Eliminating Sweatshops at Nike: Just De it!
Over the past decade, Nike has been one of the most profitable companies in the United States. However, at a time when the company's spokesperson, Michael Jordan, was bringing in over $10 million, the young, mostly women workers in its Indonesian plants were taking home only $ 2.23 a day. {{U}}(31) {{/U}}, working conditions in Nike's Serang plant, 50 miles west of Jakarta, were far from ideal. Hundreds of workers, some children, were crowded into vast sheds where they glued, stitched, pressed, and boxed 70 million pairs of{{U}} (32) {{/U}}a year. Collusion between local management and government made organizing workers into unions both difficult and dangerous, and the high level of unemployment left workers powerless. Taken together, these labor practices helped keep cost so low and quality so high that a pair of running shoes that{{U}} (33) {{/U}}for $75 retail in the United States cost just $18.25 to manufacture.
With this type of cost and price structure, it is easy to see how Nike became so profitable. However, the ability to sustain these practices became an issue in 1996 when the U.S. media exposed these sweatshop conditions. As consumers became increasingly aware of{{U}} (34) {{/U}}their sneakers were actually being made, some felt guilty, and human rights groups went so far{{U}} (35) {{/U}}to organize boycotts of Nike products. Given the damage to Nike's image and future profitability, something had to be done.
At first, Nike CEO Phillip Knight defended his operations, noting that Nike pays its workers no{{U}} (36) {{/U}}than its rivals do and that these workers make more than minimum wage in the host countries. Critics countered that the level of pay was{{U}} (37) {{/U}}the subsistence level and much lower than what is paid by other U.S. companies such as Coco-Cola, Gillette, and Goodyear.
To end this image problem{{U}} (38) {{/U}}and for all, on May 12, 1998, Knight pledged to (a) raise the minimum worker age requirement, (b) adopt U. S.-style safety and health standards, and (c) allow human rights groups to help monitor working conditions in all foreign plants. He again showed his commitment to reform six months later{{U}} (39) {{/U}}raising wages 22 percent to offset the currency devaluation that rocked Indonesia in the fall of 1998. Knight used both occasions to challenge his competitors to do the same, realizing that their failure to do so would put Nike at a competitive disadvantage. Although it is currently unclear how these{{U}} (40) {{/U}}will respond, it is obvious that Nike is at least trying to establish its image as a trend setter in both footwear and working conditions in international locations.