Nike Shoe Factory Controversy Essay, Research Paper

Nike Shoe Factory Controversy

There has been a lot of controversy lately about the working conditions and low wages in overseas Nike shoe factories. This controversy has affected thousands of overseas workers, hurt the economy of Indonesia, decreased the gross revenue generated by the Nike Corporation, and lowered the overall opinion of the corporation. Nike has worked diligently to combat this controversy and help find a solution to end this controversy and help everyone involved. The purpose of this research is to provide a clear view of the controversy, a history of the events that lead to it, and solutions for the whole ordeal.

In 1957, Phil Knight and Bill Bowerman met at the University of Oregon in Eugene. In the early sixties, they formed a company named Blue Ribbon Sports, which they ran from Knight s mother s laundry room. Then Phil Knight purchased two hundred shoes from the Japanese shoe company Asics. Knight and Bowerman designed the first two Nike shoes called the Cortez, named after the Spanish conquistador, and the Boston, for the Boston marathon. Business kept growing into the 1970 s; they changed the name to Nike, after the Greek goddess of victory. The swoosh design was made by Carolyn Davidson and was sold to Nike for $35.00. In 1973, Steve Prefontaine became the first major track athlete to wear Nikes. He helped to convert many athletes to wearing the young company s shoes. In the 1980 s, Nike decided to go public with 2000 shares of stock. Nike became the number 1 seller of shoes in Canada and the company reaches out and forms Nike International Ltd to service more than forty foreign countries. In 1985, the Nike Air Jordan court shoes are introduced with a whole line of apparel. With the Air Jordan, Nike is established as the technological leader in the industry. In 1987, Nike introduces a new ad campaign called the Revolution. In causes a lot of controversy due to the Cold War and fear of communism. Nike receives a small dip in their gross revenue. In the 1990s, Nike spends more than $100 Million in advertising alone (Acaria). In the late 1990 s, the popularity of what the industry calls brown shoes took off; these shoes took away twenty percent of athletic shoes sales and Nike s profits dropped 69% in the one quarter (Jenkins 1). Nike saw a few drops in revenue but overcame them and now this controversy has caused a drop itself.

The controversy about the conditions and wages in the Nike factories has several different parts and findings. There have been allegations that Nike has been dogged for most of the decade by well-documented charges that its closely controlled contractors pay sub minimum wages, prefer countries with regimes that suppress labor organizing, expose workers to hazardous conditions, demand long working hours and even physically abuse employees at Nike s Southeast Asian factories (Moberg). To break these allegations down some more, it has been alleged that 13-15 year old children have been working for up to 17 hours a day making the equivalent of $0.15 an hour. There were also allegations that there was physical and verbal abuse in the workplace. More than 2,000 workers (57% of respondents) indicated that they had seen workers being shouted at or mistreated by supervisors or managers. Examples of verbal abuse given by the workers included the Indonesian equivalent of phrases like Fuck You! You Idiot! , You Whore! and You Pig! Examples of mistreatment included wage deductions, having their ears pulled, being pinched or slapped on the buttock, being forced to run around the factory yards and having to stand for hours in factory yards (being dried in the sun ). Workers also complained that they are forced to work excessive amounts of overtime, that it is often extremely hot in work rooms, that access to drinking water is limited and that they receive very low wages (Bissell 1). To add to all these allegations, there were also allegations that there was bad air quality in some of the factories. There had been a violation of the OSHA guidelines for exposure to certain VOCs or volatile organic compounds. Over the years of investigation, there had been an improvement, but they fail to take in account the affect these toxic gases had on women s health, especially since women make up 80% of the workers (Bissell 12). The allegations regarding low wages are spread out throughout Eastern Asia. Workers at the Lian Thai factory in Thailand only receive the minimum wage of 162 Baht ($US4.25*) for working an 8 hour day and say they need about 200 Baht ($US5.25*) just to cover the basic needs of one person (Bissell 10). In Indonesia, the minimum wage first year worker only receives Rp250,000/month ($US34*). Though these allegations are very tough and have hurt Nike s revenue and could possibly hurt them more, there are some who have a different opinion on this sweatshop labor. Bill Buford says, Garment factories, occasionally referred to as sweatshops are a traditional feature in the immigrant experience in the U.S. While the pace is brisk, immigrants can find opportunity in sweatshops that they would be unable to find elsewhere (Buford 1). It has also been said that it is so difficult to control the rights of the individual countries so unstable as the ones mentioned. Ronald Blackwell calls Vietnam, China, and Indonesia, three of the most difficult countries in the world for ensuring workers rights (Dionne 2).

