18 months after the Kathie Lee Gifford scandal, sweat shop conditions are worse than ever; top American companies exposed
Weekly News Update on the Americas, 22 November 1997
"They Hit You...They Hit You in the Head...To Make You Work Faster," says Nicaraguan Factory Worker Jolena Rodriguez.
A HARD COPY/National Labor Committee Joint Investigation Airdate - Tuesday, November 11; Wednesday, November 12; and Thursday, November 13 Wal-Mart, K-Mart, and JC Penney exposed in Nicaraguan sweat shop investigation
Workers making these garments are paid a base wage of 15 cents per hour; compared to the base wage of 31 cents per hour Honduran workers were paid in the Kathie Lee Gifford scandal.
Child workers as young as 15, working 13 hour days, seven days a week. "We young people have the capacity to work more and be more efficient for them," says Karla, a worker, "never has anyone been fired for being underaged."
Workers allege verbal, physical and sexual abuse by supervisors. "I refused his offer to have sex...He moved me to another (production) line to see what they could do to me; if they could fire me," says factory worker, Carla Beltran.
Factories surrounded by barbed wire, under armed guard.
Tin and stick shacks, with cardboard walls and dirt floors; housing entire families in a space the size of two cubicles; as many as five people are crammed into one bed.
Los Angeles, November 11, 1997 -- Tonight, HARD COPY's Hard Target investigative unit, led by correspondent Ed Miller, joins forces with National Labor Committee Executive Director Charles Kernaghan, the man who broke the Kathie Lee Gifford sweat shop scandal. HARD COPY and Kernaghan travel to the sweat shops of Nicaragua in an undercover investigation. The investigation implicates some of America's biggest stores and most popular brand names. The three-part HARD COPY report will air tonight, Tuesday, November 11; Wednesday, November 12; and Thursday, November 13.
HARD COPY and the National Labor Committee uncovered garments being produced which include brands such as Faded Glory for Wal- Mart, Arizona for JC Penney, Route 66 for K-Mart. Workers making these garments are paid a base wage of 15 cents per hour; compared to the base wage of 31 cents per hour Honduran workers were paid in the Kathie Lee Gifford scandal. Many of the workers are underage; workers allege being physically and sexually abused; they are exposed dangerous chemicals from solvents; the workers take megadoses of vitamins in order to work faster and stay awake; and they are forced to work overtime without additional pay.
The HARD COPY investigation took place in a Free Trade Zone (FTZ) near Managua, Nicaragua from October 23-25. FTZ's are areas set up around the world which were originally established and built using American tax dollars. Manufactured goods produced within the FTZ are shipped to the United States and are subject to reduced tariffs or no tariffs. The FTZ HARD COPY visited uses barbed wire fences and armed guards to keep the workers in and visitors out. The Nicaraguan FTZ contains about a dozen companies owned by manufacturers of different nationalities. The HARD COPY investigative team went to Nicaragua and posed as blue jeans buyers. They found workers who begin work as young as 15 years old. We young people have the capacity to work more and be more efficient for them, says Karla, a teenaged worker, never has anyone been fired for being underaged. The workers are crammed into overflowing school buses, literally hanging from the outside of the buses which are going in excess of 35 mph. The workers are shipped from their homes to work, behind the barbed wire gates manned by armed guards.
Workers are paid hourly, but they have daily quotas of production they must meet. Overtime is mandatory and does not pay time and a half. One worker, Olga Maria Condoza, says, "They make us work overtime. They make us stay. Anybody who doesn't stay gets a warning, and three warnings and you are fired." The workers work as much as 13 hours each day, seven days a week. The long hours force the workers to take megadoses of vitamins to stay awake and work faster. The pills are purchased inside the FTZ. Maria, a factory worker who produced Faded Glory jackets for Wal-Mart, was asked if lots of workers take the pills. Maria said, "Many people take these pills...they make us work faster." According to the HARD COPY report, the workers are so malnourished that high doses of vitamins keep them awake and make them work faster.
Once they arrive at work, employees allege they are subjected to verbal, physical, and sexual abuse. One worker, Jolena Rodriguez, states, "They hit you...they hit you in the head...to make you work faster." Another worker, Maria, makes less then $12 per week. Maria commented on the abuse by saying, "When the work doesn't come out...they go around and scream at everybody." Supervisors, under the pretense of checking for stolen goods, allegedly touch and feel the workers. A female worker says, "They take me into another room and search us all over. They touch us all over, including them lifting up our skirts to look underneath." One worker, Carla Beltran, says she was fired for refusing to have sex with her supervisor. Beltran says, "I refused his offer to have sex...he moved me to another line to see what they could do to me; if they could fire me."
