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.

Five themes emerge from our assessment of Apple’s latest supplier responsibility report (Apple 2014a), which was released in February and which reports on conditions in its supply chain during 2013. Our focus is on the labor rights aspects of the report, and not the environmental aspects.

The effects of Apple’s reforms are often dubious and overstated by the company. For example, Apple places great emphasis on its data indicating that fewer workers in its supply chain are working more than 60 hours per week, yet ignores altogether the fact that workweeks at its Chinese factories still consistently break Chinese law (which Apple has repeatedly pledged to uphold). The average workweek Apple reports still exceeds, by a substantial margin, the 49-hour limit imposed by Chinese law. Further, Apple’s new measure to address the widely reported problem of abusive student internships focuses primarily on improving the schools the interns attend. This does not address the actual labor rights violations at issue: These internships have often been involuntary—a form of de facto forced labor—and exploitative. Suppliers have placed students in production jobs that have nothing to do with their studies and subjected them to harsh conditions, oftentimes to meet Apple’s unforgiving production schedules. In another example, Apple makes the remarkable claim that its suppliers have achieved a 99 percent compliance rate on freedom of association (the right to organize unions and bargain collectively), although such freedom is a legal and practical impossibility in China, as recognized by virtually all observers (other than factory owners and the Chinese government). Moreover, a program of remedies to this issue that was supposed to have been advanced through the Fair Labor Association (FLA) process has fallen woefully short of its stated goals. Apple has also touted training programs under which, according to the company, 1.5 million workers were trained in labor rights in 2013, 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 own data show that labor rights violations remain common and that there has been no overall progress when it comes to worker health and safety. For instance, Apple’s own audits show that 27 percent of supplier practices are not in compliance with juvenile worker protections, 28 percent are not in compliance with occupational injury protections, and 30 percent are not in compliance with ergonomic standards. In the health and safety area, overall non-compliance is 23 percent, which is essentially the same level as in 2009, when it was 24 percent. (Cautionary note: Comparisons over time are not precise due to the changing composition of the facilities audited.)

Apple has apparently walked away from key reforms promised as part of the FLA process. In the wake of media criticism of the treatment of workers in its supply chain, especially at its largest supplier, Foxconn, Apple publicly recommitted itself more than two years ago 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. In the area of wages, for example, the new Apple report neglects to report on developments (if any) regarding promises that Foxconn would increase take-home pay to offset promised reductions in work hours. Nor does Apple mention the promise that suppliers would pay back wages to the large number of workers found to have worked (illegally) unpaid overtime hours. We are among those who have regularly reported these and other apparently broken promises, but Apple has yet to respond.

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 supplier annual 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 describe labor conditions far worse than those generally portrayed by Apple. Just in February 2014, for instance, China Labor Watch released a report regarding one Apple supplier that found brutal working conditions that violate Apple’s standards, essentially across the board. A 2013 investigation by China Labor Watch of factories operated by Apple’s second-largest supplier, Pegatron, found 17 basic areas where working conditions failed to meet Apple’s code of conduct.

There has been progress in some areas. Working hours, though still well in excess of legal limits, have apparently been reduced significantly. Apple now discloses the names and locations of its supplier factories—information no other major electronics brand provides—and Apple released, in this year’s supplier responsibility report, unusually detailed “Supplier Responsibility Standards,” which lay out Apple’s official expectations concerning suppliers’ labor practices. While compliance is very much in question, access to the detailed requirements is of use to the public and to worker rights advocates. Further, Apple reports that it started a new training academy that conducts an 18-month training program for management personnel in its supply chain on environmental and health and safety issues; to the extent that this academy provides effective education about employer obligations and professional managerial training, it may help fill important knowledge gaps in an industry where expertise on worker rights and safety has not historically been a professional development priority for factory managers. Apple also says it now verifies that all the tantalum smelters in its supply chain are “conflict-free”; the authors of this analysis are not in a position to independently evaluate that claim, but respected environmental organizations, including Greenpeace International, consider Apple’s commitments in this regard to be significant.

Each of these themes is elucidated below.

Dubious and overstated accomplishments

Many “accomplishments” touted by Apple represent actions that, upon inspection, are far less meaningful than Apple indicates. Apple’s unduly positive characterization of these actions is an important reminder to readers that, while the depth of Apple’s concern for the well-being of workers remains in doubt, the depth of its concern for its public image does not.

