A Nightmare for Workers: Appalling Conditions in Toy Factories Persist

Thursday, December 6, 2018

Download the detailed pdf report
 Download the detailed pdf report
Executive Summary

To this day, most toys are made in China. They are the source of children’s dreams all over the world. However the process through which these dreams are created remains a nightmare. Countless hours of overtime, contact with dangerous chemicals and poor wages barely enough to live on are some of the biggest problems. This report reveals violations found in four factories that produce, among others, for the biggest toy brands Hasbro, Disney, Mattel, and Lego but also for German manufacturers such as Simba Dickie, Schleich and Ravensburger. These products are sold at Walmart, Costco, Target and other retailers. The report identifies the causes of poor working conditions and calls on multinational companies to take responsibility in their production facilities to combat this exploitation.
 
 
Wah Tung factory workshop

Serious violations that endanger workers

To highlight the poor working conditions of the factory workers China Labor Watch dispatched undercover investigators into four factories between April and September this year: Dongguan Lovable Toy Products Ltd., Dongguan Herald Metal and Plastic Works Ltd., Jetta (Guangzhou) Industries Co. Ltd., Wah Tung (He Yuan) Toy Products Ltd. Co. The investigation revealed 23 rights violations, and the most severe rights violations are highlighted below:

• During peak production season, workers put in 80 to 175 overtime hours per month despite Chinese labor law stipulating that overtime hours are not to exceed 36 hours a month.
• Workers did not take part in the legally mandated 24 hours of pre-job safety training which should cover any toxic substances they may come into contact with, in addition to the safe operation of machinery. Without the necessary training, workers are unaware of the toxic chemicals they come into contact with, and protective measures to take.
• Workers may come into contact with toxic chemicals, or work in environments with a high level of noise and dust, but are not provided with the necessary protective equipment.
• Lack of a pre-job physical examination. Without a physical examination, it would be difficult for workers to prove that an occupational disease resulted from working at the factory.
• Workers were made to sign blank contracts, which were not explained, and did not receive a copy of the contract.
• Poor living conditions. The factory dormitory houses 8 workers to a room, and some showers did not have hot water.
• Failure to purchase social insurance in accordance with the law. Chinese Labor Law requires employers to purchase social insurance and the housing provident fund for workers in accordance to a set contribution rate.
• Lack of independent unions which represent workers’ interests.
• Lack of effective grievance channels. When workers face issues at work, they choose to resign or endure the difficulties.
 
 
Exhausted workers at Jetta sleep during their break 

Differences in working conditions between the factories

As part of the Chinese economy is heavily based on manual labor, excessive working hours are an inherent problem, and the issue is present in all factories. However, there were disparities in the working hours between the four factories. Wah Tung has the most extreme conditions with up to 175 hours per month and only one single rest day in August. If the assembly line adjusts to producing a new product resulting in workers having to work overtime to meet the production quota, wages will not be paid for the overtime hours put in. Workers are to continue working until the quota is fulfilled. During peak season, break times are partly shortened and the workers clock out at 21:30, but continue working afterwards. Furthermore, at Lovable, 104 overtime hours were accumulated over the month, Herald demands 96 hours per month and at Jetta, up to 80 hours. These conditions are intolerable: Chinese labor law stipulates a maximum of 36 overtime hours per month.

The calculation of wages in the factories is often incomprehensible for workers because of its complexity. It consists of a basic wage (usually equivalent to the minimum wage), overtime hours, and many other deductions and subsidies. The NGO Worker Empowerment calculated in 2017 that a living wage for a household in Guangdong province is between 6900 RMB ($991.85 USD) and 7500 RMB ($1078.10 USD). Assuming a household with two income earning adults, a worker would need to earn at least 3450 RMB ($495.97 USD) to 3750 RMB ($539.05 USD) per month as a minimum wage. Unfortunately, the reality is quite different. During off-peak season, workers’ monthly wages close to the base wage, which is 2100 RMB ($301.87 USD) at Jetta, 1800 RMB ($258.74 USD) at Herald and 1720 RMB ($247.24 USD) at Lovable. At Wah Tung, workers earn around 2,000 RMB ($287.49 USD) during the off-peak season. These wages are well below what is required to maintain a decent standard of living. As such, during peak season, workers have no choice but to put in excessive overtime to earn a living wage. At Wah Tung workers receive on average between 3000 and 4500 RMB ($431.24 – $646.86 USD), at Lovable 4000 RMB ($574.99 USD), at Herald 3500 RMB ($503.11 USD) and at Jetta 2900 to 3500 RMB ($416.86 – $503.11 USD). If we calculate the living costs according to a household with two income earning adults, they can only earn a living if they both work overtime. However, a living wage should, by definition, be attainable in the normal working week by just one person of the household.

In addition to wages and overtime, living conditions and occupational safety are important issues and once again, there were differences between the factories. At Wah Tung and Lovable, 8 to 10 workers are squeezed into barren dormitories. With Jetta and Herald, only 2 to 4 workers share a room. There is no warm water in the showers and this has to be carried in large buckets by the workers.

Occupational safety is a problem. The injection molding workshops are extremely noisy. Thinners, solvents and glues are used, and the strong smells emitted from these substances irritates the nose and the skin. The workers do not understand how toxic the chemicals are and toxic fumes can also be produced when melting plastic. Machines are also operated without clear safety instructions and protection, which repeatedly leads to serious accidents. Safety training and regular health checks are therefore crucial, however, neither Wah Tung, Lovable nor Herald informed workers of any safety procedures and did not provide adequate protective clothing. Only Jetta placed value on workers’ occupational safety and health.
 
 
 Jetta factory cafeteria
 

Why do these violations continue?

The reason why the rights and interests of Chinese workers have not improved is threefold.

