Case Study - Nike

Should We Buy Nike Products?

With the economic knowledge that you now possess, you are now in a position to make up your own mind about the consequences of buying Nike products. There are millions of people around the world who choose not to purchase Nike brand sportswear because of the controversies that have been discussed in these pages. But is their choice the right one?

When you first started studying Economics, you learned about a concept known as consumer sovereignty. This is when we assume that it is consumers who ultimately make the decisions about the way in which resources will be allocated. When someone decides not to purchase a Nike product, they might be doing so because they are trying to reduce the demand. If the demand falls, then it follows that Nike will no longer need to make the product. As a result, the exploitation which concerns the protestors will stop.

The problem with this logic is obvious. When the workers lose their jobs in Nike factories, they will not automatically be employed in other places. As a result, they will move from having a job which may well have relatively poor conditions (by western standards), to having no job at all. Remember this – if these people felt that they would be better off without a job, then they wouldn’t work for Nike. The fact that they stay in work suggests that the people who work in these factories feel that their standard of living is higher while they are there.

Consider an example. In the previous section we looked at the economic progress of Taiwan. If the anti-globalisation protestors had organised protests in the 1960s and 70s, then it is possible that people would have stopped buying items with a “Made in Taiwan” sticker. If lots of people made the same choice, then it follows that some people in Taiwan would not have ended up in the economic situation in which they find themselves today. In other words, in trying to protect the people of Taiwan, the protestors could actually have caused a decline in their living standards.

There is no doubt that working conditions in some countries are significantly worse than we have come to expect in Australia. However, international pressure has worked to overcome many of these problems. In the past, the problem of long hours, underage workers, and poorly lit or poorly ventilated factories were certainly significant. Today, Nike has adopted a code of conduct which prevents them from exploiting workers in this way. Between 1999 and 2004, Nike worked with the World Bank to find ways in which workplace practises in developing countries could be improved. During this period, over 16,000 workers in Asian factories were interviewed.

It is worth taking a moment to consider what it is like to work at a Nike factory in South East Asia. Workers in China, Taiwan, Indonesia, Thailand and India all make Nike apparel. People in western countries sometimes feel the need to protect these workers from exploitation, however a review of the surveys completed by the workers themselves shows that they really don’t feel the need to be protected.

For example, in India workers were surveyed in 2003. Survey results revealed the following interesting facts:

Around 60% of Nike employees in India are female.
97% of the workers were Hindu (compared to 82% of the country as a whole), while the remaining 3% were Muslim.
Almost all of the workers reported working 48 hours in a normal week.
85% of all workers suggested that they would be comfortable speaking to their manager if they felt that a change in the workplace was necessary.
Monthly “communication meetings” are held for all workers with the managers, and as a result over 50% of workers reported that they were “very satisfied” with the performance of the management team.
When asked what they would like to be doing in three years time, by far the most common response was to remain employed by Nike in the same factory.

Clearly these are not the responses of people who feel like they are being exploited! However, one issue still needs to be discussed, and that is the pay structure that is offered to employees in these factories.

It is true that employees are paid a lower wage than comparable employees in the United States or Australia. However, before we conclude whether or not the wage is “low”, we must also consider the standard of living which can be sustained relative to others in the community. If the workers are paid more than others with similar levels of education, then it is reasonable to assume that their position in a Nike factory is a good one. As it turns out, Nike pays above the minimum wage in every country in which it operates. This is supported by the many surveys which have been completed by the World Bank; not one employee in any Nike factory reported receiving a wage which was below their expectation, and almost all (over 95%) suggested that the overtime that they completed was voluntary.

In other words, purchasing Nike products will help to support some hard working people who might otherwise not have a job at all. It is true that the multinational corporation will make more money on the transaction, but as they co-ordinated the supply chain, paid for marketing and took all of the financial risks, many would argue that this is a fair reward.

Current Page: Should We Buy Nike Products?