There is quite a big stink being made over a story that first appeared in the London Mail on Sunday newspaper and is now available online. The charge leveled is an old, worn out one about sweat shops in China; the latest twist is that Apple is making a killing from IPods profiting from the abuse of Chinese laborers. Mark Graban has written on it, taking Apple to task, and a lot of folks see it the way he does way. I am a bit more skeptical.
For one thing, most of the anti-sweat shop noise is generated by folks highly motivated by an ulterior agenda. For example, if a factory opposes union organizing efforts, that, de facto, makes them a sweat shop in most circles, no matter what the wages and working conditions might be. Note that a lot of the funding for the anti-sweat shop crowd comes from American labor unions who have an obvious interest in driving foreign wages up and pressuring companies to manufacture everything here- within the reach of their organizing efforts.
Mark wrote, "American companies used to treat people this way, but conditions improved. You have to give credit to labor unions for that, as much as we love to criticize unions." I have great respect for Mark, but I think he could not be more wrong with that statement. Workers ‘rights’ in the U.S. – minimum wages, work hour restrictions, workplace safety, overtime pay, retirement benefits and protection against discrimination – were all assured by the government long ago. If the unions had been successful, all of those laws passed in the 1930’s would not have been necessary. Unions are dying on the vine precisely because workers realize that they have nothing to offer. Why pay dues when the government and the employer have it all covered?
The anti-sweat shop crowd, however, is driven by an ideology based on the principle that all employers, especially all manufacturing employers, are inherently evil and left uncontrolled they will always be abusive to employees. That is absurd. By the criteria laid down by the Worker’s Rights Consortium – the gang all of the colleges belong to in their anti-sweatshop crusade – Toyota in Georgetown is a sweatshop. They say a factory "shall recognize the union of the employees’ choice". If it doesn’t, it is branded a sweatshop and the products made in it cannot be bought or sold on American college campuses. More important, the colleges will not license their logo to appear on any goods from that plant. Global Exchange (At least give them credit for being right up front about it) states, "A sweatshop is any factory where workers’ basic human rights to form independent trade unions are violated."
The other interesting criteria for sweat shop classification is environmental compliance. Ann Coulter is a conservative writer who has skewered the liberal community for hiding behind tragic victims to make their case. Because the mothers of Iraq war dead and widows of 9-11 are such sympathetic figures, no one can criticize their liberal political views without appearing to be cruel and insnsitive. The environmentalists are following the same practice. Certainly there should be environmental standards for manufacturing, but that is a separate issue from sweatshops. Co-op America lambastes what it has classified as sweatshops, in the course of pursuing "economic action for a just planet". But everywhere you look in its organization you find that its primary concern is really the conversion of all manufacturing to its definition of a "green business". The way to get off of their sweatshop list is to comply with their extreme environmental agenda, and if you do not support their environmental agenda, then you care nothing for the poor young girls who comprise the sweatshop workers in the world
All of this seriously undermines the credibility of those who cry about sweatshops. The problem with the Apple article is that it falls into the same logical hole the caring – very wealthy, but caring – young ladies from Wellesley College fell into a few months ago. The Wellesley Association of Labor Rights Activists got together a few months back to put on their fourth annual "Sweatshop Simulation. The girls worked for 12 hours "under fluorescent lighting, loud constant factory noises, and heat". They received two bathroom breaks and a lunch break, and received "wages in cash comparable to those of an overseas sweatshop worker." The purpose was to "raise awareness about sweatshops".
The median house value in Wellesley, Massachusetts is $600K and the average household income is almost $200K. Wellesley is one of the most expensive colleges in the land – almost $50K a year. I imagine the "wages in cash comparable to those of an overseas sweatshop worker" were a bit of a shock to the Wellesley girls. For that matter, had they been paid the "wages in cash" a factory worker here in Tucson would have earned, it probably would not have covered the tab for an evening at the sushi bar at the China Sky restaurant in Wellesley. I also imagine that twelve hours of legitimate work "under fluorescent lighting, loud constant factory noises" would be a pretty rude awakening to a young woman whose daddy can spring for a Wellesley degree. On the other hand, 12 hours wages paid to the guy who mopped up the Wellesley ‘factory for a day’ at the end of the event would go pretty far in Shenzhen – the site of Apple’s crimes. Paying Chinese wages in wealthy Boston suburbs hardly teaches useful economic lessons.
The point is that before you get too worked up about sweatshops, you need to do two things: Consider the source of the information; and Try to look at it from the right perspective. I have been to the Shenzhen Economic Enterprise Zone and to the city of Shenzhen and I can help with the perspective. The author of the Apple story left out a few important points.
