Nike and Child Labor

Nike and Child Labor

It is no secret that American-owned countries frequently outsource their labor to people in foreign countries, because foreign labor is cheap when compared to domestic labor. One reason that foreign labor is frequently less expensive than domestic labor is that many foreign countries do not impose the same types of regulations on employers as the United States does. One of the more controversial missing regulations relates to the use of child labor. While child labor is largely outlawed in the United States, and strictly and carefully regulated in the areas where it is not outright prohibited, many countries in the world do not take such a hard-line stance on child labor. As a result, many American companies are employing children in their foreign companies, despite legal prohibitions that would prevent them from doing so in domestically-run companies. Moreover, U.S. law makes no attempt to prevent the products of child labor from entering into the domestic product stream as long as the child labor was performed outside of the U.S. One of the most infamous perpetrators of this practice is the Nike Company, which has received substantial criticism for employing underage children in its overseas factories, especially in China.

Ethically, this issue seems very clear cut to most Americans, who live in a country where children, even impoverished children, have access to a government-sponsored standard-of-living that exceeds the standard of living for most working-class people in less-developed nations. Furthermore, the international community, specifically the United Nations, has sent a clear message that children are entitled to an education and should not be employed in oppressive environments, specifically environments that would interfere with a child's access to an education. However, the international community has also sent a clear message that children are entitled to a certain standard of living. While placing the burden of providing necessities for a child on the child's parents and then the state, the international community has failed to address the reality that in many impoverished nations, parents do not have the financial resources to adequately provide for their children's care. Moreover, these same impoverished nations are also unlikely to have sufficient state resources to provide an adequate standard of living to children whose parents are unable to provide such support. In that case, law makers and law enforcement face an untenable dilemma; make and enforce laws that prevent child labor, which may mean starvation or worse for an individual child, or permit child labor and reinforce a cycle of inescapable poverty? When viewed from that angle, the ethical problem, which seems so clear-cut in a land of plenty, becomes much more difficult to resolve.

Moreover, business people face their own ethical issues. Corporate boards have a fiduciary duty to maximize profits for their shareholders. Therefore, at least in theory, they have an obligation to seek the lowest costs and the highest profits attainable. If that means selling a pair of Nikes for $150, while only paying their child sweatshop labor workers pennies a day, what decision should a board make? After all, if a board is in compliance with local laws and is paying the going rate for labor in a specific country, are they doing a service or a disservice to employ people at that local rate? Moreover, if children are in need of jobs, is a company being exploitative to provide them with those jobs?

In theory, those questions can be thought-provoking ethical questions. However, when one looks at the reality of sweatshop labor as handled by an extremely profitable company like Nike, which fashions itself as the industry leader, it becomes clear that the employment practices are unduly exploitative. For example, most of Nike's shoes are produced in three Southeast Asian countries: Indonesia, China, and Vietnam. These countries were not selected only for their access to cheap labor, but because of cultural or legal barriers to challenging employers. For example, "in China and Vietnam, the law prohibits workers from forming independent trade unions" (Global Exchange, 2007). For many years, Nike hid behind the independent contractor excuse when called to account for its exploitative labor practices. However, it is important to realize that Nike and other large companies who similarly employ independent contractors for manufacturing and production maintain a much higher degree of control over their product than in a typical independent contractor situation. For example, "Nike dictates the terms to the contractor: the design, the materials, the price it will pay" (Global Exchange, 2007). Moreover, while Southeast Asian workers do seek out these jobs when they become available, the reality is that they also vehemently protest the working conditions in Nike plants:

In April 1997, 10,000 Indonesian workers went on strike over wage violations. In the same month, 1,300 workers in Vietnam went on strike demanding a one-cent-per-hour raise and in 1998, 3,000 workers in China went on strike to protest not only low wages, but hazardous working conditions. And remember, in these countries, workers who protest put themselves at great personal risk. They can end up fired and blacklisted from further jobs, or worse yet, be interrogated and jailed (Global Exchange, 2007).

