Bill Anderson
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“Poverty Wages” in the sporting goods industry – What does this mean?

“Poverty Wages” in the sporting goods industry – What does this mean?

Those of you who follow the mainstream media will have seen some not-so-positive-news in the press in recent weeks regarding working conditions in some countries. A series of stories – triggered by the release of reports from some labour rights groups – have run in the newspapers alleging that the sporting goods industry uses “sweatshops” and pays “poverty wages”. adidas, as the Official Sportswear Partner of the London 2012 Olympic and Paralympic Games, features prominently.

These are not new claims. And the fact that the allegations have surfaced in the run up to the Olympic Games isn’t new either. It reflects the normal advocacy cycle, where the international trade unions and labour rights group do their very best to draw the world’s attention to working conditions in the developing world. The profile and visibility of the Olympics serves as the vehicle to achieve this. The international non-governmental organisations are therefore doing their part, publicly, to improve workers lives.

But have you ever asked yourself what lies behind a statement or sound bite that claims, for example, that a factory worker earns “as little as 34 pence an hour”. What does it mean? To the western reader it seems unjust, unfair and undeserving. Why are people working for so little? Surely this is exploitation?

The complexity of wage-setting

adidas has spent a lot of time looking into the question of fair wages, launching research back in 2001/2002 in Indonesia, developing guidelines and training programmes and, more recently, piloting a Fair Wage Assessment tool to help factories improve the process of wage-setting. And we can say with complete candour that pay remains a complex and not-so-easy-to-address topic for our contract factories; especially where the overall cost of doing business has been steadily climbing, due to fuel and commodity price increases, and consumers have been equally sensitive – in these times of austerity – to higher prices.

Quote 1 Fair WagesBy far the biggest influence on wages in any developing country is the size of its labour pool and the action taken by government in setting the statutory minimum wage. Many developing countries actually have a very small “formal” sector offering full-time work, for example in manufacturing or the service industry, with the larger part of the job market being in the informal sector, with no protection, permanence and very low or subsistence wages. The informal sector includes the street vendor, the small mum-and-pop businesses and a huge pool of underemployed day labourers. In a country such as Bangladesh, with a population of 160 million and an annual GDP (gross domestic product) which is 33 times smaller than Germany, approximately 80% of the workforce is employed in the informal sector.

For the relatively low-skilled mass production industries that generate high employment, such as footwear or apparel manufacturing, it is the government-mandated minimum wage which set the floor for pay. The base wage for factory workers closely parallels the minimum wage, to which are added overtime premiums, allowances and other discretionary payments, such as bonuses. Therefore, to a large extent, worker’s wages are determined by their local job market, the skill levels of the workers, the overall level of economic development in the country where they live and the actions taken by government in fixing minimum wages. Brands, and their buying practices, are not a significant driver.

So what does this tell us about a headline where workers are “earning as little as 34 pence an hour”? Could a worker be paid so little? Theoretically, yes, if a worker were deprived of any opportunity for overtime, allowances or bonuses s/he could receive such a meagre sum in one of the lowest wage cost countries.

Determining the relative value of currencies

It is little misleading, however, to convert workers’ wages into another ‘hard’ currency. This does not lend itself to a proper comparison. Pay has to be considered in terms of what it buys locally. So if you earn a dollar in India and a dollar in the USA what you can buy for that dollar is very different, given the differences in the costs of living in each country. To get around this economists usually compare pay in terms of Purchasing Power Parity, or PPP, against a common basket of goods.

"Poverty Wages” in the sporting goods industry – What does this mean?

 

Whereas adidas has only 0.005 per cent of our global supply chain in Bangladesh, which is a very low wage cost country, we source a lot more of our goods from other parts of Asia. Although the data is a couple of years old, I thought I would share with you the International Labour Organisation’s summary of the Purchasing Power Parity of minimum wages in selected countries in Asia. These are countries where 80 per cent of our global production takes place. The figures for PPP given in the graphic above are US dollars per month.

This is a truer picture of base wages.

With overtime pay, performance bonuses and other allowances, a worker’s “take home” wage, as paid by our suppliers, is often double this number.

If you have any questions or remarks on this topic please don’t hesitate to comment.

If you are interested in more information on which rules we apply at our own sites and our suppliers’ factories  click here and learn more about our Workplace Standards.

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  1. Goodluck

  2. Thanks for this – it does provide a truer picture of wages in Adidas’ supplier factories.

    If a worker works 6 days a week, 8 hours a day (a very low estimate by any standard) workers in Vietnam would earn just 28p an hour by purchasing power parity according to the figures above – much lower than the 34p figure used by campaigners.

  3. Clever try Adidas. But doesn’t get you – more importantly the workers – off the low pay hook

  4. Are those minimum pay levels you mention actually paid to workers in Adidas factories in the countries mentioned?

    When Adidas negotiate contracts what do you put in place to make sure that pay rates are actually observed?