You can start to get a feel for things by looking at a map. A short train ride from Hong Kong – the capitalism center of the world and the site of a deep water port of gargantuan scale – through the New Territories puts you in Shenzhen. Hong Kong was part of the UK until 1997, and the Shenzhen EEZ was created in order to have a place in China set aside for industrialization that was accessible from Hong Kong. There really were two borders. The first is the one between Hong Kong and the Shenzhen EEZ, and the second is between the Shenzhen EEZ and real China. The EEZ is really an industrial no man’s land with less Communist control in order to make it more accessible for business.
There are a lot of factories in the Shenzhen EEZ – I mean a lot of factories. There are plenty of people in China to work in them, but not nearly enough in Shenzhen. Manufacturers fill the void by recruiting in the extremely poor rural villages to the west. The standard arrangement is that a young person signs up for a year to work in a factory. Included in the deal are room and board, health care, and uniforms, along with wages. The factories are walled compounds with three separate dormitories within the walls: One for the men, one for the women and one for the managers (all men). Security is tight partly to keep the young folks from getting any wild ideas and leaving to explore the surrounding area, but mostly to keep the rest of China out. The Shenzhen EEZ is a pretty wild, lawless area. You would not want your sister working in a plant in the EEZ unless you were sure there were sturdy walls and tight security to keep her in and the bad guys out.
Since there is nothing to spend money on, wages are either held by the company until the year is out and paid in a lump sum, or sent back home to mom and pop – whichever was the deal going in. Also included in the deal is a round trip bus or train ticket. The contracts are timed to expire at the beginning of the Chinese New Year holiday when the factory shuts down and everybody goes home. The employees are promised a bonus, usually a month’s pay, if they return at the end of the holiday for another year. The return rate is critical to the manufacturers for obvious reasons, and they go to great lengths to keep it high. Despite the widespread belief that the Chinese use people up and toss them out at will, the fact is that Chinese managers understand the value of a trained and experienced workforce as well as anyone. They cannot profit if they must retrain an entirely new workforce every year. The best companies – like Johnson Electric – see return rates after the holiday in the 90-95% range or better. Most companies view 75% as about as good as can be expected.
They do have company issued uniforms, and they have mandatory workouts – kind of like P.E. class – for health reasons. Sick employees are bad for business. They keep the boys and girls apart as much as they can out of a sense of cultural morality, as well as for sound business reasons. It would not go over well back in the village to have little Suzie Wong come back pregnant after her year at the factory. Of course, the boys and girls devote a great deal of effort to beating the system and finding ways to socialize.
Is it a lousy system by American standards? Of course. Are the workers underpaid by American standards? You bet. Do they work long hours by American standards at tough jobs? Certainly. How about by Chinese standards? You have your answer when they vote with their feet every year. The vast majority come back again and again of their own free will.
And how bad is it really? Let’s see … institutional food, mandatory physical workouts, fenced in for a year, no inter-gender fraternization, mandatory uniforms, lousy pay, airtight security, and a wad of cash at the end if you’ll agree to do it again … sounds like the deal my son has in the U.S. Army, only without anyone shooting at you.
Of course there are miserable, wretched, legitimate sweatshops in the world, but a typical Chinese factory isn’t one of them, and the factory in the Shenzhen EEZ making IPods isn’t either. It is just a some uninformed people, or people with a special agenda, taking shots at Steve Jobs and Apple.
A more important sweat shop story hit the news recently that carries a far more significant message for the lean manufacturing community. Right Foot Forward For Child Labourers from the BBC talks about clamping down on using child labor to sew soccer balls in Pakistan. Rizwan Dar is the Neanderthal who used to make money by abusing kids. The people studying evolution should make a lab monkey out of him – he is proof that Neanderthals have the ability to learn tricky concepts. Said this Director of Saga Sports, the world’s largest soccer ball maker, "Ultimately it paid us back." He finally figured out that when he stopped using ten year old kids, the quality of the product went up and the cost went down.
A serious business knows that lean manufacturing principles render significantly lower costs and better quality every time. We could have told the slow-to-learn Mr. Dar that employing and engaging the best people and fairly compensating them for their contribution would yield greater profits for Saga Sports. It would have saved thousands of Pakistani kids years of hardship – and made a lot of money for Mr. Dar.
Sweatshops are not a cost cutting approach to manufacturing; they are a waste of skilled resources that can never succeed in the long term and no lean manufacturer would be stupid enough to run a sweatshop or buy from one. Trained, respected employees always produce better products at better costs than ill treated ones. Whether there is a local version of OSHA or not, a 5S plant is always more cost effective and productive than a dark, dirty, oppressive place. Does Walmart buy from sweatshops like the aforementioned sites assert? Judging by the fact that most retailers have a cardboard box below the register to hold store returns, while Walmart has pallet rack behind the customer service desk, I suspect they might be guilty as charged.
Here’s the bottom line: What a reporter from London, a starry-eyed girl from Wellesley, an environmental extremist, or a union organizer has to say about sweatshops should mean nothing to a world class manufacturer. Just be sure to source from companies that are truly lean, and your non-lean competition will end up on the business scrap heap, and they will take the last of the true sweatshops with them.