Nike's behavior throughout Southeast Asia has been the subject of a tremendous amount of controversy. In fact, several reputable human rights organizations have called for boycotts of Nike products because of their unfair labor practices. However, a discussion of labor practices throughout Southeast Asia ignores the fact that each country has specific cultural and governmental influences that make child labor and otherwise exploitative labor practices possible within that country. This paper will focus on child labor in China because China is the wealthiest of the countries where Nike is alleged to use child sweatshop labor, and, as such, has the financial resources to target those unlawful practices, where countries like Vietnam and Indonesia lack the financial resources to thoroughly investigate and target such human rights abuses.

Legal

Laws

The United States strictly regulates child labor, by limiting the types of work a child can do, working conditions, and the number of hours a child can work each day. It also establishes age limits for certain types of labor. The Fair Labor Standards Act (FLSA) provides that:

(a) No producer, manufacturer, or dealer shall ship or deliver for shipment in commerce any goods produced in an establishment situated in the United States in or about which within thirty days prior to the removal of such goods there from any oppressive child labor has been employed: Provided, That any such shipment or delivery for shipment of such goods by a purchaser who acquired them in good faith in reliance on written assurance from the producer, manufacturer, or dealer that the goods were produced in compliance with the requirements of this section, and who acquired such goods for value without notice of any such violation, shall not be deemed prohibited by this subsection: And provided further, That a prosecution and conviction of a defendant for the shipment or delivery for shipment of any goods under the conditions herein prohibited shall be a bar to any further prosecution against the same defendant for shipments or deliveries for shipment of any such goods before the beginning of said prosecution.

(b) the Secretary of Labor, or any of his authorized representatives, shall make all investigations and inspections under section 11(a) with respect to the employment of minors, and, subject to the direction and control of the Attorney General, shall bring all actions under section 17 to enjoin any act or practice which is unlawful by reason of the existence of oppressive child labor, and shall administer all other provisions of this Act relating to oppressive child labor.

(c) No employer shall employ any oppressive child labor in commerce or in the production of goods for commerce or in any enterprise engaged in commerce or in the production of goods for commerce.

(d) in order to carry out the objectives of this section, the Secretary may by regulation require employers to obtain from any employee proof of age. (29 U.S.C.S. 201 §(12)(a-c).

Under the FLSA:

(l) "Oppressive child labor" means a condition of employment under which (1) any employee under the age of sixteen years is employed by an employer (other than a parent or a person standing in place of a parent employing his own child or a child in his custody under the age of sixteen years in an occupation other than manufacturing or mining or an occupation found by the Secretary of Labor to be particularly hazardous for the employment of children between the ages of sixteen and eighteen years or detrimental to their health or well-being) in any occupation, or (2) any employee between the ages of sixteen and eighteen years is employed by an employer in any occupation which the Secretary of Labor shall find and by order declare to be particularly hazardous for the employment of children between such ages or detrimental to their health or well-being; but oppressive child labor shall not be deemed to exist by virtue of the employment in any occupation of any person with respect to whom the employer shall have on file an unexpired certificate issued and held pursuant to regulations of the Secretary of Labor certifying that such person is above the oppressive child labor age. The Secretary of Labor shall provide by regulation or by order that the employment of employees between the ages of fourteen and sixteen years in occupations other than manufacturing and mining shall not be deemed to constitute oppressive child labor if and to the extent that the Secretary of Labor determines that such employment is confined to periods which will not interfere with their schooling and to conditions which will not interfere with their health and well-being. (29 U.S.C.S. 201 § (3)(l).

Chinese law is theoretically as strict about prohibiting child labor as American law is. Under the Regulations on Prohibition of Child Labor, which was adopted by the State Council in 2002, employers are prohibited from hiring children under the age of 16. Moreover, "The regulation stipulates that employers will be fined 5,000 yuan ($720) for every child laborer they hire for one month. If they continue to do so, authorities will rescind their licenses" (Xiaofeng & Qian, 2008). In addition to laws specifically addressing child labor, China has a compulsory education law, which requires each child in China to attend nine years of school, which should prevent many young children from being able to enter into the workforce (Xiaofeng & Qian, 2008).