The investigation also shows the housing conditions in which the workers live. The huts have tin and thatch roofs, fabric doors, dirt floors and cardboard walls. The houses do not have running water and propane tanks are used for cooking when the families can afford to buy fuel; open fires are used when there is no money for propane. The report shows multiple families living in the cramped, tiny spaces. The conditions are so bad, that one family of five is forced to sleep on one boxed spring bed that has no mattress.
Furthermore, the investigation uncovers environmental abuses by the manufacturers. Bleaches, solvents and dyes are washed into outdoor, open pits. Empty, rusted barrels of chemicals are stored out in the open, not in a controlled area. Workers also complain that they burn their hands with the bleach and chemicals used to make stone washed jeans.
According to the American Textile Manufacturers Institute, 60 percent of the $184 billion a year that is spent in the U.S. on apparel purchases is for imports. And, according to the American Apparel Manufacturers Association, since 1990, the Caribbean Basin's share of U.S. apparel imports has grown from 12 percent to 22 percent.
After the Kathie Lee Gifford/Wal-Mart scandal involving Honduran workers, Wal-Mart and JC Penney strengthened and began to seriously implement existing human rights codes of conduct. These companies pledged to police their subcontractors to ensure the human rights codes of conduct were observed. Wal-Mart stopped its production in Honduras in 1996, at the time of the scandal, and shifted much of its operations to Nicaragua. Production has resumed in Honduras since that time. In the aftermath of the scandal, Gifford became a strong proponent of ending the abuses of the sweat shops, especially the use of child labor.
Another result of the previous scandal was an endorsement in April of an apparel industry human rights code of conduct by President Clinton. The code of conduct bars the use of child labor in factories around the world that make shoes and clothing for the U.S. market. Additionally, President Clinton created the White House Apparel Industry Partnership. The task force is a coalition of labor, religious, and garment representatives created to develop industry-wide standards and monitoring procedures. The group is scheduled to make its final report at the end of November.
At press time, JC Pennney, K-Mart and Wal-Mart are looking into the allegations.
HARD COPY is produced and distributed by Paramount Domestic Television. The Paramount Television Group is part of the entertainment operations of Viacom Inc.
Nicaraguan Comparison of Sales and Budget. Nicaraguan Government Budget Compared to U.S. Employers/Importers in Country
Nicaraguan government budget = 585 million U.S. $
Source: 1997 Securities and Exchange Commission filings and Government of Nicaragua
NLC: Anatomy of Exploitation, J.C. Penney
Anatomy of Exploitation:
You pay $14.99 to purchase a pair of J.C. Penney Arizona Jeans. The young women in Nicaragua who made those pants were paid just 11 cents.
Is this right?
J.C. Penney sources production of its popular private label Arizona Jeans to a Taiwanese-owned Chentex Factory in a free trade zone in Nicaragua. The jeans sell for $14.99 in the U.S.
At the Chentex Factory, a line of 200 sewers must complete a daily production goal of 3,500 pants. There are four workers doing each operation.
The base wage at the Chentex factory is 19 cents an hour, or $9.12 a week. However, by meeting production goals their average wage in the factory in 23 cents an hour, or $1.84 for an eight- hour day.
Two hundred sewers earn $1.84 each a day, which amounts to $368 in direct labor costs. The 3,500 pairs of Arizona jeans they produce each day would sell for $52,265 at J. C. Penney stores in the U.S. This means that the direct labor cost for sewing these jeans comes to only 7/10ths of one percent of the sales price. In other words, the women in Nicaragua receive just 11 cents; for every $14.99 pair of Arizona jeans they sew.
Since J.C. Penney leaves just 11 cents behind in Nicaragua in direct labor costs, one wonders what happens to the other $14.88- -99.3 percent of the sales price? (14.99-.11=$14.88)
By comparison, if J.C, Penney made these jeans in the U.S., the labor cost would be approximately 10 percent of the sales price, or $1.50.
Could J.C. Penney afford to do better? After all, 23 cents an hour, or $11.04 a week is a sub-subsistence wage in Nicaragua, on which no one can survive.
In 1996, J. C. Penney's sales totaled $24.3 billion, while their profits were $565 million. It is striking that J.C. Penney's annual sales are actually 42 times greater than the entire national budget of Nicaragua, which is only $585 million. In fact, in 1996, J.C. Penney spent $988 million on advertising alone, which in itself is 1.7 times as the national budget of Nicaragua. Yet, J.C. Penney pays no taxes in Nicaragua--no corporate taxes, no municipal, state, sales or income taxes, since they operate in a Free Trade Zone.
