Manufacturing In China: The Dangers To The Local Workforce
A look at some of the unethical trends that pervade Chinese labour provision for multinationals
This is a guest post written by BusinessBecause member Jaime Rodriguez. Jaime discusses the consumption mentality of consumers, the drive for large corporates to always stay profitable and the malpractices swept undercover to maintain cheap production.
Up to February 2012, China’s workforce was composed of 795 millions of citizens. Throughout history and since its beginnings, technology has had one main objective: to free humans from complications in order to improve their quality of life. In practice, this objective has enslaved millions of people around the world and in the process, has converted humans into machines as well. A relentless demand for electronic devices has arbitrarily put security into an insignificant position.
Western and multinational companies have decided, by rule or by demands of the actual economic system crisis, to outsource their production lines. As part of this rule, these companies have chosen China and other Asian countries as their main source of production. Their focus on producing high volumes of product at the lowest cost possible (even if that compromises employee’s benefits and security) seems to be the method of choice in the way these companies do business.
The slightest increase in production or overhead costs could turn these Asian companies unprofitable, and jeopardise their contract with western civilization. As a result, Asian management have decided to cut their employee’s benefits, reduce wages, and ignore basic security measures and procedures. In summary, these unethical trends create unsafe working environments. Western companies are then finding vulnerabilities in their globe-spanning supply chain. These vulnerabilities do not relate to the challenges of shipping components and finished products to their markets from Asia. Rather, they have to do with reputational risk—the risk that comes from being seen as irresponsible and uncaring, perhaps not through their own actions, but through those of their business partners.
O'Connell, M. S., & Delgado, K. (2011) state on a recently published paper that the three main reasons of accidents in the workforce environment are caused by:
(1) a lack of knowledge on the use of protective equipment
(2) lack of understanding of the safety rules or
(3) the employee was not informed of the procedures to follow.
It is the manager’s responsibility to raise awareness and reduce the rate of accidents through three main components:
(1) training the staff through lectures and videos emphasising on the consequences of not following securities measures
(2) using the drill or simulacrum, as it is considered one of the most effective tools and
(3) engage a more rigorous hiring process.
During this process, the manager must identify certain candidates that tend to cause more conflicts in the working area.
First, there’s consciousness: employees who a have high level of consciousness tend to be better workers, want to do things the right way, and are more apt to follow rules and guidelines.
Second, there is the concept of “locus of control”, which O’Connell & Delgado, divide into two types: internal and external. Employees who have an internal locus of control are aware and have control over the things that happen to them. On other hand, an employee with an external locus of control believes he has knowledge or control but is more likely to cause accidents, not only to himself, but to third parties.
Finally, there is impulsiveness: these persons have many difficulties handling stress; they tend to panic on the worse situations and don’t necessarily contribute to organization during an emergency.
Dealing with a multicultural workforce could become a challenging task if the manager does not have knowledge of or access to certain resources that could help better organize its employees. For instance, the American National Institute of Standards, a non-profit institution that dedicates itself to standardise international safety codes, has developed numerous manuals that could be implemented in Asian companies through demand of multinational corporations.
There is an expectation by management, supervisors and line employees that workplaces should be safe and that employees should not be asked to do unsafe work. Employee training is one of the most important parts of these expectations.
The Western companies must educate their suppliers about the importance of health and safety and make it clear that it is an important consideration in continuing to do business with suppliers, including those further down the supply chain, understanding that health and safety measures may result in cost increases and that the customer is willing to accept those increases.
To see all of this theory in practice we should analyse the Foxconn case. Based in Taipei, China, Foxconn is the world’s largest contract maker of electronics. It serves over 25 international companies including: Apple, Nokia, Microsoft and Panasonic.
In 2010, at least a dozen of its employees committed suicide when the company announced they would reduce wages. As a solution, Foxconn made their employees sign a document pledging not to commit suicide.
In the Longhua province factory, which has more than 200,000 employees, workers get paid only $50 a month (£31 or 38€) in return for working 15 hours a day (they also receive food and bed). Four months ago, the company declared a labour shortage of 19,000 workers. In response, Foxconn recruited underage workers as a cheap source of labour for production lines, where it is more difficult to attract young adults for the job.
