enforce it. We were told that when visitors come to inspect the factory, the workers and the supervisors are told in advance so that the factory is swept clean, and that if workers are interviewed, it is always in the presence of management.

Nike's Code says that workers should have the right to organise. However, the factory has no trade union, and although workers are allowed to make complaints to their supervisor, most worry about losing their jobs if they complain. In one case the supervisor was fired after a complaint against him was made, but in most cases, workers who complain are fired. Many workers feel that the factory does not think their rights are important.

There have been many wildcat strikes at the factory in the past two years. Usually, the workers strike because the factory did not pay them or because of the grueling work hours. In March 1997, the assembly production department went on strike because the factory did not pay them their wages. All the workers who went on strike were fired. In another instance, eight workers in the quality control department became angry with their supervisor and went on strike, but they, too, were fired. In 1996 the cutting department went on strike because of low wages, but when they requested a raise, management refused. Other reasons for striking in the past included long working hours and poor quality of food. On Chinese New Year this year, the factory gave workers only half their wage and they went on strike until management agreed to pay the full wage.

According to several workers, the factory employs children ages 13-15 in the sewing, handwork and cutting departments. This is a clear violation of China's Labour Law, which says no child under 16 is to be employed, and Nike insists it will not employ children under 15.


Nority International Group Ltd., A Reebok Subcontractor

Nority Shoe Factory is located in Dongguan, Chang'an County and employs 6,000-7,000 workers, most of whom are women. The factory is Taiwanese-owned and produces shoes for Reebok. We first investigated this factory in our 1995 study and found violations in wages, health and safety conditions. The present study reveals that few improvements have been made.

Reebok's Code of Conduct states that workers are not required to work more than a 60-hour week, and China's Labour Law stipulates a maximum of 44-hours, and overtime should be limited to one hour per day. At Nority, however, the normal work week, not including overtime, is 12 hours a day, six days a week, or 72 hours a week. The work is divided into three shifts: 8am-11:30am, 12:30pm-4:30pm, and 5:30pm-10pm. Without even considering overtime, this work schedule is in violation of both the Reebok Code and China's Labour Law.

On top of this grueling 12-hour schedule, workers are often forced to work an additional 2-5 hours of overtime. Refusal to work overtime could result in a fine of $7.23 to $21.67 (60 to 180Rmb), and a worker who refuses to work overtime three days in a row will be fired. Reebok's Code makes it clear that workers should have the freedom to choose whether they want to work overtime, as does China's Labour Law. Compulsory overtime at Nority is therefore a gross violation of both Reebok's Code of Conduct and the Chinese Labour Law.

Aside from long working hours, the work is also very stressful. Workers are given a quota to fulfill. Most say they are unable to fulfill their quota during work hours, and therefore they have to stay behind and work without pay.

Some workers said they were given four days off every month, while others said they only got one to three days off per month. As of May 1, 1997, Chinese law calls for Saturdays and Sundays off, but this is not respected at Nority.

The factory also fails to pay the legal minimum wage and the legal wage for overtime pay. The legal minimum wage in Dongguan is $1.93 (16Rmb) for 8 hours of work, but workers in Nority receive only $1.20-$1.45 (10-12Rmb) per day. The legal minimum for overtime pay is $0.36 (2.99Rmb) an hour, but at Nority workers only receive $0.27 (2.20Rmb) per hour which is $0.10 (0.79Rmb) below the minimum. This, too, is a violation of Reebok's Code.

The factory provides food and housing, but workers must pay for them. Housing costs $3.86 (32Rmb) per month and the workers complain that there are 12 people to a room and they share only one bath. Meals, which are not considered very tasty, cost from $4.82-$8.43 (40-70Rmb) per month. There is a transportation allowance $24.10 (200Rmb) for workers to go home to visit their families, but only after working for one year. After deducting their benefits and adding in overtime, most workers said that they made from $60.24-$72.29 (500-600Rmb) per month.