  5. It is my firm conviction that Adidas have a moral duty, as a profit-making organisation that depends on political stability and peace (and thus ultimately depends on the triumph of human rights and fundamental freedoms) in order to do business, to fulfill the rights of their employees as both workers and human beings.

    Various human rights conventions enshrine human rights to just and favourable conditions of work including just remuneration and entitlements to sick leave, maternity pay etc. While governments of nation-states have had the primary responsibility for fulfilling human rights -in practical terms this accountability is shared by industry and the private sector. John Ruggie’s UN Global Compact is no way near enough. We need an enforcement framework with teeth to hold corporations responsible for human rights violations. The claim, and it is a true one, that local currencies can often buy more goods locally, is frankly pathetic. Even when this is factored in, wages still institutionalize poverty.

    A corporation’s very reason for being is to maximise profit to shareholders. This is the bottom line. Such single-minded focus on profit margins will inevitably come to trample on legitimate social and environmental concerns, some of which may be of the gravest ethical import, and be addressing a pernicious injustice. Failure to pay a decent living wage and burdening people, on whom you depend to make your products, with resultant suffering, struggle and fear is such an injustice.

    I want to say ‘shame on you, Adidas!’ but you are not alone. You function in a world predicated on the modus operandi you cling to -i.e. we can make more money if we cut ‘costs’ -’costs’ being the very wages that put food in the bellies (or struggle to) of the people you need to even exist as a business.
    You, Adidas need to change. But we also need a cultural and paradigm shift.

  6. I wonder, does the author maintain a clear concious while trying to justify this abomination? Such an assumption would do much to damage public opinion of Adidas staff as well as the corporation’s overall morality.

  7. Very interesting indeed! Unfortunately very relativistic as well. Lets say blogs have been very powerful PR tools nowadays. Adidas yearly revenue is continuously rising, profits are gorgeous. Shareholders must be satisfied. However working conditions in Asia are bad as ever and a lot of workers provided with poverty wages are not able to feed themselves. Parity game does not justify business purchasing practices at all. Here is the other side of the story:
    http://www.tuc.org.uk/tucfiles/291/sportswear.pdf.

  8. So the company moves the manufacturing of its product to a low-wage country, where it claims it is helping workers rise above a subsistence existence. So it says it is helping to feed people and it allows the company to manufacture the product for a fraction of the cost.

    The question remains, as always: If the company is saving so much money in the manufacturing of each pair of shoes, why when it reaches the store-shelf are these shoes selling for hundreds of dollars? Hundreds of dollars each.

    The argument above would seem to indicate that the company is advocating keeping costs down to allow it to offer cheaper products.

    But instead it is keeping costs down and charging even more for its product.

    How to you justify that markup between what it costs you to make a product and the price you charge for it, in hard currency?

  9. Are you really trying to lay the blame for your disgustingly low wages at the doors of Governments for not setting liveable minimum wages? Get real Adidas – you are a leading global sports brand who makes billions $ every year. What family in the US could live on $85 a month? How much money did you pay consultants to spend “lot of time looking into the question of fair wages”? What appals me most is your complete arrogance in posting this, attempting to justify your despicable practices and in the process treating your customers like idiots you can bamboozle into thinking this is acceptable. I am not a member of labour rights groups – I was an Adidas customer. But not anymore.

  10. Adidas part of your argument also relies on workers ability to work overtime. on low pay people are forced into working overtime to may ends meet – which takes away from time spent with family and recovery time.
    You should be thinking not just about the national minimum wage but of what is a true living wage for workers producing your goods. what will allow them to earn enough to house, feed, clothe, educate their families, pay for health care and have time when they are not working, time they can participate in wider community and society activities and share time with their families.
    Governments set minimum wages low to get companies like yourself to go there.
    Why not be a leading in the sports footwear and apparel sector and lead by true example by ensuring your workers get a true a realistic living wage.

  11. Not nearly good enough Adidas! Despite your equivocating, your workers are still paid an absolute pittance. How much do you pay David Beckham to wear the things they make? Be responsible and lead the way on fair, (REALLY fair!) wages.

  12. Alison Williams
    July 11, 2012 2:08 pm

    Peoplre very very angry angry about this. You have cruelly exploited vulnerable people for the sake of massive profits.

    SHAME ON YOU!

  13. I note that on the guidelines for this very blog you ask people not to “engage in any conduct that you wouldn’t accept yourself”. So I ask you – would you accept wages of 34p an hour? Would you accept verbal or even physical abuse from your boss? Would you allow your son or daughter to work in one of your supplier factories? No? Didn’t think so…

    Exploitation. Not ok here. Not ok anywhere. http://www.waronwant.org/olympics-home

  14. I don’t understand your map – you have Indonesia twice? But anyway, the point is that your massive profits make it very difficult to see your argument! Pay a fair living wage, not a shameful one, you can easily afford it … people will admire you for it!