Apple reports that 95 percent of the weeks worked by employees in its supply chain met its standard of 60 hours or less (Apple 2014a, 5), conveniently omitting any reference to Chinese law, which limits workweeks to 49 hours. The reported compliance rate is somewhat higher than the 92 percent figure it claims for 2012 (Apple 2013, 6) and is sharply higher than the 38 percent figure for 2011 (Apple 2012a, 7). While the degree of compliance may be overstated (see just below), this is significant progress. The fact remains, however, that this still leaves many Apple factories regularly exceeding legal overtime limits. Apple reports that the average workweek for the full-time workers in its supply chain is 54 hours per week (Apple 2014a, 11); that is, 54 hours of hard, repetitive, physical labor. Thus, the average workweek exceeds legal limits in China, where most of these workers are located, by more than 10 percent (the law, of course, requires all workers to work within the legal limit; Apple’s suppliers cannot even meet this standard when hours are averaged). Apple has allowed these systematic violations of overtime law even though the FLA’s engagement with Foxconn promised to achieve full legal compliance by July 2013 (Fair Labor Association 2012a). It must be noted that Apple’s Code of Conduct (Apple 2014b) has stated for nearly a decade that its suppliers must abide by all applicable local laws. In view of the above, it is stunning that the legal 49-hour Chinese standard is never mentioned in Apple’s supplier report.

To make matters worse, there are doubts about the accuracy of Apple’s claim of 95 percent compliance with its 60-hour standard. A recent China Labor Watch study found that the Pegatron factory in Shanghai, which produces iPhones, has a policy of falsifying work hour records to hide excessive duration. The study found that at Pegatron, “[w]orkers are required to sign [a false overtime form] and are not to pay attention to the number of hours written on the form; the document’s only purpose is to deceive Apple during inspections” (China Labor Watch 2013a, 16–17).

Another “accomplishment” highlighted by Apple is a new effort it says is designed “to protect student workers from exploitation” (Apple 2014a, 4). The claim is likely inspired by the heavy criticism key Apple suppliers have received for colluding with the Chinese government and school officials to effectively compel thousands of students to toil on electronics production lines, under the guise of academic “internships,” and for the abusive conditions students experience, even if they take the positions voluntarily. This is a means for factories to address labor shortages, particularly at peak production periods. Students have frequently been told that they will not be allowed to graduate unless they succumb.

Unfortunately, Apple’s new effort primarily focuses on improving the educational experience at the schools supplying these workers, which has nothing to do with the fundamental problems of de facto forced labor and abusive working conditions that characterize these internship programs. As China Labor Watch’s report on Apple’s supplier Pegatron finds, certain suppliers rely heavily on student interns for production positions that have nothing to do with their academic studies and the use of coercive means to compel students to participate (China Labor Watch 2013a).

One other “accomplishment” cited by Apple deserves particular notice, as it illustrates the extent to which Apple’s supplier report can mislead the public. Apple reports near-perfect compliance (Apple 2014a, 32) when it comes to “freedom of association” (the right to organize unions and bargain collectively), a claim it also made in previous years. Virtually all observers, however, recognize that such freedom is non-existent (indeed, is legally impossible) in factories in China, where the only legal union is controlled by the Chinese Communist Party. Workers in China cannot legally organize independent unions and typically have no ability to change practices in their workplaces through collective bargaining or other legal mechanisms. (Where Chinese workers have been able to influence labor practices, it has invariably been through illegal strikes and other forms of protest—including, in the most extreme example, the worker suicides that generated international embarrassment for Apple and Foxconn.) As discussed in the FLA section below, even the modest reforms pledged by Apple to ameliorate this denial of basic rights have fallen far short of stated goals. Apple muddles the issue by making the freedom of association requirements in its standards subordinate to local law, an approach used in the codes of conduct of many global corporations that manufacture in China. Since Chinese law does not permit freedom of association, this approach effectively dodges the issue. Notably, Apple, in claiming 99 percent compliance with freedom of association, fails to explain this distinction to readers.