All of the workers who were interviewed were aware that there were safety regulations the factory should follow, but only half of them thought that the factory did so. The rest said they didn't know, or simply that the factory did not follow the regulations. There are fire exits and fire drills once or twice a year, but there is no protection around the machines, no face masks to protect the workers from dust and fumes in their work area, and most of the workers didn't know if the safety equipment they were given was up to standard. Most workers say that there have been accidents in the factory, and all of them state that no attention is paid to workers' safety. Finally, most of the workers say they have suffered from dizziness and other problems, and that many of their co-workers had the same problems.

The working conditions in the Nority Factory are clearly hazardous to the workers' health. There is serious dust and noise pollution, excessive heat, dangerous fumes (from glue, for example) and congestion.

Upon being hired, the workers had to pay one month's deposit, which is illegal under Chinese law. Moreover, while the money is supposed to be returned to the workers when they leave the factory, this only happens if they leave under favorable circumstances.

The factory is run like a prison labour camp . The workers must do mandatory calisthenics before work, and can be fined for missing them. Talking during work is not allowed, and again, they can be fined if they break this rule. As warnings for minor offences, the workers can be told to sweep the floors, but more commonly they are made to pay fines of $7.23-$21.69 (60-180 Rmb) per offence. This means that a worker might have to pay as much as 18 days worth of wages for something as small as missing morning calisthenics or talking to their co-workers.

All of the workers who were interviewed mentioned abuse of the workers by management. The workers are yelled at by their superiors, and well over half of the interviewed workers had been fined. Several said workers had been beaten by the security guards for leaving the factory premises without permission. The workers can also be fired simply for not exercising or for refusing overtime. Workers are also be fired for becoming pregnant. This is certainly in violation of the China's Labour Law, which grants maternity leave, yet Nority like many other factories in the area which employ women workers finds it easier to dismiss pregnant workers.

Reebok insists that the workers in their subcontracted companies should have full knowledge of Reebok's Code of Conduct. Reebok assures the public that its Code is translated into local languages and placed in common areas throughout the factory. Yet over whelmingly, the workers in Nority knew nothing about the Reebok Code of Conduct.

Workers at Nority are supposedly represented by the government-controlled trade union. However, only half of the workers who were interviewed knew there even was a trade union in their factory. Of those who did know, they all noted that the trade union was controlled by the factory owner and was not representing workers. This is in contrast to Reebok's Code, which says workers should have the right to freedom of association and collective bargaining.

In our 1995 shoe report , we noted that there were many strikes in the Nority Factory because of dissatisfaction over wages. However, such strikes were isolated incidents, and had never been successful in securing improvements. In the most recent round of interviews, wildcat strikes were again noted because of low pay, poor living conditions, and quotas which were too high. Once again, though, there have been few improvements.

In general, the workers are unhappy about the way they are treated and feel that the factory owners and supervisors pay little attention to their needs. The safety conditions, the work environment and the living conditions all suggest that the attitude of the supervisors is one of disregard for the workers' well-being. The flagrant violations of Reebok's Code and China's Labour Law at Nority should be of grave concern to Reebok, for it could seriously damage the company's reputation.


KTP Holdings Ltd.

KTP Holdings Ltd (hereafter KTP) has factories located in Bao'an and Dongguan counties. KTP produces mostly for Reebok, but also for other shoe companies such as Adidas and LA Gear. Orders from Reebok constitute 45-50 percent of KTP's business. The factory in Bao'an employs 4,000-6,000 workers, most of whom are women. Most of the workers are from Hunan, Sichuan, and Jiangxi provinces, and are 22-25 years old. The workers have generally been working in the factory for one to three years.

According to factory regulations, the workers have to get to the plant at 7:00am for morning calisthenics at 7:30am. Then they work from 8:00am to 12:30pm, have a 30-minute break for lunch, and then work from 1:00pm to 5:00pm. After dinner, they have to work overtime, usually until 10-11pm. "We eat so that we can work again. We have no idea of the time", one worker said. Most workers stated that they worked a 12-hour day, though one woman said she worked 16 hours a day.

Despite the law calling for Saturdays and Sundays off, workers at KTP get only two days off a month. It's even worse during the peak seasons, we were told, when they get no days off at all.