The women in Nicaragua told us that they could survive on a wage of 88 cents an hour, $42.37 a week. They are not talking about living a middle class existence. They know they will always be poor, but with these wages they and their children, could climb out of misery and into poverty. An 88 cent wage would still be only 1/10th of the average U.S. apparel wage of $8.31 per hour. So Nicaragua, as a developing country, would clearly maintain its "competitive advantage."
What would happen if J.C. Penney paid the women in Nicaragua 88 cent an hour? Would the sky fall in on J.C. Penney's financial viability?
With an 88 cent-an-hour wage, the direct labor cost to sew a pair of Arizona Jeans would amount to just 42 cents--or less than 3 percent of the $14.99 sales price. This would leave J.C. Penney in control of $14.57, or 97 percent of the sales price.
It is a very legitimate question to ask J.C. Penney: How can they not make a very good profit when the company, and its contractors, would still control 97 percent of the sales price of the garment?
They should explain this to us.
NLC: Race to the Bottom
This document contains a comparison of the costs involved in making identical jeans in the U.S. and in Nicaragua based on production of Britannia Relaxed Fit boys jeans.
The story of two pairs of jeans--exactly the same--one made in the United States, and the other made in Nicaragua.
Two pairs of Britannia Relaxed Fit boys jeans were purchased in Kmart. (The Britannia label, which was owned by Levi Strauss, has recently been sold to the VF Corporation.)
Made in the USA
Made in Nicaragua
Retail price $17.99
Retail price $17.99
Average U.S. apparel wage $8.31/hour
The highest apparel wage in Nicaragua (which few workers make)-- 43 cent/hour
Sewing time--15 minutes
Sewing time--20 minutes
Labor cost--$2.08 ($2.0775) ($8.31/hr x 15 minutes = $2.0775)
Labor cost--14 cents ($0.14332) ($.43/hr x 20 minutes = $0.143332)
(Here we have increased production time five minutes--a full 33%- -to compensate for the workers' malnourishment, excessively long working hours and extreme heat.)
Labor cost as percentage of retail price:</LI> 11.5 percent
Labor cost as percentage of retail price: 8/10ths of one percent
How it all adds up:
So, the company saves $1.93 in labor cost on each pair of jeans. ($2.08 - $0.14 = $1.93)
For example, the Chentex factory in Las Mercedes free trade zone has 4 production lines of 200 sewers each. One line produces 3,500 pairs of jeans a day. All 800 sewers produce 14,000 jeans a day. 14,000 pairs of jeans multiplied by $1.93 each in savings on lower labor costs equals $27,020 in savings to the company each day. For a typical six day work week, the total savings would be $162,120. In a year, this would add up to $8,430,240.
In November 1997, Levi Strauss is closing 11 plants in the U.S., slashing 6,395 jobs--1/3 of its entire U.S. workforce.
It would take a worker in Nicaragua an entire week's wage to purchase one pair of jeans--despite the fact that, in effect, each worker sews 17.5 pairs of pants each day --(two hundred sewers on a line produce 3,500 pants per day; 3,500/200 = 17.5)-- which sell for $314.83. The workers earn $3.44 a day. No one can live on such wages, which are well below subsistence levels.--So, obviously, they are unable to purchase anything made in the U.S. NLC: Chentex Pay Envelope A Chentex Pay Envelope $2.48 for a Ten-Hour Day -- 24 Cents an Hour
This document presents wage and earnings information based on a pay stub for a worker at Chentex, one of the largest clothing subcontractors in the La Mercedes Free Trade Zone in Managua, Nicaragua and site of production for several major U.S. companies including J.C. Penney, Kmart, and others.
This woman earned 299.04 cordobas for 14 days work making these well-know U.S. labels. At 9.8 cordobas to the U.S. dollar, this comes to $30.51--or $2.18 a day. (299.04/9.8 = $30.51; 30.51/14 = $2.18) The workday is from 7 a.m. to 5:15 p.m., with a single half-hour break for lunch--9 hours 15 minutes. So, she earned 22 an hour.
She also worked seven hours of overtime, increasing her wage (including all benefits) to 340 cordobas--$34.69, or 24fcent; an hour. (340/9.8 = $34.69; $34.69/14 days = $2.48/day; $2.48/10 hours, 10 minutes = 24fcent;/hour fully loaded wage.)
Copy pay stub available upon request
(Note that this check gives no indication of the number of regular hours worked, nor whether the 7th day bonus is paid. And none of it is in Spanish, making it quite easy to cheat a young teenaged girl.)