Also of interest is Apple’s statement that it has “driven” suppliers “to train more than 3.8 million workers on their rights since 2008—including over 1.5 million in 2013 alone” (Apple 2014a, 5) and, in the full body of the report, that it requires “training for new and existing employees about Apple’s Code of Conduct, local laws, and occupational safety and health” (Apple 2014a, 7). Such training can be of value, if properly designed and delivered by people who have relevant knowledge and a genuine commitment to advancing worker rights. Such training is much more effective if it is conducted by non-governmental organizations, unions, or qualified government officials, and not by the employers themselves. Employers have a large conflict of interest when it comes to educating workers about their rights, all the more so when the rights in question are ones the employer has been routinely violating. Nor do most factory managers in China have the knowledge of and respect for worker rights necessary to educate others on the subject. Apple, however, does not explain who provides the training or provide any concrete information on its scope or content in practice.

Information from independent reports, moreover, suggests that this training can be purely cursory. China Labor Watch, for example, investigated conditions at three Apple suppliers in 2013. Its just-released investigation of Quanta’s Shanghai facility, whose products include Apple computers, found that only 10 minutes of safety training is provided to new employees, even though it is a particularly dangerous facility, with the production process involving several hazardous chemicals and gases (China Labor Watch 2014). Its investigation of Jabil’s Green Point factory (which makes rear plastic covers for iPhones) found that worker training lasts only two hours, that exam answers are given to the workers to be copied down, and that information on safety is lacking (China Labor Watch 2013b, 4). Its investigation of Apple’s second-largest supplier, Pegatron, found that its trainings lasted eight hours (just one-third of the 24 hours required under Chinese law), and “simply consisted of rolling through perfunctory slideshow presentation[s], after which workers were told to copy answers to all questions on the training test” (China Labor Watch 2013a, 5).

Labor rights and health and safety abuses indicated by Apple’s data

Apple’s supplier responsibility report contains information on eight categories of practices related to labor and human rights and seven categories related to worker health and safety. Although Apple typically does not discuss changes over time in these categories, roughly comparable data from its previous reports are available back to 2009. We have compiled that data in the two tables below.

Table 1 depicts trends in the area of labor and human rights. Apple’s data suggest modest overall progress since 2009, driven largely by reductions in excessive work hours. Still, in two areas, juvenile worker protection and wages and benefits, Apple’s own data show that about one in four practices are not in compliance. (We follow Apple’s use of the term “practices in compliance” here even though its meaning is somewhat unclear.)

Table 1

Table 2 depicts trends in the area of worker health and safety. Here essentially no overall progress is indicated. Overall compliance in 2013 was only 1 percentage point higher than the compliance rate Apple reported in 2009. More than one in four occupational injury protection practices are still not in compliance. Nearly one in four emergency practices are not in compliance. Some 30 percent of ergonomic practices fail to comply with Apple’s standards. And despite Apple’s assertion of widespread communication programs, more than one in four health and safety communication practices are not in compliance.

Table 2

All of these data are, of course, entirely self-reported and cannot, in and of themselves, constitute persuasive evidence of progress in those areas where Apple claims it. However, Apple has no incentive to underreport compliance; the fact that high levels of non-compliance are reported is thus revealing. One other point should be mentioned: Since the number of facilities audited has increased significantly, the figures for each year apply to different sets of facilities. If Apple would release audits of the individual facilities and not just aggregated data, it would enable an assessment of reported developments among consistently audited facilities.

Apple and FLA promises

In January 2012, and in the wake of intensifying media criticism of labor practices in its supply chain, Apple joined the Fair Labor Association, committing itself to abide by its standards. The next month Apple announced the initiation of “unprecedented” FLA investigations (Apple 2012b). In late March 2012, the FLA released its findings from its “audits” of three Foxconn facilities supplying Apple and announced a series of fundamental reforms that Apple and Foxconn pledged to implement by July 2013 (Fair Labor Association 2012a). Apple’s widely cited same-day response to the FLA report fully embraced the proposed reforms, stating in part, “We appreciate the work the FLA has done to assess conditions at Foxconn and we fully support their recommendations” (Pepitone 2012).

More than two years after this process began, and more than six months since the passage of the July 2013 deadline, reforms in several critical areas have still not occurred. The latest Apple supplier responsibility report was another chance for Apple to explain this failure, but the report is altogether silent about the FLA process and what has been accomplished. The only mention of the FLA is on page 27, when it includes the FLA in the list of organizations that it draws on for its standards. This raises the question: Has Apple walked away from essential commitments made in the FLA process?