  15. Pay is not that complex. people deserve a fair wage that they can live on. You seem so sad that your profits may have taken a hit from rising fuel and commodity prices – and indeed they have risen. What you fail to mention that the people that this really affects are not multi billion pound profit making companies such as your but the people who are paid a pittance to work in the factories that make your products. People in bangladesh, Indonesia etc who live on a tiny wage are hit the hardest by rising fuel and commodity (or food prices more simply stated). No one should feel sorry for you, stop feeling sorry for yourselves. Furthermore, saying they wouldn;t be able to work over time seems laughable given the amount of time they already work – e.g 12 hours a day, 6 or 7 days a week.

    Stop trying to convince us that these campaigners don’t have a point – they do, we know it and you know it. maybe you should write a blog or give a reasonable response in the media about what you intend to do about it? Like, i dunno, just off the top of my head, ensuring that workers are paid a living wage and they are not harrassed/sexually assaulted while making your trainers.

  16. I would prefer to pay more for my goods knowing that the workers making them receive a decent income to be able to support their family. I am not hearing from you that this is what is happening, only that you are conforming to low values set by governments. If we can afford to buy your goods we should be paying a fair amount given the effort gone into to making them. Once you start publishing plans to improve this situation and progress showing improvement i will start buying from you again.

  17. Dear Bill and adidas moderators,

    If you are going to post such a topic on a public blog please be prepared to engage with responses as it might backfire on you by simply ignoring…
    I personally am not against what you have justified however the lack of response is surprising…and it is not because you are not monitoring the response’s.
    You initially posted this quite a few hours ago and when I initially viewed, I too noticed that you posted an inaccurate image with Indonesia listed twice. Since Mr C McLoud has mentioned this 4+ hours since the original posting you have edited/rectified this which is reflected by the new time that the article is posted after all the other comments.

    To the other posters,
    In terms your backlash it might be wise to do your research on the average wage of someone in those countries (not just factory workers) and the actual living cost of each respective country. I am presuming that you all live and work in the USA or EU but of course none us and even the poster in Singapore could live of such wages…however the cost of living in China, Pakistan etc is reflective of the wages. These wages are not just limited to Global companies doing business there…you will probably find these Global companies are more tightly regulated and pay better than a local companies and provide better conditions. Their workers are amongst the better paid workers in the country which allows them to send money back to their hometowns and provide for their family.

    Again this is not limited to clothing manufacturers. I’m sure we all use an I-phone, Tablet, PC etc. that has been manufactured in country with lower manufacturing cost’s and we have seen time and time again Apple in the headlines with the standards of their outsourced Foxconn employees.

    Bill and adidas,
    This is a complex issue to explain and as you have probably noticed most posters have not bothered to actually read the fact’s which results in their emotive backlash. A better medium to explain the issue in simpler terms might be by creating a video… I would also recommend actually responding to the post’s and admitting an error in the initial posting etc. No one is perfect… but the whole point of social media is to interact in meaningful way.

    To the other posters,
    Read and research the facts before making an uniformed comment like “What family in the US could live on $85 a month?”. You will also find that the Profit margins that companies like adidas Sports/clothing industries make is substantially less other global consumer goods companies that you purchase on.

    Simon

  18. I’m still waiting for the PT Kizone workers to be paid their LEGALLY OWED severance pay.

  19. Caroline Elliot
    July 11, 2012 5:53 pm

    Great – you have now changed the two Indonesia’s but labelled Burma as Thailand…I am sure this is in line with the rigour of your research into fair wages and working conditions in your supply chains.

    Possibly the only truth in this is the size of the informal economy and that workers in the informal economy have “no protection, permanence and very low or subsistence wages”. But isn’t it great that Adidas can then come sweeping in to save the day by giving ridiculously low minimum wages? Not a living wage.

    I am sure Adidas’s decisions of where to purchase from are not at all based on where they can exploit the most through being in countries with a low minimum wage, a large informal economy, low levels of economic development and low skilled workers.

  20. None of this justifies or compensates for adidas not paying the 2,700 Indonesian PT Kizone workers the $3.4 million they are owed in legally mandated severance pay, which, mind you, is a MINUSCULE amount relative to the billions of dollars they make in revenue yearly. I think I can speak for many and sum it up quite simply when I say SHAME ON YOU ADIDAS! As one of the world’s leading athletic companies, please prove that you have more integrity and can take responsibility for your actions.

  21. Jeffery Hermanson
    July 11, 2012 6:44 pm

    This whole blog is based on a fallacy: that wages are set by the “market” and Adidas’ practices have nothing to do with the wages that are paid. In reality, the practices of Adidas and other global brands are the main determining factor in the wages that are paid.

