Question

Briefly summarize both the Chinese and African markets. What's happening in China's labor market and colleges and the impact on Africa. Remember: relative prices matter!

Chinese Maker of Ivanka Trump’s Shoes Looks for Cheaper Labor

By KEITH BRADSHER (Links to an external site.)Links to an external site., JUNE 1, 2017

DONGGUAN, China — The Chinese factory workers who make shoes for Ivanka Trump and other designers gather at 7:40 every morning to sing songs. Sometimes, they extol worker solidarity. Usually, they trumpet ties between China and Africa, the theme of their employer’s corporate anthem. That’s no accident. With many workers here complaining about excessive hours and seeking higher pay, the factory owner wants to send their jobs to Ethiopia. The employer, Huajian International, now faces scrutiny from labor activists for how it treats workers. Chinese authorities this week detained an activist who went undercover in the company’s factory here for a labor rights group. Two other activists who worked at Huajian are missing; it’s unclear whether they were detained. Zhang Huarong, center, Huajian’s founder, singing the company’s song with employees. Credit Gilles Sabrié for The New York Times Ms. Trump’s father campaigned for the United States presidency on a platform of bringing back overseas manufacturing jobs. But deep and demographic shifts mean a lot of low-end work — like making shoes — doesn’t offer huge profit in China. As President Trump accuses China of stealing jobs those jobs are now leaving for other shores. Huajian, which also makes shoes for a number of American brands, was a major beneficiary of the decades-long shift of manufacturing jobs away from the United States. Global brands flocked to China to tap into the country’s cheap and willing labor pool. Today, Chinese workers are less cheap and less willing. More young people are going to college and want office jobs. The blue-collar work force is aging. Long workdays in a factory no longer appeal to those older workers, even with the promise of overtime pay. In interviews in December and again on Sunday and Monday outside Huajian’s vast industrial complex in this southern Chinese factory city, numerous workers interviewed by The New York Times complained about 14-hour days. While many liked the overtime pay, they said the days were too long, especially since they often included up to three hours of unpaid breaks for lunch and dinner. The workers insisted on anonymity for fear of retaliation by management. Shoes on a conveyor belt in Dongguan. Many Huajian workers have complained about excessive hours and are seeking higher pay. Credit Gilles Sabrié for The New York Times China Labor Watch, the advocacy group investigating the factories, said it found that employees had worked longer weeks than Chinese labor law allows, even excluding breaks. Such violations are common in Chinese factories. A Huajian spokesman, Wei Xuegang, said the company knew nothing about the activists. Asked about the accusation from China Labor Watch, he said Huajian scheduled extra hours during busy times but paid workers according to the law. In a December interview, Zhang Huarong, the company’s founder and chairman, said Huajian followed overtime laws. The Ivanka Trump brand declined to comment on the labor conditions or the activists. In terms of bringing jobs back to the United States, the company said, it was “looking forward to being a part of the conversation.” Such tensions are fueling the drive of Huajian’s founder, Mr. Zhang, to move work to Ethiopia. A former drill sergeant in the Chinese military who sometimes leads his workers on parade-ground drills, Mr. Zhang says work like making shoes will never return to the United States and is increasingly difficult in China as well. “Do Americans really like to work, to do these simple and repetitive tasks?” said Mr. Zhang, in the December interview. “Young Chinese also don’t want to do this after they graduate from college.” In many respects, China’s economy is maturing. The number of people who turn 18 each year and do not enroll in college — the group that might consider factory work — had plummeted to 10.5 million by 2015 from 18.5 million in 2000, government data shows. Because of the effects from China’s former “one child” policy, the figure is on track to fall below seven million by 2020. Costs are rising too, as the government raises minimum wages and benefits in an effort to shift China’s economy away from cheap manufacturing. Wages in Dongguan have increased ninefold since the late 1990s, Mr. Zhang said. Workers said they resented the hours, especially the unpaid breaks. One employee’s printed schedule in December showed that the factory required 60 hours and 10 minutes of paid work per week. Chinese laws require that workweeks average no more than 44 hours and limit overtime to 36 hours per month. On Monday, in the middle of China’s three-day Dragon Boat Festival holiday, throngs of workers filed into the factory. Asked whether he would be eating zongzi, the traditional rice dumpling served during the holiday, one worker replied that they don’t get to celebrate. Another said Huajian gave each worker two small dumplings and an egg for the holiday. One worker, a middle-aged woman with the surname Du, said her children had gone home to central China. Ms. Du wished for time off to celebrate, so she could make rice dumplings for them. Mr. Zhang said that his company kept working hours within legal limits, despite workers who want more overtime pay. “We cannot let them work extra hours just because they have low pay,” Mr. Zhang said in a lengthy interview in December. “We have thought about it, but we want to do business well.” Many workers have said their days were too long, especially since they often include up to three hours of unpaid breaks for lunch and dinner. Credit Gilles Sabrié for The New York Times China Labor Watch said on Tuesday that it had lost contact with three undercover activists at Huajian factories. The wife of one in the factory in Dongguan said he had been detained by the police. Li Qiang, who started China Labor Watch 17 years ago, said the group’s activists had never before been detained by the police. “I’m very worried about their safety,” he said. “The longer I’ve lost contact with them, the more I worry.” Huajian peaked at 26,000 employees in China in 2006. Staffing is now down to between 7,000 and 8,000 thanks to automation and the shift to Ethiopia, Mr. Zhang said. Huajian produces 100,000 to 200,000 pairs of Ivanka Trump shoes each year, a small fraction of the eight million pairs of shoes it produces annually. The Dongguan factory makes the heels while a second factory completes the shoes. Marc Fisher Footwear, which licenses the Ivanka Trump brand for shoes manufactured by Huijian, has said it was looking into the allegations. Mr. Zhang has had occasional brushes with Chinese labor laws, although no more than many employers in this increasingly litigious society. In 2014, Li Jianguo, a worker, sued Huajian, saying he worked 104 hours of overtime per month and was not paid for it. Huajian acknowledged in that case that the worker had been putting in 52 hours of overtime per month, according to the text of the court verdict, and agreed to pay him for that. Mr. Zhang said that workers currently earn $525 to $580 per month, including overtime pay but not including company-paid benefits like medical insurance and housing subsidies. Workers said that pay ranged from $380 to $580 per month. The money can go a long way in a factory city like Dongguan. Workers said that a 215-square-foot apartment in the neighborhood costs $29 a month to rent. The company provides a monthly housing subsidy of $11.60. A worker at the Huajian factory that produces heels for Ivanka Trump shoes, which are completed at another factory. Credit Gilles Sabrié for The New York Times Citing labor costs and the country’s foreign investment push, Huajian is building a sprawling complex of factories, office buildings and a hotel on the southern outskirts of Ethiopia’s capital, Addis Ababa. Mr. Zhang’s shoe factories there already have 5,000 employees. When finished in four years, the Addis Ababa complex will be ringed by a replica of the Great Wall of China. Some interviewed Huajian workers said they were not concerned about jobs being moved to Ethiopia, given the plentiful number of jobs in China’s southern manufacturing zone. Still, many longtime workers face age discrimination if they leave, as other factories prefer workers under 35. Shoemaking is not strenuous and poses few physical dangers, making it more appealing to older workers. “I really couldn’t get used to these long working hours at the beginning,” one worker said, “but I don’t really have a choice.

