A Milestone Week for Apple’s Stock, but Not its Workers

This week was a milestone for Apple. As its stock continues to rise, its market cap exceeded $700 billion—the largest valuation ever achieved by any U.S. company. This milestone, however, must be viewed with considerably less admiration after one takes a close look at its new “supplier responsibility” report. The report reveals important information about one of the less appetizing ingredients of Apple’s vast success: the continued mistreatment of the workers who make its products. The report shows that widespread labor rights violations can still be found in Apple’s massive supply chain, and that Apple continues to obfuscate these realities in its public communications on the subject.

Apple fails to report that its own data shows that labor practices are getting worse in several important areas. In its new report, which covers 2014, Apple says that in 92 percent of cases, the workweeks of the employees in its supply chain fell below its 60 hours per week standard. Apple fails to report that this compliance rate is down from the 2013 compliance rate of 95 percent. In 2014, Apple found that the overall labor rights compliance rate in the area of Health and Safety was 70 percent; it fails to state that this is down from the 2013 compliance rate of 77 percent. Notably, while Apple fails to report prior year data on those issues, which reveal negative trends, the report does provide such data on other topics—those where this year’s data is better than that of prior years.

The effects of Apple’s reforms are often dubious and overstated by the company. For example, in reporting that 92 percent of the time workers in its supply chain are working less than 60 hours per week, Apple ignores the fact that workweeks at its Chinese factories still consistently break Chinese law, which restricts workweeks to less than 50 hours and which Apple has repeatedly pledged to uphold. The average workweek Apple reports still exceeds this legal limit by a substantial margin. Apple also continues to make the remarkable claim that nearly all its suppliers have achieved freedom of association (the right to organize unions and bargain collectively), saying its suppliers achieved 96 percent compliance with this standard. As Apple is aware, such freedom is non-existent in China. Independent unions are illegal. Workers who try to form them go to jail. Moreover, the information available about a program run by the Fair Labor Association (FLA), which was supposedly going to provide a greater voice for Apple’s workers (within the cramped confines of Chinese law), indicates it has fallen woefully short of its stated goals. Further, Apple touts training programs under which, according to the company, 2.3 million workers were trained in labor rights in 2014. This is a large number, to be sure; unfortunately, it is the suppliers themselves, not worker rights advocates or worker representatives (and not even Apple or its new training academy), that provide this training—and Apple provides no substantive information on its actual content or impact. Independent reports indicate that this management-provided training may be entirely cursory. (Apple’s repudiation of the use of bonded foreign labor was a positive step, but does not address the much larger, multi-faceted problem within Apple’s supply chain in China of the excessive use of domestic labor hired through dispatch agencies.)

Apple’s own data show that labor rights violations remain common. For instance, Apple’s audits show that 21 percent of supplier practices are not in compliance with juvenile worker protections; 28 percent are not in compliance with wages, benefits and contracts protections; and 31 percent are not in compliance with student worker protections. In the health and safety area, overall non-compliance is 30 percent, meaning nearly a third of all practices in this area fail to meet Apple standards. As one specific example, 31 percent of supplier practices fail to meet ergonomic standards, a crucial issue in an industry where the production process is defined by long hours of repetitive motion.

Apple continues to ignore the fact that it has walked away from key reforms promised as part of the Fair Labor Association process. Three years ago, in the wake of explosive media criticism of the treatment of workers in its supply chain—especially at its largest supplier, Foxconn—Apple publicly recommitted itself to advancing fundamental reforms, this time through its new membership in the FLA. Since then, however, the company and the FLA have largely gone silent regarding certain crucial commitments they made. Apple, for instance, had promised intensive FLA audits (which despite weaknesses are at least more transparent and independent than Apple audits) in more than 90 percent of its supply chain. But the FLA appears to have only engaged in such in-depth studies of about one-fifth of the supply chain. Nor does Apple mention the promise that suppliers would pay back wages to the large number of Foxconn workers found to have worked (illegally) unpaid overtime hours. We are among those who regularly reported these and other apparently broken promises, but Apple has not responded.

Apple’s self-regulatory approach raises independence and accuracy concerns—independent reports continue to paint a far more troubling picture of Apple’s supply chain. Apple has greatly increased the number of factory audits that it performs, but these audits are not carried out in an independent manner, and the information contained in them is reported selectively, by Apple. Apple’s annual supplier responsibility reports—which draw on these audit reports to broadly characterize conditions in the supply chain, but which reveal few or no concrete, factory-specific details—should thus be treated with ample caution, especially given the failed history of industry-controlled factory auditing programs. Meanwhile, reports about particular Apple facilities from independent investigators such as China Labor Watch, as well as a BBC documentary released in late 2014, describe labor conditions far worse than those generally depicted by Apple. On February 11, for instance, China Labor Watch issued a new study containing evidence that Apple is shifting its production to suppliers who pay less in wages and have a greater tendency towards labor rights violations than Foxconn.

One final observation: those who may have read our assessment of last year’s supplier responsibility report of Apple’s may notice the many similarities in this year’s assessment. The failure of Apple to respond to the consistent criticisms that we and others have advanced is one more indication that the milestone achieved by Apple this week, as the company with the highest market valuation ever, contrasts sharply with the harsh, and often illegal, working conditions and low pay still commonly faced by workers in its supply chain.

  • Ken

    On the other hand, Apple is buying back stock with dirt cheap loans (to avoid taxes) to prop up share prices and increase bonuses to management. In this zero sum game, someone has to lose, better the voiceless serfs in the supply chain.