NYT: ‘As China’s Workers Get a Raise, Companies Fret’

June 2, 2011 § Leave a comment

The New York Times

By KEITH BRADSHER

Published: May 31, 2011

HONG KONG — Wages are surging this year inChina and among its main low-wage Asian rivals, benefiting workers across the region. But the increases confront trading companies and Western retailers with cost increases and are making higher prices likely for American and European consumers.

Bruce Rockowitz, the chief executive of Li & Fung, the largest trading company supplying Chinese consumer goods to American retail chains, said in a speech here on Tuesday that the company’s average costs for goods rose 15 percent in the first five months of this year compared with the same period last year. Executives at other consumer goods companies have encountered similar or larger increases.

Airline flights to Vietnam, Bangladesh, Indonesia and other low-wage Asian countries are packed these days with executives looking for alternatives to double-digit wage increases in China. But wages are rising as fast or faster in many of these countries, following China’s example, while commodity prices have surged around the world, leaving buyers with few places to turn.

Bangladesh raised its minimum wage by 87 percent late last year, yet apparel factories there are still struggling to find enough workers to complete ever-rising numbers of orders. “Everywhere you see signs saying ‘people wanted,’ “ said Annisul Huq, the chairman of the Mohammadi Group, a large Bangladesh garment manufacturer.

The Gap surprised financial markets on May 19 by announcing that a 20 percent jump in costs from suppliers by the second half of this year would depress its profits, prompting a 17.5 percent plunge of its shares the next day. Coach, the luxury handbag company, announced in January that it would try to reduce its reliance on China to less than half of its products within four years, from 80 percent now, by moving production to Vietnam and India.

Yet wages in Vietnam have been rising as fast as Chinese wages, or faster, while India has posed many problems for large-scale manufacturers. Mr. Rockowitz said that India’s infrastructure — roads and ports — was “really poor,” while labor issues, including government regulations, make it hard to build Chinese-style factories for tens of thousands of workers.

With costs rising in China and few alternatives elsewhere, “you have the perfect storm for raising prices,” said Bennett Model, the chief executive of Cassin, a Manhattan-based line of designer clothing. The company’s costs have risen 25 to 35 percent in the last year for cotton and fur garments alike.

Cassin has begun experimenting with garment production in Guatemala with some success, Mr. Model said, adding that many garment companies were still leery of buying from anywhere except China. “Everybody’s scared of the quality — you spend so many years training a factory” to meet detailed specifications, he said.

Yet with 14 million people, Guatemala has the population of only a single large Chinese metropolitan area like Shenzhen or Guangzhou.

Workers in developing countries all over the world are becoming more aware of pay elsewhere through the Internet and the use of social media like Facebook, increasing the pressure for higher wages, Mr. Rockowitz said.

Li & Fung handles about 4 percent of American retailers’ imports from China of virtually all kinds of consumer goods, according to investment analysts. The exception is electronics, which tend to be imported directly to the United States by other companies like Apple.

Mr. Rockowitz and other executives predict that the extremely high concentration of factories in southeastern China near Hong Kong will give way to a dispersal across the country in the next five years. Workers are becoming much more reluctant to spend up to three days on buses and trains from the interior to reach coastal factories, particularly when the growth of domestic spending in China is creating more jobs in the interior.

Even the recent opening of high-speed rail routes that cut travel times up to 80 percent has not been enough to revive the flow of migrants. “They don’t have to take a 1,000-mile trip to the coast — there’s a shortage of people, unbelievable,” said Douglas Hsu, the chairman and chief executive of the Far Eastern Group, a big Taiwanese multinational with extensive investments in mainland China.

And wages in China’s interior have been rising even faster in percentage terms than in coastal provinces, steadily narrowing what was once a pattern of much higher wages in coastal export zones.

Many companies have another reason for staying in China these days: that is where their sales are growing fastest. “If the market is in China, which in many cases it now is, there’s much less incentive to move,” said Charles Oliver, the senior partner of GCiS China, a market research company in Shanghai.

China has become the world’s largest market for a long list of products, like cars and steel. Producing and selling in China protects companies from later facing “Buy Chinese” policies, antidumping cases or other Chinese import restrictions.

Manufacturing in China allows companies to incur costs in renminbi, the same currency as a growing part of their sales. That insulates them from one kind of currency volatility even as the renminbifluctuates more against the dollar and euro.

Rising wages and strengthening currencies in Asia are making it less attractive to move higher-value industries like auto manufacturing out of the West. But little mentioned by almost anyone making or trading consumer goods in Asia these days is the possibility of moving these relatively labor-intensive manufacturing industries back to the United States or Europe.

Mr. Rockowitz was dismissive of the idea in his remarks on Tuesday at the Foreign Correspondents’ Club.

“The Western world does not have the work force to do this kind of business,” he said. “For ‘made in Italy,’ the workers are old now and there are no new workers coming in.”

The Guardian: Apple’s Chinese workers treated ‘inhumanely, like machines’

May 2, 2011 § Leave a comment

The Guardian UK

Gethin Chamberlain
Saturday 30 April 2011

Investigation finds evidence of draconian rules and excessive overtime to meet western demand for iPhones and iPads

An investigation into the conditions of Chinese workers has revealed the shocking human cost of producing the must-have Apple iPhones and iPads that are now ubiquitous in the west.

