On October 15, Nike announced that it would increase the base wage by 25 percent for its shoe workers in Indonesia. As the following study makes clear, this increase comes far short of offsetting the loss of purchasing power due to the decline of the rupiah. Even with the promised increase, Nike workers in Indonesia still will struggle to meet their basic needs.

Executive Summary

This research is based on approximately 50 in-depth interviews with Nike workers in Indonesia about how the present economic crisis has affected their standard of living. While workers producing Nike shoes were low-paid before their currency, the rupiah, began plummeting in late 1997, the dollar value of their wages has dropped from $2.47/day in 1997 to 80 cents/day in 1998. Meanwhile, the prices of basic goods have sky-rocketed. Workers reported that they had received a 15 percent pay raise earlier this year, meaning that their base salary had increased from about Rp. 175,000 per month (approximately $17) to about Rp. 200,000 per month (approximately $20). However, they estimated that their cost of living had gone up anywhere from 100 to 300 percent.

Many Nike workers have quit their jobs and have chosen to return to their home villages because they can no longer afford to live in the city. Workers who continue in their jobs say that the wages they receive are completely consumed by the end of the pay period. This means they cannot put aside any money in savings or send money home to parents in the village. Nor can they afford to buy clothes and other necessities.

In addition to the interviews with workers, we did an exhaustive study of the cost of fulfilling the minimum physical needs of a single worker - including food, cooking fuel, housing, clothing, toiletries and transportation. We found that the cost for a single male worker is $33.20/month, and $35/month for a female worker. The base pay for Nike workers, however, is $20/month-not enough to fulfill the basic needs for one worker, much less a family.

This report also includes several case studies of workers, to give a first-hand view of how they live and their difficulties surviving under present conditions.

Both Nike workers and their supporters in the United States are calling on the company to help its approximately 80,000 Indonesian workers in this time of economic crisis. Doubling their wages from 10 cents to 20 cents per hour would cost the company a mere $20 million a year. This is 1/10th what Nike spent on its sponsorship of the Brazilian soccer team, and less than 3 percent of Nike's advertising budget. Doubling the wages of Indonesian workers would not only allow these workers to live decent lives, but would help convince millions of consumers that Nike is serious about cleaning up its sweatshop image.

Background

Nike has always paid the lowest possible wages in Indonesia, claiming year after year that it could not afford even to pay the country's minimum wage. When Nike started producing in Indonesia in the late 1980s, average wages were around $1.00 per day. Indonesia raised its minimum wage each year in the early 1990s, and by 1997 the minimum wage was $2.47 per day. Average labor costs for a pair of shoes that retail at around $150 is around $5. Nike remained the market leader throughout the decade and company profits rose steadily. Nevertheless, each year Nike contractors in Indonesia refused to pay minimum wage raises of a few cents a day. Thanks to a corrupt and inefficient government, they usually got away with it, until the workers themselves protested.

In 1993, 1994 and 1995 Nike factories throughout Jakarta were rocked by massive strikes and demonstrations. Each year, the government raised the minimum wage by a few cents. Each year, the shoe manufacturers refused to pay the minimum wage raise. Each year, days of strikes and protests finally forced managers to agree to pay what was mandated by Indonesian law. Each year, several Nike workers were fired for their role in organizing these strikes to receive what was owed them under the law.

In 1997 Nike escorted former civil rights activist Andrew Young through the Indonesian factories. The company told Young, and he told others, that Nike factories were paying minimum wage. In 1997, once again the Indonesian government announced a minimum wage hike from $2.26 a day to $2.47 a day. Once again, Nike subcontractors refused to pay this increase, despite another year of record profits for the company. This time, 10,000 workers went on strike to demand the raise. In response, company representative Jim Small remarked, "Indonesia could be reaching a point where it is pricing itself out of the market."

In late 1997, as the currency crisis began to hit Indonesia, the Indonesian Sports Shoe Manufacturers Association lobbied the Indonesian government to institute a wage freeze. The shoe contractors claimed they could not afford to pay higher wages in rupiah, despite the fact that all the company profits are made in dollars. Worker salaries, however, had dwindled to less than a dollar a day. Therefore, while Nike shoes continued to sell for the same price in dollars, Nike wages in dollars shrank drastically from $2.47 per day to as low as 50 cents per day. In the meanwhile the cost of basic goods was rising fast. By April 1998 most Nike workers could not afford even to eat three meals per day.

