Just Doing It

Inside Nike's new-age Sweatshop

Multibillionaire Nike founder and CEO Philip Knight has made himself the sixth-richest man in America by coming up with the idea in the early '70s of producing athletic shoes in Asia for American - and now worldwide - consumption. Nike itself has never built a factory or made a single shoe: That's the task of transnational contractors, mainly Korean or Taiwanese. But by catching the crest of the running wave, and combining cheap labor, athlete-influenced design, and multimillion-dollar endorsement deals with figures such as Michael Jordan, Andre Agassi and Tiger Woods, Nike climbed to the top of the heap. Nike doesn't simply sell shoes, of course, but an image: It's irreverent, hip and progressive. Its ads tout women's empowerment; the company has signed on to a recent White House "no sweatshop" agreement.

That's why Nike's labor record has been like a disfiguring disease creeping across the image, one that Nike could cure if it were not so hooked on the profits from the firm's relentlessly hard-driving, low-balling treatment of the people who make its sports gear. Nike moves where the work is cheapest: Over the past decade, as labor costs rose and workers formed stronger unions in Korea and Taiwan, Nike and its contractors moved their production to Indonesia and China, which together now produce 70 percent of Nike shoes, and more recently to Vietnam, Thailand and the Philippines. There have been repeated reports of Korean and Taiwanese contractors in China, Indonesia and Vietnam hitting, verbally abusing and humiliating workers. Nike contractors often have not paid already-inadequate minimum wages, provided mandated benefits, or allowed minimally humane breaks during long hours of overtime that can double the normal 40-hour week in Indonesia. One group of Indonesian contract workers who had to strike in 1992 just to win legally mandated minimum wages is still fighting to get its jobs back.

The search for the lowest wage doesn't figure prominently in the company's own account of its peregrinations. Benson claimed that Nike had come to countries like Indonesia simply because it needed "more production [ and ] more diversity." After a little prodding, she acknowledged, "Labor costs are important, but you can't forget materials costs, taxes. There are many factors to consider."

But the visit to Nikomas, as well as interviews with workers and nongovernmental organizations, confirms the view that, despite efforts to improve both its image and aspects of factory reality, Nike is a gratuitously tough boss, even by the hard-nosed standards of the competitive market. Its business practices still clash with the code of conduct it promulgated in 1992 to counter bad publicity. (At Nikomas, only half the code is on public display, omitting the provisos that lay the basis on which workers could protest.) In Indonesia, Nike has created about 115,000 jobs that pay near-subsistence wages, but even government officials grouse that such operations generate little self-sustaining economic development.

Twenty thousand workers, 90 percent young women, toil in the sprawling, attractively landscaped Nikomas complex of green-and-white buildings. Pou Chen Corp., a major Taiwanese transnational shoemaker, opened the factory in 1993 at a cost of $100 million and produces more than a million shoes a month there exclusively for Nike. Many miles from the nearest big city, the factory provides housing for 12,000 workers. A walk through its vast open production rooms, with hundreds of workers bent over sewing machines, makes depressingly clear how much manual labor still goes into shoemaking, even though there are also sophisticated presses to mold shoe soles and a few computerized sewing machines. Some of the work seems dangerous: Young women wielding brushes work over open bowls of strong-smelling glue with no masks or ventilation (though Enderle said Nike had plans to shift to water-based glues). The Nikomas factory is more attractive than the typical needle-trade sweatshop found throughout the world, including the United States. Niketown seems to have gotten rid of the physical sweatshop, while leaving the particulars of sweatshop labor - low wages, unceasing work intensity, and discipline without meaningful worker representation - entirely in place.

Until recently, not all workers even earned the legal minimum - $2.50 a day, which worker advocates contend falls a dollar short of being minimally adequate. Last year, for example, Pou Chen successfully petitioned the government to be excused from a new increase, and it requested a further exemption from this year's hike. It won its reprieve but agreed to pay the minimum anyway - a prudent decision. Half of the 10,000 employees of another Nike contractor plant near Jakarta walked out in late April over the contractor's refusal to pay the new minimum. Nike tried to play it both ways - insisting in interviews that contractors should pay the minimum, but refusing to pay more for the shoes. At the same time, a Nike spokesman ominously wondered out loud "whether or not Indonesia could be reaching a point where it's pricing itself out of the market."