We have described the failure of Apple to meet the FLA commitments in a series of pieces, most recently in November 2013 (Nova and Shapiro 2013). One broken promise has already been discussed here: the commitment to comply with China’s legal limit on work hours. The FLA itself, in its last report on Foxconn, found that the three facilities it examined all failed to meet this commitment. In the March–October 2013 period, 67 percent of workers at the Longhua facility and 56 percent at Guanlan worked more hours than permitted by Chinese law, according to the FLA. At Chengdu, the FLA found that nearly all workers worked hours in accordance with Chinese law from March through June, but not from July to October, when 78 percent to 84 percent worked hours that exceeded Chinese law. (Fair Labor Association 2013)

A second unfulfilled commitment relates to freedom of association and providing workers with a “voice.” This promise was featured prominently by the FLA, but, as of now, the only “progress” that has been made was to appoint some worker representatives to the leadership of management-controlled unions—but not enough worker representatives to prevent management from retaining control. In other words, two years after Apple, Foxconn, and the FLA heralded reforms to enable workers to have a voice and act collectively to protect their rights, the only collective worker bodies in Foxconn facilities are unions run by factory management.

The lack of progress concerning promises on compensation is especially egregious. The promises here included raising wages enough to offset any reductions in hours; providing back pay to the large number of workers who worked unpaid or underpaid overtime as a result of longstanding illegal pay practices by Foxconn; and conducting a study, to be carried out by the FLA, to determine the amount of compensation necessary for workers to meet their basic needs (in March 2012 the FLA (2012b, 9) found that nearly two-thirds of a representative sample of workers at Foxconn said their compensation was not sufficient to do so and promised the study as a step toward addressing the problem). The FLA has not reported progress in any of these three areas, and the latest Apple supplier report is entirely silent on these issues.

One other promise, made explicitly by Apple in early 2012, was that “[s]imilar inspections [to those at Foxconn] will be conducted at Quanta and Pegatron factories later this Spring, and when completed, the FLA’s assessment will cover facilities where more than 90 percent of Apple products are assembled” (Apple 2012b). None of these additional inspections has apparently taken place, meaning that the FLA assessed facilities employing less than one-fifth of the Chinese workers in Apple’s supply chain. While the FLA audits have important weaknesses, they are at least more transparent than the audits done by Apple, which are never made public. Moreover, Apple presented the FLA’s sweeping audit plan as the centerpiece of its reform commitment; it is remarkable that much of this plan was apparently never carried out.

Concerns with Apple policing its own supply chain

The deficiencies discussed above point to an overarching concern: Apple’s approach to improving labor conditions in its supply chain largely consists of conducting audits that are neither independent nor transparent, and of promises that lack an outside enforcement mechanism, and thus are less likely to be fulfilled.

Apple (2014a) conducted 451 audits of its supply chain in 2013, a sizable 51 percent increase from 2012. These audits, according to Apple, covered nearly 1.5 million workers. All of its final assembly manufacturers are audited each year, and 33 of the audits focused on the critical issue of the treatment of migrant workers. Thirty-one of the audits were “surprise” audits. Apple also indicates it demands remedies for any violations found by its audits.

As impressive as this may sound, it is vital to understand that apparel brands, toy manufacturers, and other companies have been doing this kind of labor rights auditing at their suppliers for many years; many of the major companies have been doing so since the 1990s. The track record of these comprehensive audits is dismal: Major violations are routinely missed, and genuine labor rights progress is scant. The most gruesome example is Bangladesh, where garment workers died en masse in a long series of preventable fires and building collapses despite years of industry-run safety inspections. Apple itself has failed in the past, by its own tacit acknowledgment, to crack down on repeat violators, even though it promised repeatedly to do so. It is thus incumbent upon Apple to demonstrate that its expanded audit program is leading to actual reforms. For example, this means Apple should not simply assert that it demands remedies for violations that it finds, but should supply credible evidence that remedies have been implemented.

As far as the lack of independence of the Apple audits, note that the standard audits are carried out by Apple itself, and are directed by an Apple auditor. There is an obvious conflict of interest when a company investigates its own supply chain, draws its own conclusions, and then selectively publishes results.