    The most important practice that affects wages is the use of subcontractors to produce the garments and footwear, and the constant threat of moving production from one subcontractor to another – usually because the subcontractor can’t produce for the price Adidas wants to pay. This instability of production is the primary cause of the “race to the bottom” that results in the prevailing wage usually being the legal minimum wage, far below what would be considered a “living wage.”

    The second practice that affects wages is the systematic denial of the workers’ freedom of association, through the selection of subcontractors in countries where this basic right is denied and through failure to demand compliance with labor rights standards in countries where the right is “guaranteed” by local law.

    The ideology that justifies these practices by Adidas and the global brands like Nike and Apple is the sophistry that somehow the brands are “not responsible” for the conditions in the factories where their goods are produced, because the factories are “independent businesses” that set their wages and conditions without involvement by Adidas or the other brands. This disregards the fact that everything the factory owners do is based on the demands of the brand regarding price, delivery, and quality. Any factory that doesn’t meet these demands is cut out of the Adidas supply chain.

    Adidas is currently being criticized for failure to pay severance to workers thrown out of work when one of its Indonesian subcontractors, PT Kizone, went bankrupt. They claim they have “no responsibility” for the payments, even though the severance debt was accumulated during years spent producing Adidas’ garments. They insist they will never accept responsibility for severance, and indeed this is only one of many cases in which workers producing Adidas garments have been cheated out of severance when their factories closed. Thus Adidas has profited in the millions of dollars – perhaps tens of millions of dollars – from the few recent cases in Indonesia of which we are aware. And this may be only the tip of the iceberg.

    Labor rights groups and unions are not attacking Adidas because of the Olympics, we are attacking Adidas because of their practices, and the arrogant and disgusting way in which they try to deflect criticism by denying responsibility.

  22. First, the piece fails to mention the exorbitant profits adidas makes because so labor is such a small fraction of the sale price of a garment. Second, it conceals the enormous downward pressure adidas and a small handful of other companies have put on suppliers to keep wages and other costs low—a trend that not only creates low wages but unsafe sweatshop conditions.

    You also fail to mention that one of the allegations relates to the PT Kizone factory closure, where adidas refuses to take responsibility for legally earned severance pay.

    Even if adidas is willing to let low wages stand, can’t you at least pay what workers have legally earned?

  23. Frank Thomas (Moderator)
    July 11, 2012 9:09 pm

    Hi all,
    Thank you very much for leaving your comments here. As Bill is currently travelling he asked me to let you know that he will get back to you with his answers and remarks as soon as possible. Thank you for your understanding. Best,
    Frank

  24. Sadly, I think Bill acting as a well-paid staff person for Adidas has very little agency in discussing the meaning of poverty wages, wages he himself does not experience. Rather, I would suggest listening to workers from the PT Kizone factory themselves, who very loudly explain just how Adidas has treated them, going as far as to protest at the Germany Embassy in Jakarta.

    http://usas.org/2012/06/13/pt-kizone-workers-protest-in-jakarta-to-demand-1-8m-from-adidas/

  25. Adidas hide behind their image supported by hopefully naive high profile sports men & women selling us stuff.
    Adidas have a high value image, high value products and engage in exploitation to maximise profit.
    Healthy living, desirble products, generous corporation, as long as you look no further than the advertising blurb.
    Why shouldn’t companies that hide behind ‘we pay above minimum wages’ not try and do more.
    I know can’t blame the companies their job is to make money, well then stop promoting the caring corporate face & be honest about it, we pay the least we can, especially in developing nations and charge the most we can for our products. Whoops maybe people would feel bad that wouldn’t do would it

  26. Just pay your staff better wages and stop pretending it’s more complicated than that.

  27. Ha! Don’t make me laugh, adidas. I don’t think we buy any of your PR shenanigans.

  28. I’m still waiting for the PT Kizone workers to be paid their LEGALLY OWED severance pay.

  29. I’m still waiting for the workers of PT Kizone to be compensated their $1.8 MILLION IN LEGALLY OWED SEVERANCE PAY. Until that happens, and until adidas can ensure with third-party monitoring that it will no longer continue to flout international and domestic labor law and will recognize that each of its employees down the supply chain is an ACTUAL HUMAN BEING then, we, the consumers, will not stop making a ruckus. It is abhorrent that American universities hold their licensing contracts with such human rights’ violators so near and dear.

    http://usas.org/2012/06/13/pt-kizone-workers-protest-in-jakarta-to-demand-1-8m-from-adidas/

  30. This is shocking! Adidas should be ashamed of themselves, and the public should boycott them.

  31. “Brands, and their buying practices, are not a significant driver.”

    This makes it sound as though Adidas are happy to leave all wage levels to be set by ‘the market’. By this logic, if wage levels went even lower, Adidas would accept this. Low wages have in fact been influenced by the creation of economic trade zones – which companies like Adidas have lobbied for. Companies the size of Adidas can effect markets – and it’s ridiculous and just plain greedy of them to try argue that they can’t. It also sadly misses a great opportunity for them and companies like them to actually have a positive influence on people’s lives.

