By Stanley Lubman, The Wall Street Journal
A riot involving 2,000 workers at a factory in the northern Chinese city of Taiyuan on Sunday night has once again shined a light on conditions at factories owned by Apple Inc. supplier Foxconn. The cause of the riot appears to have been a fight between workers that somehow escalated into larger-scale unrest. While the precise dynamics that led workers in the factory to run rampant remain unclear, it’s noteworthy that news of the incident comes with Apple recently announcing that advance sales of its iPhone5 have broken all previous records.
The success of the iPhone and similar products means competition among companies like Apple and Samsung, both of which rely heavily on Chinese factory supply chains, is likely to increase. This increase in competition, in turn, will crank up pressures in factories whose workers are already struggling under harsh conditions.
Recent reports have not only described the difficult conditions for full-time workers who are hired directly by these factories, but have also spotlighted the treatment of two other classes of employees– “dispatch labor” and “student interns”– in factories that manufacture components for both Apple and Samsung.
Earlier this year, China Labor Watch (CLW), a labor rights advocacy organization headquartered in New York City, investigated 10 facilities operated by Foxconn, an arm of Taiwanese multinational Hon Hai Precision Industries that employs almost 1 million workers. Foxconn factories produce electronic components for Apple and many other major foreign consumer technology companies. The CLW report (pdf) found “a variety of dangerous working conditions,” as well as unfair calculations of work time, low basic wages that compel acceptance of large amounts of overtime in order to have adequate income on which to live, very high work intensity, and failure to pay for social insurance, work-related injury insurance and other insurance required by law.
The report includes a focus on the extensive use of “dispatch labor” — workers hired by employment agencies known as “labor dispatch companies.” These agencies, which have contracts with factories, sign employment contracts with workers who are then sent to work in those factories. The workers have no direct contractual relationship with the factory. Chinese law requires that these dispatched workers may only be hired for “temporary, auxiliary or substitute job positions” but this limitation is widely ignored. CLW’s specific findings with regard to dispatch workers show that they are treated worse than direct-hire workers: They do not receive severance pay, the intensity and duration of their shifts tend to be longer than those of direct-hire workers, they work significantly longer overtime hours and the factories contribute significantly less to social security.
According to a report earlier this year by Businessweek, as much as one-fifth of the urban Chinese work force—60 million—are labor dispatch workers. The article adds that the problems noted here are not decreasing. Rather, labor shortages in some factories are growing and those factories are facing increasing difficulties in recruiting regular workers. As a result, they are looking to hire more dispatch workers.
Student interns are another class of employees whose treatment has been criticized in the past by NGOs. More recently, CLW has specifically commented on the use of student interns by Foxconn. Earlier this month Chinese state-run news media reported that several vocational schools in the city of Huai’an, in eastern China, required hundreds of students to work on assembly lines at a Foxconn plant to help ease worker shortages. “They said they are forced to work by the teachers,” Li Qiang, founder of China Labor Watch, said in an interview earlier this month , adding that 10 of 87 workers on one iPhone assembly line were students. “They don’t want to work there — they want to learn,” said Mr. Li. “But if they don’t work, they are told they will not graduate, because it is a very busy time with the new iPhone coming, and Foxconn does not have enough workers without the students.”
CLW issued another report this month on its investigation of six factories in China in which Samsung’s ownership ranged from 88% to 100%, as well as two “supplier factories.” It found violations that included “well over 100 hours of forced overtime work per month, unpaid work, standing for 11 to 12 hours while working, underage workers, severe age and gender discrimination, abuse of student and labor dispatch workers and a lack of worker safety.”
This report found that five of the factories generally offered “an illegitimate contract or no contract at all. Instead, dispatch workers will sign a contract with the dispatch companies, allowing the factory to shirk responsibility for their workers’ benefits and safety.” The same five factories hired students, many underage, from vocational schools. They did not receive a legitimate labor contract. “[I]nstead, the factory signs a contract with the school of which the students never receive a copy.” Students must accept the work in order to meet graduation requirements, and the schools receive kickbacks from the factory.
One problem is raised by labor advocacy NGOs that insist on measuring compliance with international standards. Apple and other foreign companies have resisted using those criteria because they do not wish to raise their costs or exert time and effort in order to oversee their supply chains more closely. A report in British newspaper The Guardian on Apple’s secretiveness in responding to a transparency study by Chinese environmental groups noted that “it is difficult for third parties to hold foreign firms to account because they tend to be secretive about their suppliers, citing corporate confidentiality. This lack of transparency, combined with official corruption and dire political accountability, has made China a haven for polluters.”
Public scrutiny of these issues has had some impact. In February, under mounting criticism, Apple became the first electronics maker to join the Fair Labor Association (FLA), a manufacturing watchdog that conducts independent audits of labor conditions inside factories. An FLA report released in August gave Foxconn good marks for improving working conditions at three of its factories in China. It should be noted, however, that the FLA is not without its critics. Nor was the report comprehensive: Among the factories is missed, for example, is the facility in Taiyuan where Sunday’s riot occurred.
The pressure on factories like those studied by CLW will accelerate as Apple and its competitors cope with surges in their need for components. At this current moment of political transition there is hesitation to make any changes in labor policies. China has resisted foreign criticism, and only made limited efforts to correct the working conditions noted in the factories or strengthen enforcement of laws on hiring workers and on their benefits.
Once again, although existing laws could be used to deal with the reported conditions, the problem is lack of enforcement. There is no reason to assume for the near future that conditions in consumer technology factory supply chains will be improved.