In response to all these allegations, Nike did many things. They increased the age requirement to work at a factory to 18, increased wages 70% for entry level workers, joined the Global Alliance for Communities and Workers, and changed footwear manufacturing to a water-based method to improve air quality. In the statement issued by Nike, available on Nikebiz.com, it says, No contract worker making Nike footwear product can be under the age of 18. No contract worker making Nike apparel, equipment or accessories can be under the age of 16 (Nikebiz 1). They also issued a statement regarding the wage increases. all 11 Nike footwear factories in Indonesia raised the wages of all entry-level workers (approximately 37% of the total workforce or 28,000 workers) effective April 1, 1998, from Rp172,500 to Rp200,000/month, exclusive of bonuses, allowances, or overtime. In October of 1998, Nike implemented a 25% wage increase for our footwear workers to alleviate the effects of the crisis, moving the minimum wage from Rp200,000 to Rp250,000/month (Nikebiz 1). Also when the Indonesian government raised its cash minimum wage to Rp231,000/month, Nike increased their minimum wage from Rp250,000 to Rp271,000/month. All but one of the other apparel factories also met this new minimum wage. Another step Nike took was to join with the IYF, the International Youth Foundation, and form the Global Alliance for Workers and Communities. The goal of the Alliance is to involve local Non-governmental Organizations (NGOs) in the assessment of workplace conditions through interviews, focus groups, and surveys of the workers themselves (Nikebiz 4). This will help them to find out about their work experience and the worker s attitudes. This Alliance also will make sure the factories implement a new water-based method of footwear manufacturing to improve the air quality in the factories.

It has also came to light that Nike pays Michael Jordan $20 million a year for use in advertising, but only pay $2.43 in labor per pair of shoes produced. The answer to this is that Michael Jordan is incredibly more productive with advertising than a worker in Indonesia or any other Eastern Asian country. And low productivity means being paid a lower wage.

There were many economic impacts on Indonesian economy and other Eastern Asian economies. First, the raising of the minimum wage in Indonesian Nike factories lead to Indonesia raising their minimum wage as a whole. This caused an increase in the standard of living in Indonesia. Nike also raised the minimum wage again to help alleviate the affects of the Asian economic crisis. This crisis was caused by insufficient supervision of domestic financial markets, local regulation that sheltered industries from the vast changes in the global economy, new technology that collapsed borders, the emergence of powerful new competitors–in particular China for Asia s now tattered tigers, and the integrated global flows of money and information. But at the core of the crisis is the excess investment in insufficiently profitable assets, and since the cash flows were inadequate to service the debts incurred to make these investments, a cycle of defaulting killed Asia s growth. Though these increases in the minimum wage increased the wages from roughly $0.15 an hour to $0.20 an hour, any increase is good for them and increases their standard of living.

In response to Nike opening factories in places where the citizens are not likely to form unions, Unions are not the best things for productivity. Unions should be used in a way to help the worker, if the worker is experiencing terrible conditions then they could be implemented. But, in country s where the citizens complain about slave wages a union may not be the best idea. It is basic theory that the power of a group is stronger than the power of an individual. This also includes the power to be less productive and not work as hard. Low productivity and low wages go hand in hand.

In conclusion, Nike revenue has been hurt from these allegations of sweatshop labor, low wages, bad working conditions and etc. Nike has been following the guidelines given to them by OSHA and the Global Alliance for Communities and Workers. They have raised the minimum wage to increase the standard of living for their workers. And hopefully through these efforts they will better the lives of their workers and reestablish the good name of Nike.

Works Cited

Bissell, Trim Response to Nike s claims to have reformed it s labour practices. March 15 2000. contents 15 march 2000.html.

Buford, Bill Sweat is Good. (sweatshops in the U.S.) The New Yorker, April 26, 1999 v75 i9 p130(10).

Dionne, E.J. Jr. A victory over Nike: and a win for sweatshop workers. Commonweal, june 5, 1998 v125 n11 p7(1).

Jenkins, Holman W. Jr. Business World: The Rise and Stumble of Nike. Wall Street Journal; New York; Jun 3, 1998.

Moberg, David Bringing Down Niketown: Consumers can help, but only unions and labor laws will end sweatshops. The Nation, June 7, 1999 v268 i21 p15.

www.nikebiz.com/time.shtml

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