We Have a Robber Baron on the Board!

[Sam_Stone]

@Maeglin

Sam, this simply does not matter. What matters is the number of shoes produced by Nike and the assembly line labor costs per unit. The extra $.50 can be passed on to the consumer and can accompany a vigorous A & P campaign. Americans have shown a strong willingness to buy more expensive products that they feel express their moral beliefs.

Of course it matters. You want to look at it as .50 cents for a pair of shoes, because it makes the numbers look less threatening. BTW, if a pair of shoes takes 5.5 hours to make, then increaing the price of the shoes by 50 cents gives the employee a raise of less than 10 cents per hour, or about $200 per year. Do you really think that the protests against ‘sweat shops’ will end if Nike pays those employees $1200 instead of $1000? Let’s at least be honest about what the protestors against Nike want - they want 1st world working conditions, no overtime, better safety regulations, and significantly more salary. A measly 10 cents an hour raise is not going to make them happy, is it? We’re really talking about more like a dollar or two an hour more, plus overtime pay, plus air conditioning for the factories… And if they get that, will the sweatshop protestors be happy? Not a chance. Then they’ll complain that they make less than U.S. minimum wage and don’t have health care.
And if they sell 150 million pairs of shoes, then even a lousy .50 cents per pair that adds 75 million to Nike’s costs. If Nike tried to pay those workers even half of U.S. minimum wage, it would put them out of business.
And if Americans are so happy to spend more money for a good cause, why aren’t these companies competing in that arena? How come I’m not seeing ads proclaiming how much better the working conditions are for company A vs company B?

70M shoes increases Nike’s FY administrative and labor expense by less than 2%. Considering that Nike’s gross margin has risen 10% and revenues have risen by 9% YOY, this does not seem to be an unreasonable position to take. Pay your third world laborers more, invest in your brand, and increase the price of your merchandise.

Such a simple formula. Those corporate bean counters who are paid to study this stuff for a living must be really stupid to not have thought of this. If only everyone realized how simple running a global business really is!

Hell, pay only a fraction of your factory workers more and raise the price in markets where organic retailers thrive and see what happens. My gut says that New Yorkers and San Franciscans would gladly kick in an extra buck to share the wealth. Nike gets product differentiation, brand cache, and a higher gross margin, workers get an extra bowl of rice a day, and consumers get a squishy feeling every time they buy Nike. What a disaster this would surely be.

And you don’t think Nike has thought of this? What if it turns out that advertising what they pay their workers actually backfires by making people aware of the working conditions of Nike’s laborers? Frankly, I think what would happen is that the anti-globalization types would seize on any such marketing Nike did and throw it back in their faces. I can see the ads now: “THIS is what Nike thinks constitutes good working conditions! They BRAG about paying this poor man a lousy $1200 per year!”

Yep. It’s a surefire marketing strategy. In fact, it’s so good that ‘The Body Shop’ tried to run their marketing that way, by highlighting how green they were and how socially conscious they were. You know what happened? An environmental group investigated them, found out that some of their factories (gasp!) pollute, and it made for great newspaper coverage. They got pegged as being hypocrites and their company took a massive hit. The same thing happened to Ben and Jerry’s.

And running a ‘socially conscious’ business is a lot easier when you’re selling boutique goods like fancy ice cream and bath salts. See how well that works with the low-income mom who’s kids absolutely have to have a good pair of running shoes. Think she’s willing to cough up maybe an hour’s worth of her labor to be socially conscious?

If these companies could easily increase their shoe prices, or easily pay their workers more, they would. The fact is, the textile business is damned difficult. They are selling high volume, low-cost products that are very labor intensive, and they need to cut pennies wherever they find them. Why do you think they are in the third world in the first place? It would be a hell of a lot easier logistically to simply make their shoes in the U.S. And they could get rid of all that negative publicity. But they can’t do it and remain competitive.

[bdgr]

Low income moms dont buy nikes. Nikes are a luxury item.

[Yeticus_Rex]

@bdgr

I’m not denying any of what you say. I’m just saying that it is only a benifit to them because they are coming from so much farther down.

And what I am saying is that they will not be content at minimum wage either, they will also continue to look for better paying jobs as well because they are driven to improve their quality of life.

