Wal-Mart's Labor Practices and the International Race to the Bottom

Below you will find an editorial that criticizes Wal-Mart for its role in shaping labor policies and regulations in Bangladesh, where a recent fire in a garment factory killed workers:

Wal-Mart’s strategy of deniability for workers’ safety Harold Meyerson. The Washington Post Nov 27 http://www.washingtonpost.com/opinions/harold-meyerson-wal-marts-strategy-of-deniability-for-workers-safety/2012/11/27/8e59f88c-38c6-11e2-8a97-363b0f9a0ab3_story.html?wpisrc=nl_headlines

[Excerpted] ....the very essence of the Wal-Mart system is to employ thousands upon thousands of workers through contractors and subcontractors and sub-subcontractors, who are compelled by Wal-Mart’s market power and its demand for low prices to cut corners and skimp on safety. And because Wal-Mart isn’t the employer of record for these workers, the company can disavow responsibility for their conditions of work.

This system isn’t reserved just for workers in faraway lands: Tens of thousands of American workers labor under similar arrangements. Many are employed at little more than the minimum wage in the massive warehouses in the inland exurbs of Los Angeles, where Wal-Mart’s imports from Asia are trucked from the city’s harbor to be sorted and packaged and put on the trucks and trains that take them to Wal-Mart stores for a thousand miles around.

The warehouses are run by logistics companies with which Wal-Mart contracts, and most of the workers are employed by some of the 200-plus temporary employment companies that have sprung up in the area — even though many of the workers have worked in the same warehouses for close to a decade. Last year, the California Department of Industrial Relations, suspecting that many of these workers were being cheated, charged one logistics company that runs a warehouse for Wal-Mart with failing to provide its employees with pay stubs and other information on their pay rates. Wal-Mart itself was not cited. That’s the beauty of its chain of deniability....

Majia here: This article raises questions about corporate responsibility for setting industry standards for labor rights and environmental protections in countries where they operate.

The current global system REWARDS corporations financially for the race to the bottom in wages and environmental standards. 

Poor nations seeking to attract employment for their citizens from international corporations are often encouraged (directly and indirectly) to minimize labor and environmental regulations. 

Few to no international standards exist and those that do exist lack any enforcement power. 

here is an excerpt from an essay I wrote examining the "voluntary" nature of basic labor and environmental protections in the global marketplace

Perhaps the closest approximation to an international governance institution for labor and human rights concerns is the United Nation’s International Labour Organization’s (ILO), founded after World War I. The ILO has attempted to create international labor standards applicable to ratifying states. In 1998, the International Labour Conference adopted the Declaration of Fundamental Principles and Rights at Work, outlining fundamental rights surrounding freedom of association, collective bargaining, discrimination, and forced and child labor. The ILO’s supervisory bodies—the Committee of Experts on the Application of Conventions and Recommendations and the Conference Committee on the Application of Standards--examine codified labor standards of ILO member states and can initiate complaint procedures against states that fail to comply with ratified conventions. Yet in practice, these bodies lack the resources and executive power to adequately monitor and enforce labor conventions in ILO member states.

The ILO’s efforts to redress the worst reported instances of abusive labor practices are often stymied by lax or non-existent national regulatory agencies, especially in the developing world. For instance, the ILO has been relatively powerless to halt child labor, particularly when that labor occurs in domestic contexts that entirely lack transparency to government investigators. In 1992 the ILO founded the International Programme on the Elimination of Child Labour, which operates in nations world wide. Unfortunately, the ILO’s has failed to halt the most egregious cases of labor abuses because the organization lacks the resources and authority to enforce compliance and must rely on the capabilities and commitments of host nations. Even the U.S. and the U.K. have been slow to respond to ILO criticism of labor practices and relations (e.g., see Hepple, 2002).

Surprisingly, workers in wealthy nations often lack adequate protections of labor standards. A new survey found that low-wage workers in the U.S. are routinely denied overtime pay and are often paid wages beneath federal minimum standards (Greenhouse, 2009). As reported in The New York Times the study “Broken Laws, Unprotected Workers” found in its survey of 4,387 workers in a variety of low-wage industries numerous instances of wage violations, averaging 15 percent in lost pay. The study found that over one quarter of workers had been paid less than minimum wages the week before being surveyed and an additional 76 percent of workers were not paid overtime properly. The U.S. Labor Department’s reticence over the last 8 years to enforce worker rights and workplace protections suggests that even nations with well established institutions in place (aimed at ensuring transparency and compliance) often fail to enforce standards.

Failures across the globe to reign in labor abuses prompted an important UN resolution outlining corporate social responsibilities. On August 13, 2003, after a four year consultative and drafting process, U.N. Sub-Commission on the Promotion of Human Rights adopted resolution 2003/16 (the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights) (Calland, 2007). The resolution calls upon corporations to respect human rights, to eliminate all forms of discriminatory treatment and to avoid profiting from war crimes and crimes against humanity, torture, etc. Specifically, the resolution identifies the following rights for workers:

Transnational corporations and other business enterprises shall not use forced or compulsory labour. . . . shall respect the rights of children to be protected from economic exploitation. . . .provide a safe and healthy working environment. . . .provide workers with remuneration that ensures an adequate standard of living for them and their families. . . .ensure freedom of association and effective recognition of the right to collective bargaining. . . .act in accordance with fair business, marketing and advertising practices and shall take all necessary steps to ensure the safety and quality of the goods and services they provide. . . .

(available http://www1.umn.edu/humanrts/links/norms-Aug2003.html)

This resolution clarify that business enterprises have human rights obligations to workers, communities, and customers but fails to mention transparency or any right to access information (Calland, 2007, p. 223). Perhaps most critically, this resolution has no vehicles for enforcement.

            Advisory and voluntary proclamations and charters proliferate as the calls for international guarantees on worker rights increase in volume. Perhaps the most expansive voluntary framework for monitoring and gauging corporate social responsibility is the United Nation’s Global Compact, which was launched in 2000. The compact is described on its webpage as follows:

The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. By doing so, business, as a primary agent driving globalization, can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere. (http://www.unglobalcompact.org/AboutTheGC/)

Membership today includes over 5,200 corporations and stakeholders from over 130 countries. The compact aims to mainstream its ten principles in business activities throughout the world and to promote actions in support of U.N. goals such as the Millennium Development Goals. The ten principles encompass human rights, labor, the environment, and anti-corruption (see http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html).

Adherence to these principles is voluntary and the accuracy of reporting is not verified.

            Critics charge that the United Nations Global Compact serves more effectively as a public relations tool than it serves to monitor and enforce corporate social responsibility and transparency. Moreover, critics charge that publicity surrounding corporations’ participation in the Global Compact can serve to erode support for the creation of a true regulatory body with the executive power to directly monitor and enforce labor, environmental, human rights, and corruption abuses. The NGO Corporate Watch has been particularly critical of the voluntary and implicitly anti-regulatory nature of the Global Compact (Bruno & Karliner, 2000).