Overtime is compulsory. Workers said that if you refuse to work overtime, you will be fined $1.20 (10Rmb). However, the factory did not explain this to the workers when they were first hired, and China Labour Law and the Reebok Code of Conduct both state that workers should not be forced to work overtime.

The workers are paid by piece rate, and wages, including overtime, average $60.24-$72.29 (500-600Rmb) per month. Workers pay $9.04 (75Rmb) a month to live in the factory dorms. Child care, social security benefits, medical insurance and bereavement leave are not provided, although these are benefits stipulated under the Chinese Labour Law. Some workers said the factory gives them a health check-up once a year but 60 percent said they never had any check-ups.

Many of the workers thought that safety equipment and protective clothing were not necessary for their job. However, there have been accidents in the factory where workers' hands were cut off by the machines. A worker from the gluing section complained that the glue smells terrible and that there is not adequate ventilation in the factory. She explained that the fans were insufficient to get rid of the smell, and that the masks they got were useless because they were made of cloth. She also said that some of her colleagues had rashes on their hands and face, and that the workers in the gluing section often got sick.

Fines are common in this factory as well. For example, if you do not attend the morning exercise session, you are fined. All the workers said they could lodge complaints with their supervisors, but 40 percent said nothing would happen in such a case and another 40 percent said they did not know what would happen because they had never tried to complain. There is no trade union or collective bargaining in the factory, but we were told that there had been wildcat strikes over low pay.


Yue Yuen Industrial Holdings Co. Ltd., A Nike and Reebok Subcontractor

Yue Yuen Industrial Holdings Co. Ltd. is based in Dongguan, near the first Special Economic Zone in China. It is registered in Hong Kong and belongs to a Taiwanese shoe company, the Pao Chen Cooperative. According to a business magazine published recently in Taiwan, the Pao Chen Cooperative employs 140,000 workers in its shoe factories and is the biggest sports shoe producer in the world.

Yue Yuen was established in 1989 and has a contract to produce for both Nike and Reebok. It is a huge factory, employing 50,000-60,000 workers, most of whom have migrated from Hunan, Henan, Jiangxi and Hubei. About 80 percent of the workers are women 18-22 years old. All the workers we interviewed had been employed for less than one year.

Long working hours have become standard in the Special Economic Zone since it was set up at the end of 1970s. In Yue Yuen, workers work 10-12 hours a day six or seven days a week, not including overtime. This means that the workers work 60-84 hours a week on a normal schedule, which is at least 16 hours more than the limit set by Chinese law. Moreover, the fact that they must work six or seven days a week violates the law giving Saturdays and Sundays off.

Eighty percent of the interviewed workers said on top of the normal work day of 10-12 hours, they worked an additional 2 hours of overtime every day. Forty percent of the interviewed workers said that overtime work is compulsory and 75 percent mentioned that if they failed to work overtime, they would receive a fine or a warning. Although 60 percent said that the overtime work was not compulsory, they said that if you do not complete your daily quota, you had to stay behind to complete it. The Chinese Lab our Law and both the Reebok and Nike Codes of Conduct all say that they will not use forced labour. However, coercing workers into forced overtime--particularly after a working day already well over the legal limit--directly violates both the Codes and China's Labour Law.

Moreover, according to the China Labour Law Article 44, overtime pay should be at least 1.5 times the regular wage. In the survey, half the workers who were paid by piece rate did not receive any extra pay for overtime work. In addition, many workers did not know how much they got for overtime. Monthly wages ranged between $48.19 and $72.29 (400 and 600Rmb), including their overtime pay.

Social security benefits, health care, child care and bereavement leave were not provided by the factory, although they are mandatory by law. Health care is also not provided on a regular basis, and less than half said health check-ups were given by the factory.

According to the interviews, 80 percent of the workers said they did not need any safety equipment or protection for their jobs. However, many workers recalled accidents which had occurred in the factory, particularly workers' hands or fingers being cut off by the machines.

While workers said that the ventilation in the workplace was acceptable, they complained about noise, air pollution and fumes. Many of them have skin irritations, and several suffer from dizziness and headaches.