1) Price pressure by multinational companies

International brand companies are not accepting responsibility for the rights abuses in their supply chain. Brand companies play an active role in the exploitation of workers. To meet their targets, they contribute actively by using short term contracts with a fierce price competition, and changing orders on a very short term basis.

Every year many companies will request toy factories to increase their production quotas while decreasing the costs of production. For example, in one year, the production costs for 100 Hasbro and Mattel toys would be $100 USD. However, in the following year, to produce the same toy, Hasbro and Mattel require the factory to make 105 or more toys for $100 USD. For the same product, the brand companies will find two or three toy factories to compete in acquiring orders and the factory which has the lowest cost of production will receive the most orders. Under these circumstances, if factories are unable to decrease the cost of the materials used in the manufacturing process, they will have no choice but to place the burden of lowering the costs of production on the backs of Chinese workers.

At the Wah Tung factory, a worker producing Disney’s Princess Sing and Sparkle Ariel Doll, has a production quota of around 1,800 – 2,500 toys a day, works 26 days a month and earns approximately 3000 RMB (435.43$ USD) a month. For each doll they produce, the worker receives $0.01 USD. Currently, the Disney’s Sing and Sparkle Ariel doll retails at $34.99 on Amazon. A worker at Wah Tung only earns 0.031% of the market value of the toy they produce. Several workers in the manufacturing and packaging departments are working on the Disney’s Princess Sing and Sparkle Ariel Doll. Accordingly, around 75 cents from the retail price of each doll goes towards the wages of workers.

2) Repression against workers, a competitive advantage

Although labor costs in China have increased, the lack of workers’ rights and interests being fully protected can also be interpreted as a competitive advantage of the toy industry in China. In countries such as Vietnam, India and Indonesia, workers have the right to strike over unfair labor conditions. In China, workers do not have the right to strike and the possibilities for mobilizing for decent working conditions are severely limited. Although this has not prevented strikes from breaking out over the years, they were, however, mostly harshly repressed.

The unions established in Chinese factories do not serve any real purpose. The Chinese government is promoting the establishment of factory-level unions, but they are affiliated with the All-China Federation of Trade Unions (ACFTU) which is essentially an arm of the Chinese party and therefore upholds the interests of the government and does not truly represent the labor force. There are presently many factories which do have unions. However, many management level employees, such as staff from the human resources office, also manage the factory unions. Furthermore, factory management also appoints the union leaders. As union leaders are not elected by factory workers, the union fails to represent the interests of workers, and it is difficult to defend workers’ rights. Without free and independent unions, and effective complaint mechanisms, it is impossible to ensure workers’ rights are protected.

3) Recurring violations of applicable law

China labor law has many regulations, but factories will make attempts to circumvent or knowingly violate the law. Factories fail to adhere to labor laws, as the costs associated with violating such laws is low. For example, Chinese labor law has a regulation that workers’ overtime hours must be limited to 36 hours per month. However factories often make workers put in more than 80 hours of overtime. Some factories will request the local government to implement a comprehensive working hour system and in this way, factories can legally evade the overtime law and assign workers up to 432 overtime hours per year. Though since there is no punishment for violating the law related to overtime hours, many factories do not even apply for the comprehensive working hour system. Furthermore, Chinese law stipulates that factories should purchase retirement insurance and the housing provident fund for workers, according to their gross wages. Although the situation has improved slightly since the Chinese government put a focus on this issue due to an aging labor force, many factories still fail to purchase social insurance in accordance with the law. For factories who do purchase social insurance for workers, contributions are calculated according to workers’ base wages and workers will realistically lose out on half of their benefits. Workers who migrate to another province have to work there for a significant number of years before having the right to collect retirement benefits. As such, if a factory closes or a worker wishes to change jobs and relocate to another province, they will be unable to claim retirement benefits. Because the turnover rate of workers is so high, it is relatively difficult for workers who have resigned to hold the factory accountable for any salary discrepancies.

Chinese law regulates that there are limits on employing student workers and dispatch workers. As an example, student workers shall not work more than 8 hours a day and can only work in fields relevant to their major. However, student workers tend to do work similar to regular workers. During peak season, the number of dispatch workers often exceeds the 10% allowed according to Chinese law. Dispatch workers are more vulnerable to exploitation as they sign contracts with the agencies, and any grievances or disputes are handled by the agency. Dispatch workers generally receive lower wages and agencies usually do not make contributions to workers’ social insurance. Another requirement of the Chinese law stipulates that employers have to provide pre-job training, which includes group, workshop and factory level training in addition to safety training before using new materials or machines. The “Special Rules on the Labor Protection of Female Employees” was enacted to protect female workers’ rights such as prohibiting workers who have been pregnant for more than seven months from working night shifts or in extended working hours. Despite these laws, many are rarely enforced. Litigation costs are too high for workers, and therefore, workers generally do not sue factories for their illegal conduct.
   
Left: Dorm room at Lovable factory; Right: Dorm toilets at Herald factory
 
Conclusion

CLW has conducted investigations into toy factories for almost 20 years, however, this year’s investigation reveals once again the persistent issues in the toy industry in China. Brand companies still look to maximize profits, and do so by pitting factories against each other for the lowest production cost, which ultimately leads to the exploitation of workers.

We call upon the brand companies who source from these factories to make a genuine commitment to improving working conditions, and address the rampant rights violations in the toy industry. Workers have, for many years, contributed to the profits of companies make, but continue to toil in factories that blatantly violate their rights and interests. There is a need for serious changes in not only the purchasing model of the brand companies, but also the approach they take when working with their suppliers in ensuring that workers’ rights are protected.

Summary of Rights Violations

NOTE: “*” represents a violation of Chinese labor law
 
 
 
 
 
       (Photo taken at Jetta GuangZhou)