Both the United States and China were members of the United Nations' Convention on the Rights of the Child. In that document, the member nations agreed to several key issues about children, many of which relate to the issue of child labor. For example, in Article 27 of the Convention on the Rights of the Child, which addresses a child's right to an adequate standard of living, the United Nations (UN) provides that:

1. States Parties recognize the right of every child to a standard of living adequate for the child's physical, mental, spiritual, moral and social development.

2. The parent(s) or others responsible for the child have the primary responsibility to secure, within their abilities and financial capacities, the conditions of living necessary for the child's development.

3. States Parties, in accordance with national conditions and within their means, shall take appropriate measures to assist parents and others responsible for the child to implement this right and shall in case of need provide material assistance and support programmes, particularly with regard to nutrition, clothing and housing (1989).

In Article 28, which addresses a child's right to an education, which is compromised when a child becomes a member of the workforce, the UN provides that:

1. States Parties recognize the right of the child to education, and with a view to achieving this right progressively and on the basis of equal opportunity, they shall, in particular:

(a) Make primary education compulsory and available free to all;

(b) Encourage the development of different forms of secondary education, including general and vocational education, make them available and accessible to every child, and take appropriate measures such as the introduction of free education and offering financial assistance in case of need;

(c) Make higher education accessible to all on the basis of capacity by every appropriate means;

(d) Make educational and vocational information and guidance available and accessible to all children;

(e) Take measures to encourage regular attendance at schools and the reduction of dropout rates (1989).

Article 29 specifically addresses the nature of a child's education and provides that:

1. States Parties agree that the education of the child shall be directed to:

(a) the development of the child's personality, talents and mental and physical abilities to their fullest potential;

(b) the development of respect for human rights and fundamental freedoms, and for the principles enshrined in the Charter of the United Nations

(d) the preparation of the child for responsible life in a free society, in the spirit of understanding, peace, tolerance, equality of sexes, and friendship among all peoples (United Nations, 1989).

Article 31 discusses a child's right to leisure time, and provides that:

1. States Parties recognize the right of the child to rest and leisure, to engage in play and recreational activities appropriate to the age of the child and to participate freely in cultural life and the arts.

2. States Parties shall respect and promote the right of the child to participate fully in cultural and artistic life and shall encourage the provision of appropriate and equal opportunities for cultural, artistic, recreational and leisure activity (United Nations,1989).

Finally, Article 32 specifically addresses the issue of child labor and provides that:

1. States Parties recognize the right of the child to be protected from economic exploitation and from performing any work that is likely to be hazardous or to interfere with the child's education, or to be harmful to the child's health or physical, mental, spiritual, moral or social development.

2. States Parties shall take legislative, administrative, social and educational measures to ensure the implementation of the present article. To this end, and having regard to the relevant provisions of other international instruments, States Parties shall in particular:

(a) Provide for a minimum age or minimum ages for admissions to employment;

(b) Provide for appropriate regulation of the hours and conditions of employment;

(c) Provide for appropriate penalties or other sanctions to ensure the effective enforcement of the present article (United Nations, 1989).

Legal Loopholes

While the above-described laws certainly appear aimed at eliminating exploitative child labor practices, it is clear that they are not adequate to do so. The international community has failed to include any penalties for countries that outsource their labor to countries where child labor is a frequent practice. For example, examining U.S. law, it is clear that the law is drafted to permit foreign child labor. The Fair Labor Standards Act specifically states that "No producer, manufacturer, or dealer shall ship or deliver for shipment in commerce any goods produced in an establishment situated in the United States," making no provision for goods produced in an establishment outside of the United States (29 U.S.C.S. 201 §(12)(a). There is absolutely nothing in domestic U.S. law prohibiting products created by oppressive child labor from entering into the domestic market, as long as such products are not produced domestically.