  32. No matter where you live in the world, a low wage is still a low wage. Adidas are making up excuses. Currency difference is not an excuse. Sweat shop workers are living on the poverty line. In writing this article Adidas try and politely excuse their exploitation of sweat shop workers who do not have a voice. Instead they should be telling us what they have done to help and support their desperate workers. But they’re not saying anything, because they haven’t!

  33. so it’s ok that addidas workers have to work v long hours in bad conditions to earn a minimum wage?

  34. I agree with the above poster: rather than wait for Bill to return, could we please have the views of a worker. Perhaps a trade union rep would oblige?

  35. Sophia,
    In regards to your comment
    “I’m still waiting for the PT Kizone workers to be paid their LEGALLY OWED severance pay” I’m sure none of us would argue with this point…however is adidas “legally” responsible for this?

    From the article’s online it states the owner of PT Kizone has fled the country, presumable with all their assets… the owners of PT Kizone are the ones that are legally responsible for paying their employees wages…not PT Kizones customers…
    adidas and the other bands used PT Kizone as an service…so unless their contracts with PT Kizones have them actually paying their employees wages they would not have a legal responsibility to pay their severance pay. Why is not any effort made to track down the owner that has fled Indonesia and use a social media campaign to name and shame them?

    If a restaurant owner fled their business and had outstanding wages to pay, would you then demand the restaurants regular customers to pay the outstanding wages? I think not…

    I do however feel that adidas could do a better job in clarifying the details and perhaps help in locating the owner…
    You might not legally have responsibility for the workers left stranded but you might have moral responsibility
    If the online article is correct and the adidas CEO has made numerous errors on commenting on the status of the factory they should apologise and get their facts straight. Simply not commenting raises suspicions and will have the mob chase after you with propaganda to work towards their objectives.

  36. Frank Thomas (Moderator)
    July 12, 2012 4:05 pm

    Hi all,
    After receiving some feedback regarding the incorrect graphic in this post yesterday, I corrected it straight away for Bill who was travelling at this time. However, I did so without acknowledging this fact here in the comments. It is part of our moderation principles (http://blog.adidas-group.com/adidas-group-blog-guidelines/our-moderation-principles/) that we make clear whenever we acted and this time I just forgot about it. Therefore please accept my apologies. The two mistakes in the graphic are now both corrected.
    Best, Frank

  37. Dear Simon,

    Nike and the Dallas Cowboys have both paid the severance owed to the factory workers. Brands like Adidas are the true employers, but tries to subcontract to avoid responsibility, even while other brands have already paid up. It is in fact price pressure from the brands in the first place that often cause factories to close because factory owners are unable to meet the demands of the brand, and the brand threatens moving in order to pit factory against factory. Adidas has a long history of labor rights abuse in Indonesia, as seen in the cases of PT Panarub, where workers were beat for striking in 2010, and also in Indonesia in 2011 in the Pou Yuen factory where 90,000+ went on strike for better wages, and some of the younger labor activists have been jailed for up to 9 years. Adidas bears the responsibility in these cases because of its pressure it puts on factory owners to keep up with more demand with less time and increasingly lower prices. Adidas, and other corporations like it, are leading the race to the bottom.

    And yes, Adidas is absolutely legally obligated, as it has signed onto a code of conduct with universities protect workers rights. Unfortunately Adidas removed its policy for factory closures after this case began receiving attention. If you follow any of the news with the University of Wisconsin, then you know that universities in the US are preparing to take action.

  38. Correction: Actually it was Pou Yuen in Vietnam, not Indonesia.

  39. It was good to receive everyone’s feedback.

    Of course the information posted is not a summation of the actual pay levels in adidas Group’s own suppliers, it is the PPP of the government minimum wages calculated by the ILO back in 2009-10. I hope that is clear.

    I had not ventured to explain in the blog what we are doing to address fair wages, which seems to be the central theme of many of the comments I have received. So let me elaborate here.

    At adidas Group we believe that the best way to improve the general welfare of workers is to work with our business partners at the enterprise level, to promote wage-setting mechanisms which are transparent and have the input of workers. Ideally, this occurs through negotiation or collective bargaining, where a trade union is present in the workplace, or through alternative legal means, such as a workers’ council or welfare committee. We believe basic pay should be benchmarked at a level higher than the local minimum wage and should acknowledge and reward workers for productivity gains. Our suppliers’ wage-setting efforts should also take into account the general cost of living and basic needs of their workforce. The wage setting mechanisms must also be complemented by improvements in the factories human resources management system and they must meet, in full, all legally mandated benefits. These are broad goals which we have been working towards in our engagement with suppliers and in particular through the development of associated assessment tools and training initiatives. Since 2010, this has included our support for a Fair Wage Assessment which has been developed by Daniel Vaughan-Whitehead (the ILO’s Special Adviser responsible for wages policies) in partnership with the FLA.

