On BW's Chinese "Sweatshops" Article

I found the article Secrets, Lies, and Sweatshops: How Chinese Suppliers Hide the Truth from U.S. Companies in the Nov. 27 issue of BusinessWeek to be rather poorly written. But I've come to expect this level of reporting from BusinessWeek, as say, compared with the generally far superior weekly, The Economist.

The cover shows a dark image of an apparent "sweatshop", with two lines of seated female workers, heads-down, producing something in a factory, but with one worker's head turned around and looking somewhat distressed. The article's main points may very well be true (if not particular enlightening). The article describes at some length that the audit processes put in place by major American and other Western companies (Wal-Mart, Sears, JC Penney's, Nike, etc.), in the wake of protests against "unfair" labor practices in China and other such countries, are not always having the desired results. And that this is because the contracted factories (not typically owned by the Western firms, but rather by Chinese businessmen) are finding ways around the rules, regulations, etc., and can fool the auditors and pass the inspections even while making little, if any, real improvements to labor practices. The examples discussed are admittedly not so much of the clear rights-violating variety, such as slave labor, workers forced against their will, or even child labor, but rather things like skirting minimum wage laws, not paying two or three times regular wages for overtime worked, and not giving appropriate vacation allowances. I'm not in a position to contest any of these asserted facts, and frankly, it wouldn't surprise me to hear that some (or even many) factories in China or other countries with large numbers of low-skilled workers are trying to get around the laws imposed by their governments or the rules imposed by their contracted Western companies.

What I want to comment on are the many important facts that this article failed to report, data it failed to give the reader, and questions it failed to even ask. And not for want of space: the article was the cover story and the longest in the issue. Here are a few of the things that irked me about this article:

• We are told that, depending on which figures you use, the average wage in the Chinese manufacturing sector is 42-65 cents an hour. But this tells the reader virtually nothing. What does that buy in China? Not much, I'd assume. But more than it would in the USA or Europe. Couldn't the article spend two sentences noting what that really amounts to for the Chinese worker, in buying power?
  
• The article notes that while some factories are getting away with faking their audits, some others have been investigated and closed down due to failing to follow Chinese labor laws or the rules set forth in recent years by Wal-Mart, Nike, etc. But I see no mention of what happens to the hundreds or thousands of workers who had been working, voluntarily, in those factories, and are now (temporarily, one hopes) out of work. What wage will they be making in their next job, and how long on average will it take for them to get that job? Or must most of them choose to return to the poor rural life they were hoping to escape?
  
  This is the inherent tension in these kinds of labor laws and rules, because they don't, as such, protect actual individual rights, but rather restrict the workers freedom to voluntarily exchange their labor for the wage the market will bear (i.e., their skills relative to demand). Up to a point, labor laws such as these might not have a negative effect on those they are intended to help (i.e., raising a minimum wage by a nickel might not lead to a loss of jobs), but at some point they do. In the case where the factory closes down, and the people return to the rural countryside they were trying to escape -- how is that helpful to them exactly?
  
• Also on this point, at the very end of the article the authors note "Chang says he regularly loses skilled employees to rival factories that break the rules because workers are eager to put in longer hours then he offers, regardless of whether they are paid overtime rates." This is a critical point, so it is a shame that it is buried at the end of the article. These workers would love to make 2x or 3x their regular salaries for overtime they work -- who wouldn't? But short of that -- and with good reason since the profit margins at the factory in question have been slashed from 30% to 5% over the past 18 years -- the workers would "eagerly" work extra hours at the same regular pay rate they get for their normal hours... if only they were allowed to. When they aren't allowed to do so, they quit and sign on with another factory in town -- one that will give them the overtime hours, while breaking the rules against it.
  
  Noting this more prominently in the article, and continuing down with that logic a bit further, would have made for a far more enlightening article. It does get mentioned again in the sidebar titled "How to Make Factories Play Fair", under the heading "Worker Demands". That makes it sound like the workers are demanding a reprieve from inhumane treatment, and on some level they are -- but not what many readers would initially guess. Instead we find out "Many young Chinese production workers want to earn as much as they can in a few years and then return to homes in the countryside. They often insist on logging as many hours as possible, even if they don't get full overtime pay." But their desires are being thwarted, because leftists laws and rules say "No, you can't do this work for the wage you are agreeing to be paid."
  
• Also in that sidebar, it reads "The question is whether such new approaches will improve the lot of the average Chinese worker. Issues like nonpayment of wages, overtime without extra pay, ..." Stop right there! Presenting those two issues as though they are of the same general kind is ridiculous. The first is a clear violation of the individual rights of the worker -- they agreed to do X work for Y wages, and now the factory isn't paying them. But the second issue is only a violation of an arbitrary law of the government, or a rule from a Western company, not an individual right of the worker. And as noted above, the workers are willing to work the extra hours for the same pay as their regular hours!
  
• Another failing of the article is that in the examples it discusses it doesn't do a good job of making clear which of the "labor laws" are actuall laws enforced from the Chinese government, and which are not actually laws, but perhaps rules that the Wal-Mart or Nike expect their factories to now follow (after so much pressure was put on them in recent decades). This is an important distinction for the reader to understand. The former speaks to the massive government control and intervention in the economy (even while China reforms away from hardline communism), while violating the latter (through fake audits and so on) amounts to a breach of contract between the Chinese factory and the Western companies such as Wal-Mart and Nike. It is important that the types of violations involved get clearly made to the reader.
  
• And the last thing I'll mention... in a few spots in the article we are told that "Americans expect ever-lower prices for many goods, driving the demand for cheaper supplies from China." But this is just asserted, and worse, it isn't true, at least not as strongly as worded. Individuals qua consumers are price-conscious and that is as it should be. Rational consumers, whether American or otherwise, want the most for their money. In some cases this can result from lower prices, but it can also result from improving quality. A lot of goods are not going down in price in recent years, not to mention "ever-lower". But they are going up in quality -- computers with more power, clothes that are more durable or color-fade-resistant, and so on. It can also result from things being provided in a timely manner -- time is important to consumers, as they will pay more (up to a point) to get something they want when they want it, instead of having to wait. This is the old trio of production management -- cost, time, quality -- but as considered from the perspective of the consumer.