Newsweek reported that the company claimed it could not pay workers more rupiah. "Nike . . . says it would like to raise wages for its 60,000 workers in Indonesia as the value of their currency plummets, but the government recently banned wage hikes as inflationary in this time of crisis," the magazine reported. Nike was stretching the truth by claiming that the government "banned" wage hikes. Nike competitor Reebok managed to raise wages by 20 percent during this period, but Nike continued to take a hard line, paying only the bare minimum wage required by law.

Under intense public pressure, the Indonesian government finally did decide to raise the minimum wage by 15 percent this year. Nike followed suit, ordering its subcontractors to raise wages by 15 percent. This raise has provided workers with barely enough income to prevent them from going hungry.

Conditions for Nike Workers in September 1998

This research was conducted by Indonesian NGO activists with long-standing relationships with Nike factory workers in Bogor and Tangerang. The research centered on approximately 50 in-depth interviews with workers in five Nike factories. Workers at all five factories reported that they had received a 15 percent pay raise earlier this year. This meant that their base salary had gone up from about Rp. 175,000 per month (approximately $17) to about Rp. 200,000 per month (approximately $20). However, they estimated that the cost for their living expenses had gone up anywhere from 100 to 300 percent.

Here is a summary of what some basic goods cost last year, and what they cost today, in rupiah. The rupiah continues to fluctuate, but roughly speaking one US dollar equals 10,000 rupiah.

Groceries Last Year / September 1998 one week's worth of rice: 15,000 / 26,000 one liter cooking oil 2000 / 5500

one kilo sugar 1200 / 3000

one piece tempe 300-600 / 1000

one bunch greens 50 / 200 (1 bunch)

one dozen eggs 800 / 1800

Roadside stall food

rice with tofu and vegetable 600 / 1200 rice with fish and vegetable 1500 / 2200 rice porridge with beans 1500 / 3000

fried rice 1000 / 1500-2000

fried noodles 450 / 900

Some daily household items

soap for bathing 500 / 1500

soap for washing clothes 800 / 2000

shampoo/bottle 4000 / 8000

Housing (rent) 25,000-50,000 / 50,000-70,000

Transportation 12,000-20,000 / 40,000

Workers were asked what they had been able to afford with their salary last year and the year before that. They reported that during the past couple of years they had found their salary to be sufficient to cover the following expenses: housing (rent), meals, and purchase of basic necessities like soap, shampoo, clothing and shoes. In addition, many workers reported that they had been able to save some money in a workers' cooperative, pay children's school fees, or send some money home to their parents in the countryside. Most workers also reported that they usually had a little bit left over for weekend excursions.

During their one day of free time each week, the young women workers reported that they liked to take a bus and go to some other part of town that was different than the hot, overcrowded slums in which they lived. Many of them liked to go to the new luxury shopping malls that have sprung up in Jakarta in recent years. They enjoyed strolling around in the air-conditioned interiors of these malls and window-shopping. This year, even that meager pleasure is denied to them. Nearly all the workers interviewed reported that this year, they no longer go anywhere on their day off. They can no longer afford the bus fare.

They cannot afford many of the other items they purchased last year. While they report that they still have enough to buy food and to continue to pay rent, many added that the food they ate was far less filling and nutritious than what they used to eat. They are subsisting largely on rice, tempe (a soybean derivative) and vegetables, and can only occasionally afford to supplement this diet with some protein source such as eggs, chicken or fish. Both male and female workers no longer go to barber-shops/salons to cut their hair. They have no money for new clothes or shoes. And they have no money for recreation, to buy books or other reading material. Most can no longer afford to send any money home to their parents, and some report that their adolescent brothers and sisters have been taken out of school, because their families can no longer afford school fees.

The researchers asked these workers whether they had been able to afford to go home for the holidays this year. Indonesia's population is predominantly Muslim, and the biggest holiday of the year is Idul Fitri, the end of the fasting month of Ramadan. All of Indonesia travels on Idul Fitri to be with family. This year, however, many workers said they could not afford to go home for Idul Fitri. The workers wondered whether they would be able to go home next year, and whether they would be able to afford any presents for their family. Every year, they had been able to bring home money or presents for their parents and family members. This year, however, many workers were afraid they would have to return home empty-handed. One young worker told the researcher sadly that she probably would not go home this year, because she would be too embarrassed to face her family with nothing to show for her labor.

The following is an exhaustive study of the basic cost of living for a single person living in Jakarta as of September 1998. It is calculated for a male worker, with the figure for a female worker being slightly higher due to additional needs such as bras and sanitary pads.

Need Need per month / Price per unit / Total (Rp.)