    The Fair Wage approach is based on assessing 12 complementary Fair Wage benchmarks to gain a complete overview of wage practices at the enterprise level and to identify remedial needs. Different Fair Wage tools capture the different aspects of the wage story in the enterprise and provide findings that are reliable and robust. The opportunities in the Fair Wage project will help individual suppliers – and the adidas Group – to identify the management practices required in Fair Wage dimensions. The assessment evaluates compliance with legal wage provisions, wage levels, and wage adjustments and sets a series of wage policy recommendations. These recommendations encompass the quality of pay systems, their fairness and efficiency, as well as the strength of communication and social dialogue. Fair Wage Assessments are currently underway in 6 countries in our global supply chain.
    One commenter asked about how we ensure that pay rates are actually observed? We have made intensive efforts over the past 14 years to monitor our supply chain to ensure the proper payment of wages and benefits to workers, this information is also shared with our Sourcing colleagues in their review of the costing sheets submitted by our suppliers. This is to ensure that negotiated prices always account for and cover the legal norms for wages, including overtime premiums.
    For those that took the opportunity to raise concerns over the PT Kizone case, our most recent response can be found here: http://www.adidas-group.com/en/sustainability/News/default.aspx.

  40. Jeffery Hermanson
    July 12, 2012 5:33 pm

    Bill Anderson’s response on “fair wages” is filled with fine words and good intentions and I’m quite sure he is sincere. However, the reality of wage determination in Adidas’ supply chain is far different. Instead of honest and good faith collective bargaining, what we find is repression and intimidation of union activists, mass layoffs to crush union organizing campaigns, and surface bargaining and bad faith if unions ever manage to survive to get to the bargaining table. This happens far too often throughout the supply chain to be anything but an inevitable consequence of Adidas’ downward pressure on prices and the threat (and reality) of moving production to avoid cost increases related to wage gains.

    In countries like China and Vietnam, where the only unions permitted are government controlled and typically headed by the company HR director, there is not even the pretense of bargaining. The “alternative means” described by Bill in his post are a cruel joke. This is why workers in these countries have had to resort to mass strikes, at great risk of imprisonment and worse, to achieve any improvements in wages.

    The only solution to the “fair wage” problem is a recognition by Adidas and other brands that they are indeed responsible for conditions in the factories that produce their goods. They must stop the assault on workers when they seek to organize, and keep production in unionized factories at a price sufficient to support a fair, collectively bargained wage. In China and Vietnam, Adidas must direct its suppliers to keep management personnel out of union affairs and to encourage workers to choose their own representatives and negotiating committee members.

    We do not judge Adidas by their fine words or good intentions of their staff. Instead, we look at the reality of poverty wages and lack of freedom of association throughout their supply chain. This is the objective result of their production system, and the source of Adidas’ great wealth.

  41. This is just an exercise in the justification of exploitation. Seriously – the wages paid to these workers aren’t even in line with what workers in the west make, when you take a comparison of cost of living and other socio-economic factors. You are a multi-billion dollar company. You got that way by keeping your manufacturing bases in regions were you could exploit the local workforce. The ‘well, we pay them more than they could earn elsewhere’ excuse just doesn’t wash. Workers employed in foreign factories by huge international companies should be paid a comparatively equal wage to the workforce in that company’s country of origin. The working conditions in those factories should be exactly the same as the legislated requirements of the company’s country of origin. It is morally repugnant not to ensure this happens.

  42. I would like to challenge the author to live in the above mentioned countries on the wage they are defending for 12 months and then come back and write ‘adidas’ view then. Would it be the same gobbeldy gook defends or a true, moral human account of what needs addressing.
    With CSR so prominent & consumer confidence so fragile, I believe it is these international companies job to stand up for what is right!

  43. Rebecca,

    Why on earth should the author have to work on such wages to appreciate what they are earning. The wages are in line with the type of work it is (low skilled factory work)
    Would you argue that factory worker in the USA earn the same wage as someone that has completed tertiary qualification in Law and has used their degree to move up in the corporate world?

    Lupu,

    I’m unable to comment on the code of conduct you have mentioned but how has adidas not protected workers rights in the specific case of PT Kizone? There was no issues with the working conditions or human rights abuses or anything…the issue arose when the owner fled the country and has not paid the workers their entitlements. adidas had already paid the owner in full for all orders so it’s not like adidas didn’t pay them so the owner was unable to pay his workers. Do you really think a huge corporation like adidas would risk it’s reputation if it legally owed money to the workers. Perhaps Nike and the Dallas Cowboys contracts has different payment terms and still owed money so this is why they paid up?