Your talking about people who come to this country to make our min wage (orless) andsaying thats a reason our people can do the same thing…there isnt a richer version of america across a differant river. The best most people could hope for is a latteral move unless they have a place to live and some funds to get them by in the new place.

There have been anecdotes where some of us have done what you said can’t be done on a regular basis. There are some homeless shelters that do assist with job placements…not 100% successful, but better than trying to sleep outside and then go to work without a shower or clean clothes or a meal. I agree though, those shelters are few and far between, but they are improving.

I’m not talking about people who have a college degree and 500 bucks in their pocket.

Neither was I, although I cannot claim that I have ever been homeless (at least not by choice), but I have been on the brink early on in life. Some of my older relatives have though.

Low income moms dont buy nikes. Nikes are a luxury item.

Hell, I don’t buy them either because they are overpriced and ugly. I used to wear them back in the 80s though when they were a value and didn’t look like moon boots.

[Maeglin]

@Sam Stone

Of course it matters. You want to look at it as .50 cents for a pair of shoes, because it makes the numbers look less threatening.

Please respond to what I say rather than what you suspect I find threatening.

Workers are compensated for their marginal product. Make more shoes, make more money. This should not be a roadblock to understanding.

BTW, if a pair of shoes takes 5.5 hours to make, then increaing the price of the shoes by 50 cents gives the employee a raise of less than 10 cents per hour, or about $200 per year.

The idea that it takes 5.5 hours to make a pair of shoes is probably the most ludicrous single factoid that has emerged from this thread. Based on what we know from Nike’s SAM documents, it probably takes about ten minutes to make a pair of shoes. The rest of your objections, all based on this assumption, are not convincing.

Let’s at least be honest about what the protestors against Nike want - they want 1st world working conditions, no overtime, better safety regulations, and significantly more salary.

Also assuming facts not in evidence. A lot of these “protestors” really aren’t stupid people. Believe it or not, it is possible to take a reasoned position against sweatshop labor while believing in international free trade and comparative advantage.

And if Americans are so happy to spend more money for a good cause, why aren’t these companies competing in that arena? How come I’m not seeing ads proclaiming how much better the working conditions are for company A vs company B?

I am bombarded on a daily basis with ads telling me to buy local, to buy overpriced “cage free” eggs, veal humanely butchered, etc. These goods command an enormous markup. I believe that at best it is only a matter of time before people believe that like chickens, people should not labor in dingy cages.

Perhaps you do not see advertisements like this all the time because you simply do not live in a very affluent community.

Such a simple formula. Those corporate bean counters who are paid to study this stuff for a living must be really stupid to not have thought of this. If only everyone realized how simple running a global business really is!

This sort of bullshit is uncalled for. As it turns out, I am an analyst for a global business and this is this is the kind of work that I do. You start from the top down. It begins with a simple formula, and the details develop over time before decisions are made. As for why people haven’t thought of it, there are many possibilities.

And you don’t think Nike has thought of this?

Maybe yes, maybe no. Since we cannot actually observe what Nike thought and did not think, this is irrelevant.

What if it turns out that advertising what they pay their workers actually backfires by making people aware of the working conditions of Nike’s laborers?

There is a great deal of risk in growing a global business. Perhaps you already knew that.

Yep. It’s a surefire marketing strategy. In fact, it’s so good that ‘The Body Shop’ tried to run their marketing that way, by highlighting how green they were and how socially conscious they were. You know what happened? An environmental group investigated them, found out that some of their factories (gasp!) pollute, and it made for great newspaper coverage. They got pegged as being hypocrites and their company took a massive hit. The same thing happened to Ben and Jerry’s.

I suppose it pays to deliver on your promises then, doesn’t it?

And running a ‘socially conscious’ business is a lot easier when you’re selling boutique goods like fancy ice cream and bath salts. See how well that works with the low-income mom who’s kids absolutely have to have a good pair of running shoes. Think she’s willing to cough up maybe an hour’s worth of her labor to be socially conscious?