I. FOOD

1. Rice 12.6 kg. / 2,600 / 32,760

2. Beef 0.75 kg. / 25,000 / 18,750

3. Fish 0.9 kg. / 7,000 / 6,300

4. Dried anchovies 1 kg / 18,000 / 18,000 5. Vegetables 6 kg. / 1,000 / 6,000

6. Fruit (bananas) 1 hand / 4,000 / 4,000 7. Sweet potatoes 10.8 kg / 1,800 / 19,440 8. Chile peppers 0.3 kg / 12,000 / 3,600 9. Shallots 0.8 kg / 9,000 / 7,200

10. Candle nuts 0.6 kg / 6,000 / 3,600

11. Coconut meat 1.5 kg / 6,000 / 9,000 12. Sugar 1.5 kg / 4,000 / 6,000

13. Salt 0.5 kg / 1,000 / 500

14. Tea 1 packet / 4,000 / 4,000

15. Coffee 0.3 kg. / 22,000 / 6,600

16. Soybeans 3 kg / 5,500 / 16,500

Foot total: 162,250

II. FUEL

1. Kerosene 10 liters / 500 / 5,000

2. Coconut oil 0.8 kg. / 6,000 / 4,800 Fuel total: 9,800

III. HOUSING/KITCHEN EQUIPMENT

1. rent (5 meters x 2 meters, including electricity and water) 1 month / 75,000

2. Bed 1/36th of one/ 300,000 / 8,333 3. Bamboo mat 2/12 pieces / 25,000 / 4,166

4. Pillow 1/24th of one / 4,000 / 166

5. Dish 2/12 piece / 3,750 / 625

6. Drinking glass 2/12 piece / 1,166 / 194 7. Aluminum kettle 1/24th piece / 60,000 / 2,500 8. Alum. ricepot 1/24 piece / 15,000 / 625 9. Alum. wok 1/24 piece / 7,500 / 312

10. Aluminum pot 1/24 piece / 12,500 / 520 11. Spoon and fork 2/12 pair / 2,000 / 333 Housing/kitchen equipment total: 92,774

IV. CLOTHING

1. Trousers 1/12 piece / 25,000 / 4,166 2. Short-sleeved shirt 2/12 piece / 25,000 / 4,166 3. T-shirt 2/12 piece / 20,000 / 3,333 4. Sarong 1/12 piece / 20,000 / 1,666

5. Underpants 2/12 piece / 3,000 / 500 6. Towel 1/12 piece / 15,000 / 1,250

7. Cap 1/12 piece / 15,000 / 1,250

8. Shoes 1/12 pair / 40,000 / 3,333

9. Sandals 2/12 pair / 2,500 / 416

10. Laundry detergent 4 packets / 500 / 2,000 11. Bath soap 1.5 bars / 1,500 / 2,250 Clothing total: 24,330

V. Miscellaneous (15% of the totals of I+II+II+IV): 43,373 1. Transportation

2. Recreation

3. Medicines

4. Education/reading material

5. Haircut, toothbrush, toothpaste, etc.

Total for I-V: 332,527

As the above chart indicates, the total minimum physical requirements per month for a single male worker is 332,527Rp ($33.25US). The minimum physical requirements for female workers are estimated at 350,000Rp/month, or $35US. The present base wage for Nike workers of $20/month does not even fulfill the needs of one worker, and certainly does not come close to taking care of an entire family.

The lives of Nike workers today in Indonesia are miserable, although this is not entirely new to them. Before the crisis, they earned only enough to cover daily needs. When the crisis hit, their income went down drastically. They have a very independent spirit and do not want to ask, or are ashamed of asking, their relatives (in the Jakarta Bogor Tangerang Bekasi area) for help, nor do they expect financial assistance from families at home in the village.

Here are some of their stories:

SRI MARTINI

Sri Martini lives with a friend in a room measuring 12 by 9 feet. They split the rent, which is Rp. 65,000/month ($6.50US). For the two years she has worked, she has never sought entertainment: she has never gone to the movie theater, shopping malls, annual company tours, and very rarely visits her friends. She saves more money buy buying cheap food and makes up for lack of nutrition by buying a can of sweetened, condensed milk (Rp. 4000) once a month. She has also minimized spending on household equipment, not buying a bed and borrowing her kitchen equipment. She buys new clothes only once a year, for the Id Holy day. As for cosmetics, she only uses powder and does not go to the hairdresser.

During the crisis, she has been able to continue sending some money home to the village (she is the eldest child in the family and feels a great obligation to help her parents and younger siblings). But even though her consumption is minimal (just to keep from starving), she is beginning to feel that the costs are going beyond what she can afford. She can't continue to live like this.