    The only people that would know the real facts would be the corporations and the owners…
    Looking at the links adidas has provided it appears they felt they did have a moral obligation and assisted the factory workers in receiving training and finding employment with owners that are ethical and meet all the standards adidas and these other global corporations expect.

    so back to the main point…
    why has the owner of the factory not been named and shamed?
    this is the real culprit who owes money in this specific case?
    adidas, are you able to provide an update on this and the work you have been undertaking with the Indonesian Government to resolve this issue?
    Or as I fear, was the ex owner linked to the Government in some form so no action will ever take place?

    Why is it that the American Universities and student’s don’t use their power to pressure the Indonesian government to take action?

  44. [...] PR machine, glossy annual CSR report, army of spin-masters justifying abuses under a guise of the ‘complexity of wage-setting’, with board seats in Kafkaesque front groups like the ‘Fair Labor Organization’, alongside [...]

  45. I think the purchasing power parity figures are really useful to get a true grip on the problem faced by many workers. If someone was earning even the highest figure on this map, this would mean they could afford to buy the goods and services that $379 US a month could procure in the United states. In the US this would be difficult to survive on – what quality of life would $379 a month in the states deliver? The federal minimum wage in US is $7.25, or $1257 a month on 40 hour working week. This makes the purchasing power in Indonesia less than a third minimum purchasing power in the US. Even with bonuses and overtime, this will still be under the minimum purchasing power for US citizens.

  46. I wanted to pick up on several of the comments and provide a response.
    Simon asked about our efforts to pursue the owner of PT Kizone. We took this matter to the highest levels of government and the Indonesian Minister of Commerce convened a meeting with the South Korean Embassy and the local Korean trade association, to introduce measures to curb such behaviour, but in terms of tracking down Mr Lee, the former owner, they explained that although his actions were reprehensible and unethical, there are no criminal charges levelled against him, and in any case there is no extraction treaty in place with South Korea.
    After a short period the insolvent business entered into bankruptcy and the court-appointed receiver took over the liabilities and responsibilities of the former PT Kizone owner. As we have pointed out several times in our communications and public statements, adidas Group’s business relationship was effectively terminated by the factory owner (who wanted to release capacity in favour of another buyer) in June 2010. Following the shipment of our final orders we settled all monies owed to the supplier in November 2010, two months before the owner fled the country and 5 months before the business entered into bankruptcy.

    For those reading the blog who are following this case, we have posted another updated statement on our website. Go to: http://www.adidas-group.com/en/sustainability/News/2012/Update_PT_Kizone_July_2012.aspx

    I agree in part with Jeff’s comments, that there are major constraints on trade union organising certainly in the part of the world where I work as a practitioner. There remains too few collective agreement or effective means of social dialogue in terms of wage setting and this is one area of focus for us in the Fair Wage Assessment methodology we have been testing. I don’t necessarily agree that such restrictions are due to a threat to move countries, at least on our part: we have progressively consolidated our supply chain and the core suppliers that make over 80 per cent of our product have been our partners for a decade or more. But there are competitive pressures on wages, as countries seek to secure inward investment and preferential trade positions. The Cambodian government, for example, closely tracks the minimum wage process followed by their neighbour Vietnam.

    I agree with Jeff, parallel means is a poor second to an effective and freely elected trade union, but the restriction on rights in Vietnam and China are an outcome of their political systems and have not been prescribed by brands. We have been working closely with Hong Kong NGOs in running worker election programmes in factories, so there is greater direct representation, but wage negotiation remains problematic.

    I would clarify for Laura that, to my knowledge, adidas have never lobbied for the establishment of a trade zone in any country.

  47. Bianca Hinz-Foley
    July 26, 2012 8:56 pm

    PT Kizone workers who earned $0.60 an hour sewing adidas clothing have rejected adidas’s latest food vouchers scheme.

    http://usas.org/2012/07/26/pt-kizone-workers-reject-adidass-insulting-food-vouchers-scheme/

  48. Yes, “if you earn a dollar in India and a dollar in the USA what you can buy for that dollar is very different,” but a poverty wage is one that does not cover basic needs such as food, clothing, and shelter. Nowhere in this article does Adidas explicitly deny paying poverty wages.

    If Adidas diverted a small amount of their advertising budget, raised retail prices slightly, or put a small amount of their (approximately $13.3 billion in 2011) profits towards increasing factory wages and improving factory conditions, maybe they would win back customers that feel they cannot ethically buy Adidas. Not to mention extricating themselves from this ongoing PR nightmare.

  49. Alison Williams
    July 31, 2012 9:27 pm

    I dont believe a word that you say. I want to know what you are doing about poverty wages?

    This is a quote from one of your garment workers ”We are forced to take overtime work so at least it supplements our take-home pay. Otherwise, how can I survive with such meagre income, how can I pay rent for the small room where I stay, cope with my daily necessities, and send some money for my family in the province? At the end of the day it is zero balance; there are no savings left for whatever uncertain things may happen to me and my family.”
    Afairgames worker at an adidas Olympics supplier factory in the Philippines, working on minimum wage for 10 years without a pay-rise.

