How do working conditions in direct foreign-invested ICT factories measure up in China?

The following are the findings of surveys carried out in mid-2006 amongst workers from directly-owned Nokia and Flextronics factories in Guangdong and Jiangsu provinces. According to the survey results, these are not nightmare sweatshops, but they were found to be violating Chinese laws regarding social insurance, overtime hours and – most importantly – lacked democratic trade unions that can represent workers.

Chinese factories are renowned for excessively long working hours, low wages, wages owing in arrears, dismal industrial relations, high rates of occupational injury and employer’s refusal to provide social insurance. The Chinese Labour Law and related regulations are rigorous in theory, but are poorly implemented. Illegal behaviour is the norm. Legal restrictions, such as a 36-hour limit on overtime work per month are meaningless, with overtime hours in the manufacturing sector routinely exceeding 100 or even 200 hours per month! The ICT industry is no exception. Chinese factories work within both local and global supply chains, whereby Asian transnational corporations dictate prices and lead times of electronic products.

So how do these two direct foreign investors – Nokia and Flextronics – measure up against Chinese industry norms, and relevant Chinese laws and regulations? The following information was gathered through worker interviews at five factories: two Nokia factories, in Suzhou (Jiangsu Province) and Dongguan (Guangdong Province), and three Flextronics factories, all located in Shenzhen (Guangdong Province).

The survey uncovered areas in which both companies fall short of Chinese legal requirements. Overtime regularly exceed the legal limit of 36 hours in all factories except Nokia Dongguan. Workers in one Flextronics facility no.1 claimed that they regularly work between tens of hours and 192 hours overtime in a month! Nokia Suzhou and Flextronics’ other two facilities have regular overtime schedules of 48 and 56 hours respectively, which are in excess of legal limits, but in line with the 60-hour limit commonly set by Corporate Codes of Conduct. While illegal, these overtime hours are certainly below the norm for Chinese ICT factories.

Workers at all five facilities were paid according to legal overtime premiums – again, better than most factories in the region.

Social insurance is another area in which three of the five factories have violated relevant legal requirements. The Chinese Labour Law Article 7.12 requires that employers provide workers with a minimum of old-age, medical and occupational injury insurance. Nokia’s Dongguan facility only provides part of its workforce with any social insurance at all. In turn, Flextronics does contribute to old-age insurance for all its staff, but its factory no.2 has only provided health and occupational injury insurance to a portion of workers. Its factory no.3 has also failed to provide health insurance for any production line employees.

While working conditions generally meet legal standards for formal employees, both Nokia and Flextronics were found to use dispatch workers, whose working conditions and benefits are typically worse than formal staff in China.

At Flextronics’ factory no.2 in Shenzhen, all cleaning staff are hired as dispatch workers. They receive only 700 RMB for eight hours work, 30 days a month. This is clearly illegal. At Nokia Dongguan, 50% of its 4,000 strong workforce are dispatch workers hired through an intermediate company. It was unclear how their working conditions differ from formal employees. Use of dispatch workers is increasingly common, creating a new subject of concern for labour activists.

It is a requirement of the Chinese Labour Law and Trade Union Law that every enterprise establishes a branch of the All-China Federation of Trade Unions (ACFTU) under the control of the Chinese Communist Party.

Nokia has, indeed, established unions in both surveyed factories. In both cases, however, union committee and chairman positions are filled by company managers – a common phenomenon in Chinese enterprises that is illegal in many other countries such as the United States and Japan. Furthermore, at Nokia Suzhou, the union does not bargain with management to further workers’ interests, but merely organizes social events for workers. At Nokia Dongguan, the union performs a very similar function, organizing leisure activities and distributing welfare benefits. Chinese law stipulates that union officials must be elected democratically, but workers interviewed at Nokia Dongguan – some of whom had been at the factory for two or three years - knew nothing about union elections, and knew no-one who had ever taken part. Neither the union at Suzhou or Dongguan has negotiated a collective contract with management.

Flextronics has altogether ignored the legal requirement to establish trade unions.

Workers at both companies are therefore without an independent organization to represent them.

All factories pay production workers according to local minimum wage standards. Even though these factories are foreign-owned, workers’ wages are no higher that the bare minimum stipulated by law.

All factories grant production line workers leave for national public holidays. But again, Nokia Suzhou and Flextronics No.2 were the only factories that grant any more than the bare legal minimum.

Welfare benefits at Nokia Suzhou were noticeably better than the four facilities surveyed in Guangdong province. Besides the provision of rent-free or very cheap dormitories, there are more or less no benefits offered to workers in Flextronics or Nokia Dongguan.

Both Nokia and Flextronics provide training for new staff, including Occupational Safety and Health (OSH). The survey results didn’t warrant particularly concern over industrial injuries.

In summary, it is true that these five factories are certainly not the nightmare sweatshops so prevalent in China since the country opened up in the late 1970s. Nokia and Flextronics are, however, taking advantage of lax law enforcement in China and evading their legal responsibility to provide social insurance and, more importantly, establish democratically elected trade unions.

It is worth noting, however, that the issue of overtime is a complex one. Both companies in this survey violate the legal limits of overtime. But the minimum wage in China is so low that, without this extra overtime work, workers are unable to earn enough to meet the needs of themselves and their families. Low wages have created a dependence on overtime, which means that until base wages rise, most workers themselves do not want to see overtime hours drop below 36 hours per month.

It is widely observed that working conditions in Guangdong province are worse than Suzhou, and other areas of mass export-manufacturing concentrated along China’s coast.3 This survey only included one factory from outside Guangdong, and so wasn’t sufficient to test this assumption for the ICT sector.