Information from workers also appears to be primarily collected through interviews conducted inside the factory, when the preferred method (because it is more likely to lead to accurate results) is to gather information through off-site interviews. Apple’s supplier responsibility report does mention it has established channels for workers to provide information separate from the on-site interviews, through off-site phone calls, but it is unclear how much information has been provided through this approach.

Then the data are presented in aggregate form, with little information on how they are assembled and without releasing the individual audits. This makes it difficult for those outside of Apple to hold individual facilities accountable, or to check Apple’s findings against independent investigations.

For these reasons, the information found in the Apple supplier responsibility report should be assessed with great caution. This is especially so since independent assessments of Apple’s suppliers, two years after the FLA process began and seven years since Apple initiated its audit process, continue to uncover harsh working conditions that deviate sharply from the code of conduct Apple has claimed it is vigorously enforcing, and from the sunny picture of progress described in its latest supplier responsibility report.

Over the past year, for instance, China Labor Watch has conducted independent, undercover investigations of three Apple suppliers (China Labor Watch 2013a, 2013b, 2014). Two of the suppliers examined, Pegatron and Quanta, were singled out as facilities that Apple said would be investigated in a second phase of FLA work; as noted, these investigations have apparently not occurred. The third investigation was of a Chinese factory owned by Jabil Circuit, a company based in Florida. All three of these investigations found working conditions that can only be described as deplorable.

For example, in the Pegatron report, China Labor Watch (2013a) found that 17 basic labor rights standards in Apple’s code of conduct were being violated. Workers, for instance, consistently worked more hours than even the Apple 60-hour standard, performed involuntary overtime, were not fully compensated for their work time, were subject to disciplinary wage practices, received less than the legally required amount of training, and were subject to harassment and abuse by supervisors. Standards relating to students and juvenile workers were also not met. The following paragraphs from the executive summary of the China Labor Watch report provide a sense of what this means for workers (China Labor Watch 2013a, 1):

At this moment, in Shanghai, China, workers in Apple’s supplier factory Pegatron are monotonously working long overtime hours to turn out a scaled-back, less expensive version of the iPhone. Six days a week, the workers making these phones have to work almost 11-hour shifts, 20 minutes of which is unpaid, and the remainder of which is paid at a rate of $1.50 an hour ($268 per month) before overtime. This is less than half the average local monthly income of $764 and far below the basic living wage necessary to live in Shanghai, one of [the] costliest cities in China. So these workers rely on long overtime hours. If a worker does not finish three months at Pegatron, the dispatch company that got the worker hired will deduct a large portion of his wages.

After a grueling day’s work, what a worker has to look forward to is a 12-person dorm room, lining up for a quick cold shower in one of the two dozen showers shared by hundreds of workers.

At Pegatron, over 10,000 underage and student workers (interns), from 16 to 20 years of age, work in crowded production rooms, doing the same work as formal, adult workers. But some students are paid lower wages because schools deduct fees for the internship, while other students will not have their wages paid to them on time.

At Pegatron, a pregnant woman interviewed was working equally long overtime hours, despite Chinese laws protecting the health of pregnant women by mandating an eight-hour workday. After four months of intense work, she decided to leave and give up her maternity benefits rather than jeopardize the health and well-being of herself and her unborn child.

In addition, Pegatron has violations related to discriminatory hiring, harassment and abuse, fire safety, and more.

A follow-up study of Pegatron zeroed in on its treatment of student workers. Disturbingly, China Labor Watch found that the wage abuses of student workers were even worse than those indicated by its initial report (China Labor Watch 2013c).

Apple may assert that the violations have been remedied in all these factories or that the China Labor Watch information is not fully accurate. If so, Apple should provide documentation about the remedies and should offer up its own detailed information on conditions in these factories.

Areas of progress

One area of progress has been a significant reduction in work hours. As discussed, however, this progress falls dramatically short of complying with China’s legal limit.

Much of the progress in reducing work hours occurred from 2011 to 2012 and was reported upon in the previous suppliers’ responsibility report. That report also featured Apple’s disclosure of the names and locations of its supplier factories. Apple remains the only major electronics brand to release this information.