Furthermore, even though the United Nations' Convention on the Rights of the Child specifically addresses child labor, it does so in a manner that places the onus of preventing child labor on the country where such labor is performed. In Article 32(2), the UN directs State Parties to provide for minimum ages for employment, regulate hours and conditions of employment, and provide for penalties and sanctions when such laws are violated (United Nations, 1989). However, the UN Convention fails to place any burden on the countries utilizing non-domestic child labor. Because outsourcing countries generally have greater economic power than the countries where such labor is performed, it would probably be more appropriate to create laws aimed at punishing companies who utilize oppressive child labor, whether that labor is foreign or domestic.

Finally, there do not appear to be any loopholes in China's anti-child labor laws, which provide for economic sanctions and other penalties against employers utilizing child laborers. However, the reality is that China is an immensely huge country where a large proportion of the people live in poverty, and the Chinese government has a tremendous burden to meet to enforce such laws. Moreover, while the fines may seem tremendous, a fine of $720 a month for every discovered minor worker, even combined with that worker's daily salary is still less than what it would cost Nike to pay an American worker minimum wage to engage in the same work. The same holds true for any American country outsourcing labor to China. Therefore, while there is no real loophole in China's anti-child labor laws, they are not sufficiently stringent to discourage American corporations from utilizing child laborers in their sweatshops. .

Legality of using child labor

Nike's use of child labor in Chinese sweatshops is clearly illegal. It violates China's anti-child labor laws, which prohibit the employment of children under 16 in such working conditions. Moreover, Nike's use of child labor in Chinese sweatshops violates an international treaty, to which the United States and China are both signatory parties. However, there is no real provision in the law to punish Nike or similar countries. Nike uses independent contractors for production, so that Nike itself escapes financial or criminal liability for the legal violations that occur in China. Moreover, because U.S. laws only penalize the introduction of the products of domestic child labor into the market, Nike cannot be subject to civil or criminal penalties for that practice in the United States. Therefore, while engaging in a practice that is clearly illegal in its host country, Nike has established a system that insulates it from liability for this illegal practice. Therefore, as Nike does it, the use of child labor in sweatshops is practically legal.

Ethical relativism and child labor

Is the prohibition of child labor largely a Western phenomenon and is it culturally oppressive to extend these prohibitions to other cultures? While ethical relativism has largely been discounted as a moral theory because of a growing consensus that there are universal human rights, that growing consensus does not erase the fact that different culture do have different moral norms:

Ethical relativism is the theory that holds that morality is relative to the norms of one's culture. That is, whether an action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another. For the ethical relativist, there are no universal moral standards -- standards that can be universally applied to all peoples at all times. The only moral standards against which a society's practices can be judged are its own. If ethical relativism is correct, there can be no common framework for resolving moral disputes or for reaching agreement on ethical matters among members of different societies (Velasquez et. al, 2008).

Under a theory of ethical relativism, standards against child labor cannot be made universal, especially when the cultural and living conditions of children vary so widely, depending on country of origin. Ethical relativism is a strong argument for allowing some type of child labor, because of these differences in living conditions. After all, is it even appropriate for an American who has access to adequate resources to care for his children to impose his moral norms on parents in countries with a lack of such resources?

However, ethical relativism generally fails as an ethical theory:

Perhaps the strongest argument against ethical relativism comes from those who assert that universal moral standards can exist even if some moral practices and beliefs vary among cultures. In other words, we can acknowledge cultural differences in moral practices and beliefs and still hold that some of these practices and beliefs are morally wrong. The practice of slavery in pre-Civil war U.S. society or the practice of apartheid in South Africa is wrong despite the beliefs of those societies. The treatment of the Jews in Nazi society is morally reprehensible regardless of the moral beliefs of Nazi society (Velasquez et. al, 2008).

Likewise, child labor, though historically utilized in every nation and in almost every culture, is such a morally reprehensible practice. What really makes ethical relativism fail in this context is the fact that China is one of the signatory parties to the Convention on the Rights of the Child. China's government, and by extension, its population, have acknowledged that they believe it is immoral to have children engaged in child labor. To then try to justify such behavior by saying that it is culturally permissible ignores the clear mandates of a society that may acknowledge that such behavior is a cultural norm, but still makes it clear that such behavior is not acceptable in that culture. Thus, the theory of ethical relativism cannot be said to apply to the use of child labor in Chinese sweatshops.