The research, carried out by two NGOs, has revealed disturbing allegations of excessive working hours and draconian workplace rules at two major plants in southern China. It has also uncovered an “anti-suicide” pledge that workers at the two plants have been urged to sign, after a series of employee deaths last year.

The investigation gives a detailed picture of life for the 500,000 workers at the Shenzhen and Chengdu factories owned by Foxconn, which produces millions of Apple products each year. The report accuses Foxconn of treating workers “inhumanely, like machines”.

Among the allegations made by workers interviewed by the NGOs – the Centre for Research on Multinational Corporations and Students & Scholars Against Corporate Misbehaviour (Sacom) – are claims that:

■ Excessive overtime is routine, despite a legal limit of 36 hours a month. One payslip, seen by the Observer, indicated that the worker had performed 98 hours of overtime in a month.

■ Workers attempting to meet the huge demand for the first iPad were sometimes pressured to take only one day off in 13.

■ In some factories badly performing workers are required to be publicly humiliated in front of colleagues.

■ Crowded workers’ dormitories can sleep up to 24 and are subject to strict rules. One worker told the NGO investigators that he was forced to sign a “confession letter” after illicitly using a hairdryer. In the letter he wrote: “It is my fault. I will never blow my hair inside my room. I have done something wrong. I will never do it again.”

■ In the wake of a spate of suicides at Foxconn factories last summer, workers were asked to sign a statement promising not to kill themselves and pledging to “treasure their lives”.

Foxconn produced its first iPad at Chengdu last November and expects to produce 100m a year by 2013. Last year Apple sold more than 15m iPads worldwide and has already sold close to five million this year.

When the allegations were put to Foxconn by the Observer, manager Louis Woo confirmed that workers sometimes worked more than the statutory overtime limit to meet demand from western consumers, but claimed that all the extra hours were voluntary. Workers claim that, if they turn down excessive demands for overtime, they will be forced to rely on their basic wage: workers in Chengdu are paid only 1,350 yuan (£125) a month for a basic 48-hour week, equivalent to about 65p an hour.

Asked about the suicides that have led to anti-suicide netting being fitted beneath the windows of workers’ dormitories, Woo said: “Suicides were not connected to bad working conditions. There was a copy effect. If one commits suicide, then others will follow.”

In a statement, Apple said: “Apple is committed to ensuring the highest standards of social responsibility throughout our supply base. Apple requires suppliers to commit to our comprehensive supplier code of conduct as a condition of their contracts with us. We drive compliance with the code through a rigorous monitoring programme, including factory audits, corrective action plans and verification measures.”

The Journey of My Favourite Jeans

August 30, 2010 § 2 Comments

This is the story of my favourite jeans. I bought the jeans a while ago at a Mexx store, and fell in love with them because they fit me so well and matched with many of my wardrobe items. Tonight I looked at them and wondered about their journey before they got to me, who might have manufactured them and in which country. So I decided to look it up:

I first looked at the label and discovered that they’re made in China, like many many other products out there. Naomi Klein devotes a small section to factory conditions in China entitled “Not Low Enough: Squeezing Wages in China” in her work No Logo. She says:

“[E]veryone’s wages are high compared to China [i.e. other countries that have major manufacturing zones]. But what is truly remarkable about that is that the most egregious wage cheating goes on inside China itself.

“Labor groups agree that a living wage for an assembly-line worker in China would be approximately US87 cents an hour…Yet even with [the] massive savings in labor costs, those who manufacture for the most prominent and richest brands in the world are still refusing to pay workers in China the 87 cents that would cover their cost of living, stave off illness and even allow them to send a little money to their host families. A 1998 study of the brand-name manufacturing in the Chinese special economic zones found that Wal-Mart, Ralph Lauren, Ann Taylor, Esprit, Liz Claiborne, Kmart, Nike, Adidas, J.C. Penny and the Limited were only paying a fraction of that miserable 87 cents – some were paying as little as 13 cents an hour.” (212)

Yikes!

I looked up Mexx to see whether its manufacturing practices would be considered similar to these other brands Klein discusses, and found that Mexx is in fact a division of Liz Claiborne. Klein specifically outlines the working conditions for two Liz Claiborne garment factories in China. The figures are from 1998, but they at least give a general idea of the conditions of the sweatshops. The Shanghai Shirt 2d Factory in 1998 paid workers 25 cents per hour, with 66 hour work weeks (12 hours a day, 6 days a week). There was no union and workers were fined if they did not work overtime. The Shanghai Jiang District Silk Fashions factory paid 28 cents an hour, with 60-70 hour work weeks (11.5 hours a day, 6 days a week).

So my jeans may have come from a worker not even paid a dollar and hour for her labour? And how much did I pay??? My being cheated is one thing, but the real crime is how little of that money reaches the worker who actually made the product itself. As a result of this exercise, I don’t really feel much of that love I previously held for those jeans. And the sad truth is that all of my clothes probably have a similar story.

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