The workers in Yue Yuen have to participate in mandatory calisthenics every day. Unlike workers in other factories, they are allowed to talk to their coworkers while working, and the management does not use corporal abuse. However, verbal abuse and fines are popular methods of punishment. Many workers mentioned that for minor offences, the fines were $3.61 (30Rmb), but for major mistakes the fines could be as much as $10.84 (90Rmb).

Most of the workers said they could make complaints to their supervisors but half of them did not know what would happen if they did because they themselves had never complained. The government trade union does exists at the Yue Yuen factory. Sixty percent of those interviewed recalled strikes that had occurred in the factory, usually because the factory had not paid the full wages.

Almost all of the workers in the Yue Yuen factory who were interviewed had no knowledge of the Nike or Reebok Codes of Conduct. The workers who thought they knew about the Codes were often confusing them with the ISO9002, the international quality control standards which products must meet in order to be exported. It is clear that the companies are not making their Codes available, as they claim they are.


Andrew Young's Assessment of Nike: A Response

In researching and writing on the working conditions at factories in the Pearl River Delta, our ultimate objective is to contribute to the improvement of the working conditions and the position of the workers. One tool which is widely discussed as a means for improving such conditions is individual companies adopting codes which their suppliers are required to follow. There is much controversy about the effectiveness and value of such codes. A case in point is the study by Andrew Young commissioned by Nike, which set out to review Nike's compliance with its Code. As the Young report directly addresses many of the issues raised during our research, we felt it appropriate to respond in detail to Mr. Young's findings.

While the rights promised in companies' codes of conduct often mirror the rights we are calling for, there seems to be a wide gulf between the codes and the reality of conditions in the factories. Moreover, the companies' oversight of these conditions too often falls short of their promises. Critically reviewing the Young report in light of our research may highlight some of the problems of codes of conducts and suggest some alternatives for improving workers rights.

In June 1997, Andrew Young published his monitoring report after inspecting 12 Asian suppliers of Nike shoes. His overall finding was that "Nike is doing a good job in the application of its Code of Conduct, but Nike can and should do better". Young concludes that the 12 factories he visited in Indonesia, Vietnam and China were "clean, organized adequately ventilated and well lit." Moreover, he found no widespread or systemic abuse or mistreatment of workers.

Given the short time he spent in Asia and the fact that he does not speak the language of the workers, it is doubtful whether Young could gain a reasonable understanding of working conditions or the confidence of the workers. Young took only 12 days to visit the three countries, and spent only 3-4 hours at each factory. Discussions with workers were all conducted on the factory premises and translated by Nike interpreters. In a meeting with the staff of Hong Kong Christian Industrial Committee in Hong Kong, Young admitted the limitations of his discussions with workers. He failed to admit these limitations, however, in his report.

The problem is not only interpreters, but Mr. Young himself. Chinese workers do not know who Andrew Young is, and probably assumed he was part of the company. Workers naturally assume that a well-dressed foreign visitor who is introduced by management in the confines of the factory is connected to the company. In these circumstances, most workers would fear punishment if they shared their true feelings. Moreover, in our research, workers told us that management informs them beforehand when visitors are coming and asks them to behave well and clean up the work place. It would not be surprising if workers had been informed about Young's visit before his arrival. Under such circumstances, how can workers be expected to freely express their true concerns and feelings?

Mr. Young, not being familiar with conditions of shoe production in China, also overlooked key issues. It seems that Young was unaware of the sub-contracting system used by producers in China. Many big factories sub-contract part of their business to small partners on a regular or irregular basis, often to small township and village enterprises (TVEs). The working conditions in TVEs in China are notoriously worse than in other factories and have aroused serious criticism. According to government statistics, one-third of TVEs violate official standards on health and safety.1

Workers at two of Nike's suppliers in our survey of the footwear industry confirmed that their factories sub-contract work out to other factories. Our staff also witnessed workers producing Nike shoes for a Nike supplier who were not employed by the main contractor. Of course, multi-levels of sub-contracting are often even difficult to identify, and make the monitoring of Nike's Code of Conduct extremely complex and incomplete. In Young's report, however, there is no mention of this sub-contracting system and the problems it creates for monitoring.

