Have you ever thought about what it takes to make those snazzy running shoes you see advertised on TV, reeking of freedom, individualism, health and cleanliness?
Well mostly it takes cheap labour, really cheap labour, the cheaper the better. In August last year a small article appeared in Harpers magazine, all it consists of is a photograph of an Indonesian workers payslip and a few annotations to tell you what it means. This particular (fairly typical) worker earns 14 cents US per hour, at that rate the labour costs for assembling one pair of running shoes (retail price $80) would be a massive 12 cents.
This particular lady worked for the Sung Hwa company, a Korean based firm and a major major supplier for Nike (99% of Nike shoes are made in Asia). I will warn you now that I talk about Nike quite a few times in this article, because they feature heavily in so many of the sources I consulted about the footwear industry in Indonesia. Nike serves as something of a paradigm for the subject. But they are by no means the only foreign firm making a packet out of Indonesia's workers. Reebok has also invested heavily in Indonesia, and between 1988 and 1991 foreign investors channeled more than $350 000 000 US into Indonesia.
For some time Nike have contracted the manufacturing of their shoes to a number of Korean companies. In the late 80's rising wage demands from Korean workers and increasing industrial unrest led many companies to shift their manufacturing operations from Korea to Indonesia and China. It costs $10 000 a year to employ an average Korean worker to assemble running shoes, a Chinese worker $1000, and an Indonesian $500. Not surprisingly Indonesia has become a favourite manufacturing site.
The official Indonesian trades union (SPSI) is government run, all other unions were forced to join it in 1985, and it's appointed officials were members of the army. It has been refused recognition by the International Confederation of Free Trade Unions. Indonesian activists have expressed doubt that it has the will or for that matter the resources to stand up against major business interests.
Despite the theoretical government monopoly, an independent trade union - Solidarity - appeared in 1991. One of its leaders was subsequently abducted by "six armed men", and kept blindfolded and bound for the three days of his detention, except for a six hour interrogation. His interrogators wanted to know where solidarity got its money, and what were his connections with local political activists. The union leaders suspected army involvement in the kidnapping, but this was denied by army spokesmen. Although some members of the Indonesian parliament, and ministers concerned with the country's image abroad, do tend to support stronger protection for workers rights, this is not the official position. The government line was summed up by the Manpower Minister, who has been quoted as saying that:
"The right to hold a strike is protected by the constitution, but exercise of that right is still not tolerated in Indonesia because it is harmful to both sides."
The theoretical Indonesian "minimum wage" is considered sufficient to provide only 15% to 30% of minimum physical needs (depending upon location and family situation). Nevertheless a study in 1989, looking at 1017 companies in the Jakarta area found 56% of companies paying less than this "minimum" level ($0.43 - $1.33). 88% of workers in the pay range of our example above, are malnourished.
The situation of workers in Indonesia has not gone completely unnoticed outside the country. Citing restrictions on freedom of association the American Federation of Labour - Congress of Industrial Organisations, petitioned the US Trade Representative (USTR) four times between 1985 and 1991 to revoke Indonesia's right to preferential import duties (permitted under the Generalized Scheme of Preferences (GSP). In 1992 both Asia Watch and the International Labour Research Fund separately petitioned the USTR to end the application of the GSP to Indonesia. They presented "voluminous evidence" (in the words of one correspondent) of the absence of internationally recognised workers rights. The issues they raise include freedom of association, the right to organise and bargain collectively, the right to acceptable working conditions, child labour, and forced labour.
Not surprisingly with a total manufacturing cost of $12 for a pair of running shoes that retail for $63, Nike's profits rose from $1 billion in 1988 to $3.5 billion in 1991. At least in part a result of the "ruthlessness with which Nike pares its costs" (to quote the Far Eastern Economic Review).
Now to be fair to Nike they (as their representatives are at pains to emphasise) don't actually run the factories themselves. They take bids from a number of companies in Korea, which compete to give the lowest costs per shoe. They in their turn squeeze the most they can out of their Indonesian labour force. Naturally since they don't actually own the factories themselves, Nike deny any responsibility for the working conditions there. It is a straight business decision, costs down profits up. The Far Eastern Economic Review quotes the Nike General Manager in Jakarta as saying that: "It's not within our scope to investigate [allegations of labour violations]".
To consolidate its gains and diversify into the "best sports and fitness company in the world" (as the CEO told Financial World this February) the company is planning a move into sport management. They want to build a "family relationship" so that they can "exert more control", they would like to have the athletes who promote their products "embraced by Nike as a whole".
This cozy family embrace does not extend to the people who make the running shoes. They are the victims of hostile government, a complacent union, and deliberate corporate neglect.
They are also our victims - we are the next link in the chain.
- Dr. Euan Taylor, Winnipeg, Canada
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