If these companies could easily increase their shoe prices, or easily pay their workers more, they would. The fact is, the textile business is damned difficult. They are selling high volume, low-cost products that are very labor intensive, and they need to cut pennies wherever they find them. Why do you think they are in the third world in the first place? It would be a hell of a lot easier logistically to simply make their shoes in the U.S. And they could get rid of all that negative publicity. But they can’t do it and remain competitive.
[/QUOTE]

[John_Mace]

@Shagnasty

Way to go John. Don’t you know that the laws of business and economics were suspended for some people? As long as your intent is good, nothing else matters. It is better that we all go broke together instead of stratifying into inequality through the evils of textbook business practices.

I have no idea how that relates to the post of mine that you quoted.

@bdgr

if 1/4 of their shoes are made being real wages…and those shoes sell for a profit, so much so that they are moving more manufacturing here.

What part of “they have a different marketing strategy” do you not understand? NB is 1/10 the size of Nike. They make 1/4 of their shoes in the US. If Nike made a similar absolute number of shoes here, it would be insignificant. Besides, you cannot compare the output of a worker in a US factory with that of a worker in a 3rd World factory. You are profoundly ignorant of economics and business if you do.

[Sam_Stone]

@Maeglin

The idea that it takes 5.5 hours to make a pair of shoes is probably the most ludicrous single factoid that has emerged from this thread. Based on what we know from Nike’s SAM documents, it probably takes about ten minutes to make a pair of shoes. The rest of your objections, all based on this assumption, are not convincing.

Then where does the $2.50-$3.00 labor cost from from, which I’ve seen repeated at several different sites?

Also assuming facts not in evidence. A lot of these “protestors” really aren’t stupid people. Believe it or not, it is possible to take a reasoned position against sweatshop labor while believing in international free trade and comparative advantage.

Maybe some of them are this nuanced, but I’ve got to tell you, most of the anti-sweatshop protestors I’ve met and talked with don’t have the foggiest notion of any of this stuff. They don’t even know how much the workers actually make, what the minimum wages are in these countries, what the 3rd world average income is, or even basic knowledge like how productivity ties into wages.

They may not be stupid, but they sure as hell are uneducated. But it doesn’t really matter because the argument is just as much over the very existence of global capitalism. Do you really think International A.N.S.W.E.R is going to take their picket signs and go home if Nike gives its workers a 10% raise?

I am bombarded on a daily basis with ads telling me to buy local, to buy overpriced “cage free” eggs, veal humanely butchered, etc. These goods command an enormous markup. I believe that at best it is only a matter of time before people believe that like chickens, people should not labor in dingy cages.

This works for products that have small market shares. If you’re scrabbling to get 5% of the market, and you know that 5% of the public cares about these issues, it makes sense to build a marketing strategy around it and gain a niche. When you’re in the mass market - not so much.

Perhaps you do not see advertisements like this all the time because you simply do not live in a very affluent community.

Depends on your definition of affluent, I guess. I live in a community where the average household income is probably double the Canadian average, as a guess. I see almost no advertising of this kind. Sometimes walking through West Edmonton Mall you’ll see a store that advertises its social consciousness. It’s always a ‘boutique’ store of some sort. You don’t see those kinds of ads in Radio Shack or Sears.

This sort of bullshit is uncalled for.

This is true. Upon re-reading this thread, my attitude has been a bit out of line at times. My apologies.

[bdgr]

@Yeticus Rex

And what I am saying is that they will not be content at minimum wage either, they will also continue to look for better paying jobs as well because they are driven to improve their quality of life.

Illegal immigrants usually stay in the poverty bracket. Most people (there are exceptions) are driven to improve their qualityof life, its human nature. But the odds of succeeding at that are becoming increasing difficult.

There have been anecdotes where some of us have done what you said can’t be done on a regular basis. There are some homeless shelters that do assist with job placements…not 100% successful, but better than trying to sleep outside and then go to work without a shower or clean clothes or a meal. I agree though, those shelters are few and far between, but they are improving.

Yeah…I’ve done it myself, but not everyone is in a position to do so. I’ve got a friend in california who spent two years living in a car and calwed his way back indoors to a decent job. And he has a degree. It happens. But he will be the first to tell you it is nearly impossible and that he got lucky.

[bdgr]

@Sam Stone

BTW, if a pair of shoes takes 5.5 hours to make, then increaing the price of the shoes by 50 cents gives the employee a raise of less than 10 cents per hour, or about $200 per year.

When you make 3 bucks a day, even a 50 cent a day increase would be substantial.