Another problem in China is that many factories that have the factory on the ground floor, the warehouse on the second floor, and the workers' dormitories on the third floor. These "three-in-one buildings", as they are called, are now illegal because they have proven to be dangerous fire hazards. Many workers have died in their dormitories when fires break out below them.

Despite the ban, such factories are still found among small TVEs as well as in big joint ventures and foreign enterprises. For example, three years ago, a big supplier of Nike and Reebok was found to have its dormitory inside or on the roof of the factory building. Mr. Young failed to investigate whether Nike shoes were still being made in such dangerous facilities.

On the issue of health and safety, Mr. Young was silent about the use of hazardous chemicals, which is a common problem in factories in China. A 1997 report by the Shenzhen Labour Protection Supervision Department on 10,942 factories, revealed that 54 percent were handling dangerous chemicals; 28 percent of the factories did not have any protection measures installed while 45 percent had sub-standard protection. The footwear industry is a prime user of dangerous chemicals. It is well known that glue is indispensable in the production of footwear products, and many glues present serious health risks to workers. Benzene, a glue which is a recognised toxic chemical and is banned in the United States, is widely used in China. The factories also use large quantities of thinners, which can cause cancer of the blood.

Another issue Mr. Young totally avoided is the issue of wages, saying that it was beyond the "technical capacity" of his small company and that it was "not reasonable" to ask any one particular US company to pay US wage levels abroad. Meaningful wage reform, he said, can only be achieved "through national law or international standards." But Mr. Young is distorting the arguments raised by Nike's critics. The critics are not calling on the company to pay US wages to its Asian workers, but to simply pay a living wage for the country in which they live. This is obviously significantly below the US wage, but it is also usually above the minimum wage as set by local governments. Companies such as Nike that have such enormous profits should certainly pay workers wages that allow them to meet the basic needs of their families for food, housing, transportation, clothing and health care, and to accumulate savings.

Nike does not admit that it has a responsibility to pay a living wage, but it does say in its Code that workers should earn at least the local minimum wage. Even if Mr. Young refused to address the living wage issue, he was obligated to examine whether laws regarding minimum wage and overtime pay were being respected, as stipulated in Nike's Code of Conduct. But he failed to do this and therefore overlooked very serious violations.

The two Nike's suppliers we examined in this study, Wellco and Yue Yuen, violated China's minimum wage laws, particularly in regards to overtime payments. Out of 20 workers interviewed, only one was paid the legally mandated wages for overtime. Moreover, arrears in wages and illegal deductions and withholding of wages were prevalent. Seven out of 10 workers from the Wellco Factory complained of illegal withholdings of the first month's salary as a "deposit"2. Our previous research revealed that many of these deposits are never refunded to the workers.

Young also did not address the issue of workers being fined for things like arriving late or talking to co-workers during work time, fines that often amount to a substantial portion of their salary. Though China's Labour Law clearly states that fines cannot be deducted from salaries, it is a well instituted practice in nearly every factory in the Pearl River Delta, including the Wellco and Yue Yuen factories.

Forced overtime is another endemic problem in the Pearl River Delta. In our study, every factory we examined "requested" workers to work overtime. The voluntary nature of this request is laughable, as workers who resist overtime work are fined and even dismissed. China's Labour Law states that overtime work should be optional and management must gain workers' agreement in advance.3 Moreover, the fact that workers usually work 11-12 hours a day, with only two days off a month, is clearly in violation of Chinese labour regulations.4

In general, Mr. Young's report is misleading and does not present a clear picture of the conditions in the factories. While Mr. Young concluded that there was "no widespread or systemic abuse or mistreatment of workers", we rigorously disagree. Nike subcontractors are consistently violating numerous regulations in China's Labour Law and Nike's Code, which constitutes a systemic abuse of workers.

Despite his rosy view of factory conditions, Mr. Young does make some positive recommendations. He calls on Nike to disseminate its Code to all the workers, to enforce a better grievance system to channel workers' complaints, to strengthen its relationship with human rights and labour groups, and to consider some type of ongoing "external monitoring."

We applaud these recommendations and hope Nike will take appropriate action to implement them. However, the recommendations do not go far enough (see our recommendations below).