Answer 1

Chinese Market

The workers in the shoe making company, Huajian International, are complaining about their situation of working for longer hours and getting less pay in return. A few things are happening in the factories producing Ivanka Trump's shoes in China-

1. Impact of One Child Policy- Because of the Chinese policy of one child, people entering into the 18 year old group has shrunk overtime. Young people now enroll more for the college education and thus the workers available for factory work are falling. These youngsters do not want to go for these jobs after graduating. Older ones fear the job loss as shoe making is less tiring and involves few physical harm.  

2. Rising Costs- The country has raised the minimum wages for workers overtime. Hence, the cheap labor is no more available in Chinese market.

3. Working Hours- The normal working hour requirement in the factory is 60 hours and 10 minutes in a week while the law prescribed a maximum of 44 hours in a week and 36 hours of overtime in a month. This implies that the factory is making their workers work for more than 12 hours a day as against the norms of maximum 10 hours.

4. Falling Employment- The factory has been cutting down on its employment owing to advancement in technology and availability of heap labor in Ethiopia.

5. Payments- The workers pay ranged from $380 to $580 a month that does not include the house subsidy. The cost of renting a house is way more than what they receive as a house rent allowance.

Ethiopian Market- Availability of cheap labor

Impact of the above situations on African Market

1. The company is shifting to Ethiopia in search of cheaper labor than that available in China.

2. The company has already employed 5000 workers, thus a boost in employment in African market.

3. Establishment of office buildings and hotel by the company, in an attempt to increase foreign investment, improving the infrastructure in African market.