Over lunch at the factory, Nike representatives and Pou Chen Indonesia's vice president, Eric Chi, who ran a shoe factory in Los Angeles in the late 1970s, reiterated their insistence that, as Chi said, "if we treat people with respect and dignity, that will come back to us." Benson and Enderle talked about the training Nike offered, its plans for an AIDS-awareness campaign, the "fair price" store on the factory grounds and other worthy projects.

So why not pay double the minimum wage? After all, by Chi's rough calculations, the direct labor cost in a typical $60 shoe is all of $1.20. The Canadian firm BATA manages to pay its workers, who produce cheap shoes for the Indonesian market, double what export-shoe workers earn. Analysts say Nike annually spends $650 million on marketing, nearly 10 times what it would cost the company to double the wages of all its Indonesian workers. Which is not to say that all the money goes to the corporate coffers of Nike and its contractors. A sizable chunk goes to payoffs for Indonesian generals, government officials and cronies - according to the ECONIT Advisory Group, a Jakarta-based consulting firm, it comes to about 30 percent of total business costs, more than double Pou Chen's factory-labor bill.

Benson animatedly argued that the company could improve health and safety, offer soccer for street kids, or make other changes, but "simply doubling the minimum wage is not a solution . . . If one factory is suddenly doubling its wage, and others aren't, you sow seeds of unrest and wage disparity, and the company risks becoming no longer competitive and leaving the country."

But to Benson's contention that "just throwing money at people is not a solution," I suspect most Nike workers would say, "Just do it."

Many young Nike workers come from rural areas where there are few jobs outside traditional agriculture, but they rarely stay at Niketown very long. Nearly three-fourths of workers quit during a typical year, hardly an endorsement by otherwise desperate people. At the company dormitories, where 12 workers inhabit a room barely large enough to contain six double bunk beds jammed side by side, I talked with a group of women, ages 17 to 24, who sew shoe uppers. Most were happy to have a job, and even though they were rarely able to save anything (contrary to Nike claims), they complained less about the pay than the pressure. "Almost every day, if we make a mistake or don't make our quota, we're called horrible words: 'You're dumb. You're stupid,'" a 24-year-old from central Java said. "If we don't achieve our target today, the supervisor makes us do it tomorrow, and we don't get paid overtime."

Not far from the factory, in a small rustic room lined with crude posters - "No freedom," "I am not a robot," "Why work hard if it's not for a better living?" - a group of workers regularly meets, to talk about work and learn about their rights. They are not part of the official, government-controlled, do-nothing union, but also are not affiliated with the unauthorized independent federation whose jailed leader, Muchtar Pakpahan, faces charges of subversion (and a possible death sentence) for such outrages as demanding a higher minimum wage. Some of these young women lead protests over grievances like excessive overtime. But even here, others are giving up. "We came back [ from a Muslim religious-holiday break ] and the problems are always the same," one recent quitter said. "What's the meaning of a life like this?"

Those problems, the women said, include work quotas that force them to work straight through lunch, overly long days, and pay so low that they can't keep up rent payments, afford more than one modest meal a day to supplement the food their employer is obliged to provide, or save for their future. "It's work, go home, sleep, eat, go to factory, work," one high school graduate said. "Sometimes I dream of a weekend holiday, but it's only a dream."

The elections in Indonesia at the end of May offered little to inspire hope. The party of President Suharto, who has ruled since 1966, won with 74 percent of the vote as expected. Ironically, as more workers gain experience in Indonesia's export factories, they are learning - the hard way - about worker rights and protest strategy. Politics and the economy are intertwined in Indonesia because of rampant corruption and military intervention, so the emergence of a workers' movement not under Suharto's control is the biggest potential political threat to continued authoritarian rule. Nike could help itself, its workers and Indonesian democracy if it agreed to independent monitoring of working conditions in its factories.

For now, though, Nike's unintended contribution to the growth of still very precarious independent unions that are willing to fight both the company and the government could be one of the best things it does in Indonesia. But don't expect to see this in a Nike ad anytime soon.

David Moberg is a senior editor at In These Times magazine. His research was supported by a grant from the John D. and Catherine T. MacArthur Foundation.

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