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Electronics Production | July 12, 2011

Tragedies of globalization: China's electronics industry

On May 20, 2011 an explosion in the Foxconn Chengdu factory resulted in three deaths and sixteen injuries. During the past ten years of investigations conducted by China Labor Watch, similar tragedies have been periodically recorded in many of China’s factories.

While hazardous working conditions are a concern across all of China’s labor-intensive industries, in fact, the problems facing China’s labor force are more numerous and systemic. From October 2010 to June 2011, through an investigation of ten global brand supplier electronics factories, China Labor Watch discovered multiple violations of China’s Labor Law, which was recently instituted in 2008, and brand companies’ Corporate Social Responsibility Codes of Conduct, who contract production out to the Chinese factories. The majority of these violations fall under five general categories: overtime, wages, labor intensity, contracts, and discrimination. For example, among the ten investigated factories, nine of them required excessive overtime, a direct violation of China’s labor laws. In addition, several factories did not sign labor contracts with workers, or signed contracts that were then withheld from employees who sought to claim due wages and benefits, and did not offer proper safety training. Other violations included: forcing workers to work overtime; arbitrarily fining workers; discriminating against workers on the basis of their gender, age, and status as Hepatitis B carriers; adopting methods of production that required high levels of labor intensity; and, finally, using militant management strategies. The multinational companies that contract production to these Chinese factories claim that the factories bear the sole responsibility for these abuses. However, in this report, CLW posits that many of these abuses are firmly entrenched in the global supply chain system. Because most production costs, including distribution and physical materials are to a great extent inelastic, the only way factories are able to offer a competitive advantage is to lower the manufacturing costs, which often translates directly into lowering labor costs. This burden is eventually passed down to workers, who are forced to work long hours at a high intensity. When these external pressures become too great, and workers suffer from accidents or tragedies such as suicides occur, blame is often directed at factories, while international companies at most publish a press release, and vow to implement reform. CLW believes that such scapegoating is unacceptable and irresponsible behavior. In order to ensure that supplier factories will not seek to compete for the lowest order prices using labor costs as the elastic factor, brand companies must work directly with suppliers to invest in concrete and sustainable working condition improvements. Holistically improving working conditions is the responsibility of both multinational brand companies and their suppliers. With a multitude of interests and stakeholder, it is only through the collaborative of multinational corporations, Chinese suppliers, NGOs, governments, and regulatory agencies, rethinking how the global supply chain operates and is enforced, will working conditions improve. The ten electronics factories that China Labor Watch investigated over the last year are all located in Guangdong and Jiangsu provinces. In total, 408 workers were interviewed after the formal investigation started in October 2010. Before October, the NGO also interviewed 185 workers. At every factory, over thirty workers were interviewed. Not including the Longhua Foxconn factory, the other nine factories employed a total of 200'000 workers. The factory with the most workers was Shanghai Quanta, with over 47'000 employees. The factory with the least number of workers was Hongkai Electronics, with 1'000 employees. The principle methods of investigation for this report were to enter factories to collect information and to conduct off-site interviews. In order to conduct investigations inside of three factories, CLW staff posed as workers who had gained employment within each factory. After the interviews conducted in October 2010, China Labour Watch staff remained in communication with workers and revisited those factories in April and May 2011 to conduct follow-up interviews. Investigations were conducted of factories that manufacture products for Dell, Salcomp, IBM, Ericsson, Philips, Microsoft, Apple, HP, Nokia, and others. Among the factories investigated, eight are suppliers for Dell and seven are suppliers for HP. Consequently, this report accurately reflects the labor conditions for Dell and HP Chinese supplier factories. All of the workers interviewed reflected on existing widespread problems throughout all ten factories. As these ten factories are suppliers of the electronics industry’s brand leaders, it is clear that their problems further reflect widespread, systemic issues in the electronics industry as a whole. Throughout the course of this inquiry, the following five problems were discovered in all of the investigations: Overtime All of the factories’ overtime hours were between 36 and 160 hours per month. No factory was found to be in strict compliance with China’s labor law, which states that overtime should not exceed 36 hours each month. For example, at Hongkai Electronics, monthly overtime is routinely in excess of 140 hours per month. Wages The minimum wage in nine factories does not meet the living costs of its workers. Workers cannot earn a living wage from normal working hours alone, and must work excessive overtime hours in order to earn enough money to survive. In Hongkai Electronics for example, workers’ minimum monthly wage was USD 138 in October 2010. There was a USD 6 deduction for dormitory accommodations, a USD 40.50 USD deduction for food, a utilities fee deduction, and a USD 15.30 deduction for social insurance, which left USD 76.20. If workers have other expenses or financial responsibilities, such as vocational education classes or financial support of their parents (one of the main reasons migrant workers seek work in cities), it would be impossible to meet their living costs with only USD 76.20. In this situation, workers find themselves with no other option but to work excessive overtime. Furthermore, many factories require workers to complete a fixed term of employment before they become eligible for a salary increase. Some factories required workers to complete at least a three month probation period and an additional three month evaluation before becoming eligible for a salary increase. Some factories require a year or longer before workers are eligible for an annual bonus. The difficulty, lengthy terms, and sometimes unpredictability involved in gaining a salary increase further reinforces workers’ dependence on overtime in order to earn a living wage. Labor Intensity In all ten factories, the labor intensity is extremely high. For example, workers in an HP production line must complete an action every three seconds, standing for ten consecutive hours each day. In many of these factories, there is only a ten minute break in the middle of the day, during which workers can drink water and use the restroom. However, there are many people and few toilets, so some workers have no opportunity to use the bathroom during this time. On some production lines, managers demand that workers continue to work through their breaks. It is clear that this high level of labor intensity will adversely affect many workers’ physical and mental health, leading to serious, long-term consequences for their well being. Labor Contracts All of the factories investigated do not sign labor contracts in good faith with workers. Most of the time, workers are not properly informed about the specific details of the contract before signing, often in violation of Article 26 of China’s Labor Contract Law, which states that: “in the event that the agreed terms of the contract are violated, changed, or subjected to fraud, coercion, or otherwise exploited on the behalf of one party, the contract shall be rendered wholly or partially invalid.” When there is a labor dispute, workers are unable to utilize the labor contract as a means of safeguarding their legal rights and interests. If a worker is injured while at the factory, they are unable to claim compensation as guaranteed to them in their contract, because they will be unaware of this legal right. At Tyco Electronics and Catcher Technology for example, although the factories directly employ some workers, they sign labor contracts with a separate labor dispatch agency. As a result of this inconsistency, the factories may arbitrarily fire workers, providing workers with almost no job security. Similarly, the Kunshan Compal factory violates labor laws by refusing to give a copy of the labor contract to the majority of its employees. Discrimination All of the investigated factories revealed instances of recruitment discrimination due to age, gender, and/or Hepatitis B. For example, five factories were found to have covered up instances of age discrimination, while Tyco Electronics only seeks to hire female workers. Similarly, at Hongkai Electronics it was learned that they only hire workers between the ages of 18 and 40. During CLW’s 2010 investigation, female candidates at MSI were required to undergo pregnancy tests. It is possible that this was a form of discrimination against pregnant women. After a report from China Labour Watch was released in February 2011, this specific requirement was abolished. Investigators also discovered that in Shanghai Quanta, one third of workers were under 18 years of age. ----- Author: China Labour Watch
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