NURHAYATI

Nurhayati is a young woman who has worked at a Nike factory for two years. The maximum wages she earned is Rp. 350,000. She managed to earn this much only by working overtime. Without overtime, she receives only Rp. 250,000. Nur lives with a cousin and a friend in a rented house measuring 18 by 8 feet. The rent is Rp. 75,000 ($7.50US). The house only has a living room, a bedroom and a kitchen. They use a common bathroom and one toilet situated behind the house and shared with occupants of other houses. The bathroom has no roof and no electric pump. They have to draw water at a well to bathe and to cook. Nur has never sent money home to her parents or to her two younger siblings in the village. She says she cannot set aside any money to save.

She knows that her wages are not sufficient to cover all her needs. Thus she has to make do without such things as a bed, haircuts, reading material and recreation. With the crisis, her consumption pattern has changed drastically. She has begun to cut back on snacks, replacing snacks at the factory cafeteria with breakfast at home. She no longer buys cooked food and cooks everything at home. She only uses face-powder once a day, in the morning to go to work, and replacing the more expensive Rinso powder-detergent for a cheap detergent cream. She has replaced the costlier Mustika Ratu shampoo (a domestic brand selling at Rp. 7,000) for Sunsilk (a Unilever brand selling for Rp. 4,300).

DAHYANI

Dahyani lives with her husband, also a worker, in a single-room house measuring 12 by 12 feet. They pay Rp. 40,000/month($4US) for a place that is too small for two people. On either side of them are other similar rooms, and all 24 rooms have a single electricity source of 900 watts. In Dahyani's place there is only one lamp. If she turns on the fan as well, the lights will go out in all the houses. Her room has a bed, a small plastic cupboard and a fan. In front of her house are two bathrooms with no roof to serve all the residents of the houses. To bathe, she must draw water from the well. Dahyani has one stove for cooking, which she does on the terrace in front of her room. Dahyani and her husband are very careful about spending money and live very simply. They borrowed their kitchen equipment from their parents, and only buy clothes when absolutely necessary (not even once a year). As for food, they don't worry about nutrition, and eat just enough to stave off hunger. They never go out for holidays and don't spend money on entertainment. Even before the crisis, they felt that their lives were difficult.

DICKI

Dicki is a young man who has worked at Nike as a day laborer for 4 years. His rented house is poorly equipped. All that could be seen was an electric fan belonging to Dicki, a wall-clock, a bucket (bought together with his room-mates), and two plastic cupboards which they share. They sleep on worn plastic mats with pillows and thin mattresses. Water is an extremely limited commodity. It only flows at four 1- or 2-hour intervals a day. This makes him reluctant to cook. Electricity is shared among 4 houses. Before the crisis, he was able to buy jeans and t-shirts. Now he can't do that anymore; his wages are insufficient and clothes have become very expensive.

He wants to leave the job at the Nike factory but has not yet found a different job. He is considering becoming a food vendor, but he doesn't know how he is going to get the Rp. 1,500,000 ($150US) capital he will need to start. So far he has managed to save only Rp. 150,000 ($15US), even though he has been careful about spending money; he doesn't spend money on bought snacks, except for cigarettes, and he doesn't send money to his parents in the village. As the eldest child, he feels bad that he has not been able to send money to his four younger siblings. He feels he needs stronger motivation to save. Fortunately, for the last year, he and a friend have been forcing each other to save. Every week, when he gets paid, his friend takes Rp. 10,000($1US) to put into savings. The savings may not be withdrawn until the Id Holy Day. In this way he has been able to save Rp. 40,000 a month($4US). 

In his four years in Tangerang, he has only been back to the village once, that was for the Id Holy Day during his first year of work. When he went home, he was able to give his father, who sells shallots, Rp. 50,000($5US). But the pride he felt in being able to give his parents money lasted only as long as the holiday, because he soon had to return to Tangerang, and with great shame, had to ask his father for transportation money.  

Conclusion

It is evident that the economic crisis has undermined conditions for workers in Nike factories. Even though Nike raised its wages 15 percent, in keeping with the Ministry of Manpower decree earlier this year, this raise does not compensate workers for the real drop in earnings caused by the runaway inflation of prices of ordinary foodstuffs and other basic goods. Nike should double wages to compensate for the tremendous increase in the cost of basic necessities.

Doubling the wages of Nike's approximately 80,000 Indonesian factory workers, bringing their wages up from 10 cents to 20 cents/hour, would cost the company only $20 million a year. This is 1/10th what Nike spent on its sponsorship of the Brazilian soccer team (a $200 million deal), and less than 3 percent of Nike's advertising budget. Doubling the wages of Indonesian workers would not only allow these workers to live decent lives, but would help convince millions of consumers that Nike is serious about cleaning up its image as a company that profits from sweatshop labor.

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