"The working day starts at 7:40 pm and lasts until the following morning ... but you never know the exact time, actually, it is until you finish the job, if you have not finished, you can not complete your turn" says Xiao Wang (alias), a 14-year-old whose responsibility is to transport and catalogue products already packaged. This is not only a violation of China's labour law, it is also a violation of Foxconn’s policy. Furthermore, Foxconn doesn’t only hire underage workforce, but they also use extortion as means of recruitment.
The so-called “internships” and “scholarship programs”, which could last from three to six months are listed as optional, however, students are threatened by their teachers not to receive credits in subjects, denying them their graduation certificates and even warning them they could be expelled from the school if they chose not to take part in the activity.
Amazingly, a recently published study conducted at Stanford University found that iPad penetration was greater at an elite high school in Beijing than at one in Palo Alto, California.
In the first quarter of last year Apple earned $7.9 billion in Greater China, making it the firm’s second-biggest market. Adam Ozimek, an associate at an economics consulting firm, who was cited in an article published on The Economist, exposes that:
Westerners who argue that we should be sourcing our products in countries with better-enforced labour laws, like South Korea, Taiwan or Japan, rather than China, are making a huge mistake. But that's not the important argument here.
The argument isn't ‘many factories in China have terrible labour conditions, therefore we shouldn't buy Chinese products’, that would indeed be silly. It would also be completely doomed. Globalisation is a fact, not an option. We import huge amounts of stuff from China, and will continue to until Chinese wages rise much, much higher than they currently are. Rather, the argument is ‘many factories in China have terrible labour conditions’, therefore we should demand that Western companies that source their products in China use their bargaining power to force Chinese factories to improve working conditions.
William Zhu, Jas Sigh and Kathy Norton (2011) suggest, in another article, the implementation of health and safety audits. They understand that the audit can be a powerful tool for improving employee health and safety within supplier companies.
According to Zhu, audit’s accomplish three main tasks: functions as an educational tool as it shows the supplier’s management what a healthy and safe environment looks like; second, provides a powerful motivation to make changes for the better as experience shows that the necessary improvements tend to get made and promptly if the supplier’s management teams if left in no doubt that the contract (or its renewal) depends upon getting a good review based on the audit; and finally, the audit helps establishing a plan which includes setting priorities for bringing a manufacturing operation into compliance.
Zhu concludes that: “Progress should be monitored and contracts denied to companies that fail to follow through on health and safety matters.”
Public policies also compose part the problem. The legislation that predominates in the public and corporate sphere is one that empowers the interests of a capitalist agenda, which in effect, promotes unreasoned and uncontrolled consumerism.
Politically free labour organization such as strikes is much harder to conduct in China because the state bans the formation of independent unions not controlled by the Communist Party. Furthermore, any employee who is identified as a potential threat to the “peace” of the workforce is put into a blacklist of employees who are to be immediately fired and not accepted at other factories because they are "troublemakers".
Asian companies, or their managers, take advantage of this legislation in an effort to reduce production costs and again, employee’s benefits such a healthcare, reasonable wages and labour safety regulations are all reduced to insignificance. Western and multinational companies, on the other hand, are busy analysing the profitability of their overseas production lines; carefully planning their strategic launches, and thinking of the next upcoming gadget that will conquest consumers.
As long as this consumption mentality of disproportionate magnitude prevails over the way these companies do business, corporate interests will continue to promote the diverse factors that strengthen social inequality, unfair distribution of the resources, world hunger, unethical labour practices, salary unfairness, among other social, cultural, political and managerial disparities.
Future and current MBAs, managers, business executives, CEOs, and everyone who is in someway related to these malpractices must enter into a process of evaluation and make their own judgments about what it is to be done. Perhaps our answer could be to oppose the catastrophe that over the years, due to the frequency of the practices, have become the norm; and in the process, start to “Think Different”.
A conference on this topic was presented by the author at the Polytechnic University of Puerto Rico on October 30, 2012.
Zhu, W., Singh, J., & Norton, K. (2011). Going safely overseas. Industrial Management, 53(6), 26-30.
O'Connell, M. S., & Delgado, K. (2011). Safer hiring. Industrial Management, 53(1), 24-30.
Sincavage, J. R. (2005). Fatal occupational injuries among Asian workers. Monthly Labor Review, 128(10), 49-55