Conclusion and Recommendations

Both Nike and Reebok insist that the workers who make their products should be treated with "respect and dignity." Clearly, this is not true in the case of Chinese workers. As leading international corporations, U.S. sports shoe companies should play a positive role in improving human rights in China. They should become an example for others to follow.

This is what President Bill Clinton promised when he de-linked the granting of the Most Favored Nation status from human rights in China. Mr. Clinton insisted that US capital would have a positive effect on the development of human rights in China, but we have yet to see these positive results. We call on the shoe companies to accept their corporate responsibility by taking immediate measures to dramatically change the situation of the workers in Chinese shoe factories. We hope that both Nike and Reebok will seriously consider the recommendations we have outlined below. We look forward to working with both companies to institute changes that will allow the hard-working women and men who make their shoes to live with the "respect and dignity" they so deserve.

We call on Nike and Reebok to take immediate action on the following issues:

  • Ensure that the factories start to pay workers the legal minimum wage and provide compensation to workers who have been cheated out of their rightful wages;
  • Totally eliminate any forced overtime, eliminate all excessive overtime (i.e. overtime that violates the Codes and the law) and pay the legal overtime rate;
  • Stipulate that all workers must be given pay stubs upon receiving their wages so that they can see what they were paid for, at what rate, and what deductions were taken out;
  • Immediately return all deposits illegally taken from workers upon their hire;
  • Eliminate regulations that prohibit workers from talking to their coworkers;
  • Stop making morning calisthenics mandatory;
  • Stop the illegal procedure of deducting disciplinary fines out of workers' paychecks;
  • Investigate any allegations of beatings by security guards and other abusive treatment;
  • Cease firing workers who are pregnant and provide them with their legally mandated maternity benefits;
  • Provide childcare, social security benefits, medical insurance and bereavement leave, as stipulated under Chinese Labor Law;
  • Eliminate the quota system or reduce it to an amount that can be easily accomplished in an 8-hour day;
  • Undertake a health and safety review of factories with regard to dust and noise pollution, heat, fumes and congestion and provide companies with a 6-month plan to improve conditions;
  • Make public a list of accidents and work-related illnesses that have affected workers in the past three years, what measures have been taken to prevent them, and how workers were compensated;
  • Rehire workers who have been unjustly fired for participating in strikes or for efforts to improve factory conditions, and compensate them for lost back wages;
  • Eliminate child labour by seeing that any workers under the age of 16 are provided with a stipend to go back to school and are guaranteed their jobs back when they are of legal working age;
  • Provide materials and workshops to educate workers about the companies' Codes of Conduct;
  • Allow outside groups to provide education and awareness-training to workers about local labour regulations and workers rights, and ensure that workers who choose to attend such programs are not punished;
  • Set up a compensation fund for workers who are injured or killed on the job;
  • Ensure that all chemicals used in the factories are clearly labeled in the local language;
  • Pressure the subcontractors and government officials to allow workers the right to freely organize.

The factories should be asked to make these changes to comply with the law and the companies' Codes within a period of six months. An external monitoring group made up of Hong Kong labour groups and independent experts should be set up immediately to work with management on these changes. If insufficient progress has been made at the end of the six-month period, then Nike and Reebok should cut orders to those factories that have failed to comply.

  1. Nike's Code of Conduct allows for a 48-hour work week with only 12 hours of overtime. This would be six working days of eight hours each, excluding overtime.1 G. Greenfield and A. Leong, "China's Communist Capitalism: The Real World of Market Socialism", in Leo Panitch (ed.), Ruthless Criticism of All That Exists: Socialist Register 1997 (Suffolk: The Merlin Press, 1997), pp.106-115.
  2. Document 118 (1994) of the Labour Ministry (March 4, 1994) states that no enterprises are allowed to require a deposit from workers upon the commencement of work.
  3. See Article 41 of the Chinese Labour Law.
  4. Article 41 of the Labour Law also states that overtime should be limited to one hour per day. Under no circumstances can overtime exceed three hours per day and 36 hours a month. Article 38 states that workers should receive at least one day off per week.