The first-time release of its Supplier Responsibility Standards is notable. This document (Apple 2014c) is a detailed description of what Apple officially expects from its suppliers, essentially describing how Apple expects its code of conduct to be implemented. By making this document public, all parties are in a better position to assess the merits of Apple’s expectations and to see if its suppliers are meeting them. Apple also strengthened its standards by adding requirements in areas such as ergonomic breaks and responsible sourcing of materials. (It bears emphasizing that while better standards are helpful, the real test is whether the suppliers meet those standards, which, as this discussion indicates, is frequently not the case.)

Apple also initiated the Apple Supplier Environment, Health, and Safety Academy. This academy is designed to help address the absence of expertise in these areas among management personnel in its supply chain. Apple indicated that more than 240 factory personnel enrolled in this 18-month program in 2013; attendees came from factories with more than 270,000 workers. It is too early to assess the outcomes of participation in the academy, and Apple should be transparent in the future about its impacts in the factories themselves, but this could be an important effort at raising management expertise concerning environment, health, and safety issues. The impact of the academy would also be greater if it incorporated training for workers, so that they could play an active role in hazard detection and finding solutions to problems.

Apple also verified that all the tantalum smelters that are actively serving its supply chain have been certified as conflict-free by third-party auditors. Since tantalum can be produced in an unethical manner that benefits armed groups and human rights violators in countries such as the Democratic Republic of the Congo, this is a significant step. Of note, in the wake of Apple’s latest supplier report, Greenpeace released a statement praising Apple’s efforts to reduce its use of conflict minerals (Greenpeace 2014).

Conclusion

Notwithstanding some areas of actual progress, working conditions in Apple’s supply chain remain grim for many workers. The claims made by Apple in its report are often misleadingly rosy, presumably designed to deflect attention from the serious labor rights violations that even its own data suggest remain common—and which independent reports continue to find with dismaying consistency. The latest report also provides further evidence that Apple is walking away from critical commitments made when it formed its partnership with the FLA. The company made those commitments the centerpiece of its pledge to advance fundamental reforms in its supply chain, at a time when such a pledge was a public relations necessity, because of withering and widely publicized criticism of the company’s labor practices. It is discouraging, if not surprising, that promises made under the pressure of intense media scrutiny were quietly jettisoned when that scrutiny abated.

About the authors

Scott Nova is executive director of the Worker Rights Consortium, a nonprofit labor rights–monitoring organization. WRC conducts independent investigations of working conditions in factories around the world. Its mission is to combat sweatshops and protect the rights of workers who make apparel and other products.

Isaac Shapiro is a research associate at EPI and has also analyzed labor policies for the Center on Budget and Policy Priorities, the U.S. Department of Labor, a member of Congress, and the Center for Social Policy Studies.

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China Labor Watch. 2013c. “Student Workers Making iPhone Must Do Unpaid Overtime and Have Wages Unfairly Deducted.” Press release, September 10. http://www.chinalaborwatch.org/news/new-464.html

China Labor Watch. 2014. Investigative Report of Quanta Shanghai Manufacturing City. February 7. http://www.chinalaborwatch.org/pdf/2014.02.06-Quanta_Shanghai_Manufacturing_City.pdf

Fair Labor Association. 2012a. “Fair Labor Association Secures Commitment to Limit Workers’ Hours, Protect Pay at Apple’s Largest Supplier.” Blog post, March 29. http://www.fairlabor.org/blog/entry/fair-labor-association-secures-commitment-limit-workers-hours-protect-pay-apples-largest

Fair Labor Association. 2012b. Independent Investigation of Apple Supplier, Foxconn: Report Highlights. March 29. http://www.fairlabor.org/sites/default/files/documents/reports/foxconn_investigation_report.pdf

Fair Labor Association. 2013. Final Foxconn Verification Status Report. December. http://www.fairlabor.org/sites/default/files/documents/reports/final_foxconn_verification_report_0.pdf

Greenpeace. 2014. “Greenpeace Applauds Apple for Cutting Conflict Minerals, Supply Chain Transparency.” Media release, February 13. http://www.greenpeace.org/usa/en/media-center/news-releases/-Greenpeace-Applauds-Apple-for-Cutting-Conflict-Minerals-Supply-Chain-Transparency/