    Stop justifying the unjustifiable.

  50. Jeffery Hermanson
    July 31, 2012 9:49 pm

    Agree with Alison. The questions Adidas must answer are: Can the workers that produce Adidas garments and footwear sustain themselves and their families on the salary they are paid? Where does the value created by their labor end up? Are these workers treated by Adidas as an end in themselves, or as a means to Adidas’ wealth only? Does Adidas have the power to pay a living wage in their supply chain? Why don’t they?

    Now that the University of Wisconsin has sued Adidas over their refusal to pay the PT Kizone workers their legally mandated severance, we will soon have an opportunity to hear testimony from the workers about how their lives have been affected by this awful situation. I am really looking forward to see Adidas’ representatives take the stand and be subjected to cross examination.

  51. What a crying shame that Adidas can refuse to pay Indonesian workers their severance pay of 1.8 M, but happily throw 128M to plaster their name over the olympics…..DISGUSTING ! To offer the affected workers a $53 food voucher is laughable ! I will let as many people know of this injustice as possible and perhaps they will have this in the back of their minds when next purchasing sportswear !

  52. *XXX* Do you really think people will believe this *XXX*. You pay $6 to make a pair of trainers then sell them on for 10 times as much. Is that fair on your workers. No doubt the ‘overtime’ is compulsory and the bouses are peanuts. Your company is one of the unnacceptably expoitative faces of capitalism.

  53. Frank Thomas (Moderator)
    August 6, 2012 9:00 am

    Mike Hodgson, we appreciate an open and controversial discussion. However, this discussion should always be respectful. Therefore please understand I can’t accept abusive and objectionable remarks on this blog as made in the first part of your comment. Please note that I deleted this first part of your comment and marked it as *XXX*. This is in line with our blog guidelines and moderation principles (http://blog.adidas-group.com/adidas-group-blog-guidelines/our-moderation-principles/).

  54. Just pay your staff better wages and stop pretending it’s more complicated than that.

  55. Frank Thomas – how can you sleep at night working for a company that exploits vulnerable people so ruthlessly in pursuit of profit.Have you seen the photographs of the living conditions of those workers? No one with a shred of integrity can support this. I say Adidas – SHAME ON YOU.

    http://www.waronwant.org/news/press-releases/17617-olympic-projection-spotlights-adidas-factories-exploitation

  56. I feel that Bill is probably fighting hard within his company to be the change he is looking for in the world.

    However, it is tough for the reader to see that philosophy in such a short blog entry, which basically states that “poverty wages” aren’t THAT bad, when looking at the PPPs in the respective countries. The article should’ve included the actual (take home) PPP-wages of workers making adidas products. Then we could compare them to comparable blue collar jobs in Western countries and their PPP-salaries. I fear this data is too sensitive, but I ask you, Bill, to try to publish it (use averages annd estimations where needed).

    Nevertheless: no article on this topic should ever ignore the unbelievable factual differences between Chinese and, say, European working conditions. Otherwise blog entries like this one remind us of the top 10 excuses for not paying a living wages (see link).

    http://www.labourbehindthelabel.org/campaigns/item/1090-top-10-excuses-for-not-paying-a-living-wage

  57. Thank you for your comment, Yannik. Unfortunately we do not maintain wage data in a PPP format for each of the 63 countries we source from and as you will appreciate the numbers are in constant flux based on cost of living and inflation pressures. What I can say, is that in Asia take home pay levels can be up to double the minimum wage, but that of course depends also on productivity or performance bonuses, food and transport allowances and overtime premiums for work during peak production periods. The purpose of the blog was not to diminish the challenge in improving overall wage conditions in global supply chains, it was to highlight the complexity of the subject and the fact that the media offers an over-simplified picture to the public. As I wrote in response to earlier comments, adidas is actively working on ways to influence the delivery of fair wages in our supply chain through better wage practices and we are working closely with the Fair Wage Network (http://www.fair-wage.com/) and Daniel Vaughan-Whitehead, a Senior Wage Specialist with the ILO. The research being conducted by Professor Vaughan-Whitehead is on-going and we are hopeful of sharing more on this subject, as we advance our efforts in this area.

  58. So, is the author saying he’d be fine with a 90% pay reduction so long as he was relocated to a less developed nation first?
    Sounds like a great way to reduce overhead, to allow this fine company to continue pass the savings on to the consumer!

    Oh… Nevermind; just looked up how much adidas products cost.

  59. I would like to say that I’m impressed with the fair and even handed approach that has been pursued in moderating these comments.
    Whatever other faults can be laid at the companies feet, they certainly seem willing to allow and even respond to criticism.