Social responsibility

The use of child labor is not an inherently socially irresponsible act. Even in the United States, which has strong prohibitions against child labor, and which enforces those prohibitions, there are exceptions for children engaged in certain occupations. For example, many children live in agricultural communities and are an essential part of labor in a farm environment. That labor plays an important role in their education, preparing them to be agricultural workers, and helping them provide sustenance and economic support for their families.

However, the fact that not all child labor is socially irresponsible does not mean that the use of child laborers in sweatshop conditions is not socially irresponsible, because it is. In order to determine whether an act is socially responsible, one must look at the long-term effects of that act on society. In addition, one must look at how the act effects all of the stakeholders. For child labor in Chinese Nike factories, the stakeholders include the child laborers, the Chinese government, the factory owners, Nike, Nike's consumers, and the Nike Corporation and its stockholders. None of these stakeholders can expect a long-term benefit from Nike's current child labor practices.

First, the children who work as sweatshop laborers work at under a subsistence wage, trapping them in a cycle of poverty. In addition, because they are working for less than a living wage, these children must work full time and cannot pursue an education and work, virtually ensuring that they will never be able to move on to better employment. Not only are these children condemned to a life of poverty, but the extreme poverty in which they live virtually guarantees that the next generation will continue the cycle. Next, the factory owners who work as independent contractors for Nike have to meet certain financial specifications set by Nike, which pressure them to ignore labor laws and hire child labor. However, it is these factory owners, not the Nike Corporation, who face fines and possible loss of the ability to conduct business if their illegal employment practices are discovered. While employing children may provide short-term benefits to these factory owners, it also introduces an element of risk that can threaten their long-term economic viability. The Chinese government also faces severe long-term risks from this practice. While China's rising place in the world economy is undoubtedly due, in part, to its lax employment standards and unwillingness to enforce its existing labor laws, to take a place as a world leader, China must capitalize on its human resources. To have a lower class that is trapped in a cycle of untenable poverty resigns China to a role as a third-world country, which is in conflict with its goals to become a world economic leader. Nike consumers see no real long-term benefits from the use of child sweatshop labor. For child laborers to be paid a living wage would add less than $1 to the price of a pair of Nike tennis shoes. For shoes that can cost well over $100 per pair, even if the Nike Corporation passed the additional cost onto the consumer, it would have no appreciable long-term effect on Nike consumers. Furthermore, Nike consumers can experience negative consequences once they learn that their products were made by child sweatshop labor. Finally, the Nike Corporation can see no long-term benefits from the use of sweatshop labor. The practice has resulted in several highly publicized boycotts of Nike products, and, as consumers are growing more aware of the global impact of local actions, those boycotts are only likely to increase. Furthermore, since consumers would probably not even notice if Nike passed increased costs to them, Nike's financial bottom line would not have to be impacted at all by improving working conditions for its foreign workers. Because none of the stakeholders can get long-term benefits from Nike's current sweatshop practices, the practices are socially irresponsible.

Corrective action

It would be easy to suggest a treaty to eliminate the use of children as laborers in foreign sweatshops, but the reality is that such laws already exist. Instead, if one expects to change the exploitative use of child labor by American companies in underdeveloped nations, a treaty must be able to penalize those American companies. It would be tempting to suggest that such a treaty should be self-executing under U.S. law, but the reality of American criminal law is that to criminalize behavior, a party must have notice of the exact nature of the law as well as of potential penalties for violation of those laws. That would be unduly burdensome to include in a treaty, so the treaty would need to be non-self-executing, and require implementing legislation. Moreover, because the international community has already recognized certain inalienable human rights for children, it would be ridiculous to allow reservations to a treaty aimed at securing those basic rights. This treaty would be aimed at UN member nations, hopefully with the United States, most developed nations, and most underdeveloped nations signing the treaty. Therefore, the treaty would be covered under the Vienna Convention on the Law of Treaties.