Nova, Scott, and Isaac Shapiro. 2013. “Apple Fails to Deliver on Key Labor Rights Promises, but the Company’s Chosen Labor Rights Monitor Finds Little Fault.” Working Economics (Economic Policy Institute blog), December 13. http://www.epi.org/blog/apple-fails-deliver-key-labor-rights-promises/

Pepitone, Julianne. 2012. “Apple Supplier Audit Finds Major Wage and Overtime Violations.” CNNMoney, March 29.  http://money.cnn.com/2012/03/29/technology/apple-foxconn-report/index.htm

The FLA ignores crucial reforms promised by Apple and Foxconn, including increasing wages enough to offset reductions in work hours, providing back pay for uncompensated work time, and making progress towards a livable wage standard.  On March 29, 2012, the FLA described the basic remedial actions to be undertaken by Foxconn and Apple, including the promises that compensation at Foxconn factories would increase enough to offset any reduction in overtime hours; that Foxconn and Apple would provide retroactive pay for the many circumstances in which workers had not been compensated for all their overtime hours; and that a study would be undertaken to determine the amount of compensation necessary to provide for basic needs (according to the FLA’s own survey, nearly two-thirds of workers said their compensation did not provide them enough to meet their basic needs).

The FLA has not reported progress regarding any of these critical promises; indeed, the final report does not mention them at all.

The FLA reports as progress potentially meaningless changes in worker representation. The final verification report notes there has been no further progress regarding union elections, but glosses over the fact the second FLA verification treated as full remedies changes in the composition of union leadership committees that are potentially meaningless.  The FLA touted significant progress in the proportion of union committees that actually consist of workers as opposed to managers (in January 2013, 39 percent workers/61 per cent managers in the Guanlan factory – up from zero worker representation in June 2012; 41 percent in the Longhua facility – from 10 percent; and 29.5 percent in the Chengdu factory – from 7 percent).  The FLA write-up, however, ignores the central point: the majority of the union leadership, in all of these facilities, is still composed of factory managers.  Moreover, the FLA does not assess the actual influence of these committees.  Even if the majority of the members of these committees are eventually workers, it is far from clear that will they have any significant voice when it comes to decisions made at these factories.  An analysis by SACOM raises plausible concerns that sham unions may be the outcome.

Overtime hours still consistently violate Chinese law, despite promises that illegal overtime would end by July 2013, and Foxconn does not even comply with Apple’s own weaker standard of 60 hours per week.  In its very first verification report, the FLA indicated that no workers at the three Foxconn factories had to work more than 60 hours per week. Other sources contradicted this finding, and the latest report itself finds that in one of the three factories, the Guanlan facility, this standard was not met during seven weeks of the seven-month period examined by the FLA for its final report (March-October 2013).

Work weeks of 60 hours, however, are still well in excess of the maximum allowed under Chinese law, and the FLA-related promise was that the factories would comply with Chinese law by July 2013, meaning Foxconn and Apple had 15 months from the initial FLA findings report to comply with the legal standard. Nonetheless, while the FLA reports that this standard is now incorporated into Foxconn’s policies at the three factories, the FLA also reports the standard is not met in practice.  In the March-October 2013 period, an average of 67 percent of workers at Longhua and 56 percent at Gunlan worked hours in excess of Chinese law. While nearly all workers at Chengdu worked hours in accordance with Chinese law from March through June, during the July-October period 78 percent to 84 percent worked hours that exceeded Chinese law.

Contrary to what Apple indicated, the FLA process has covered fewer than one-fifth of the workers in Apple’s supply chain. Other information suggests severe labor rights abuses continue throughout Apple’s supply chain.

Apple announced its commitment to the FLA process in February 2012, stating at that time that “Similar inspections [to those of Foxconn] will be conducted at Quanta and Pegatron factories later this Spring, and when completed, the FLA’s assessment will cover facilities where more than 90 percent of Apple products are assembled.” Yet the FLA has only presented information on three Foxconn facilities, now employing 178,000 workers, fewer than one-fifth of the more than one million workers Apple says are in its supply chain. No reports have been issued by the FLA on Quanta, Pegatron or any other Apple production facility. Moreover, it is clear from independent reports that serious labor rights violations are rampant in other Foxconn factories and throughout Apple’s supply chain (a reality also revealed, in significant respects, by Apple’s own annual “supplier responsibility” report). For example, China Labor Watch released a report in July 2013 on Pegatron, Apple’s second largest supplier. It found that Pegatron violates 17 specific commitments made by Apple in its code of conduct, ranging from widespread hiring discrimination, to the significant misuse of underage workers, to forced and uncompensated overtime.

We and others have made these points before (our pieces on the previous FLA verification studies can be found here and here, our assessment of Apple’s broken promises can be found here, and a synthesis of labor rights abuses connected to the production of the new iPhones is here).

Much of the media coverage of the FLA reports still emphasizes whatever progress Apple/Foxconn/FLA claim, while neglecting promised remedies that never materialized and in some cases are no longer even acknowledged. Perhaps this reflects the numeric remedial completion score of 98.9 percent that the FLA gives Foxconn/Apple, a figure that is only this high because the FLA gives full credit in areas such as union committees where no real progress may have occurred, because the completion of any small step is given as much weight as the failure to achieve absolutely fundamental measures such as complying with Chinese labor law, and because the remedial steps measured ignore altogether some of the most essential reforms required, such as those related to wage increases. The use of these kinds of arbitrary statistical measures is deeply misleading and borders on numerology.

In short, while Apple has encouraged some progress on working conditions within its supply chain, this progress may apply to less than one fifth of Apple’s supply chain workers, is partial at best on some issues, and on others is nonexistent.  The FLA’s arbitrary assignment of a 99 percent “score” to Apple’s and Foxconn’s performance obscures the underlying reality: the world’s wealthiest corporation has largely failed to deliver on its promise to end egregious and illegal abuses of the workers who make its products – even though this is a promise the company can easily afford.

*For more information on the working conditions at Apple suppliers in China, see www.AppleLabor.com

The labor rights group Students and Scholars Against Corporate Misbehaviour (SACOM) first exposed the wave of employee suicides at Apple’s Chinese contractor, Foxconn, and the grueling conditions in which hundreds of thousands of employees work. SACOM has regularly revealed Apple’s failure to abide by its so-called code of conduct, and along with another watchdog group, China Labor Watch, has monitored Apple’s failure to live up to its announced intention to clean up sweatshop conditions at its factories in China and to stop the use of indentured student labor.

In April, China Labor Watch reported that two more Apple/Foxconn workers had committed suicide by jumping from buildings to their death. China Labor Watch also found labor law violations at ten other Apple suppliers, including Pegatron.

Now SACOM has released a new report that details the serious labor rights violations at another Apple supplier, Biel Crystal, which reportedly makes 60 percent of Apple’s touch screens. SACOM reports that five Biel Crystal workers employed at its Huizhou factory have killed themselves since 2011. One possible cause is the stress of working horrific hours—11 hours a day, seven days a week, with only a day off in a month. This is a gross violation of Chinese labor law, which limits overtime to 39 hours a month. The Biel Crystal employees work more than twice as much overtime as the law allows.

When will American consumers wake up to Apple’s crushing exploitation of Chinese workers?

Dear Mr. Cook:

Another consideration should take precedence over Apple’s assessment of Carl Icahn’s suggestion that the company return $150 billion to its shareholders through a stock buyback, which would be on top of the $100 billion already pledged to Apple shareholders through the capital return program. This other consideration is much less expensive, yet far more justified.

It has now been more than six years since the harsh working and living conditions faced by the workers making Apple products were first exposed, and 19 months since new findings, including those highlighted by a series of New York Times stories, led Apple to pledge to make dramatic reforms. Some modest reforms have advanced since then, but the public record still suggests labor rights abuses in Apple’s supply chain remain distressingly common and significant.

We offer up for your, and for that matter Mr. Icahn’s, attention this recent summary of the public record, which examined three new investigations by China Labor Watch, and concluded that the new iPhone products are being produced under working conditions that “include widespread abuses of labor laws and common decency, as well as widespread violations of Apple promises and its supplier code of conduct.” It also summarizes findings concerning Apple’s reform promises of early 2012, stating that the available information indicates:

“Apple has not met commitments to ensure that workers in its supply chain receive retroactive compensation for working unpaid overtime, has not ensured promised wage increases, and has not, through the FLA [the Fair Labor Association], provided an assessment of the livable wage standard for its Chinese workers. Apple also has not met its commitment to reduce overtime work hours to the level allowed by Chinese law; it has not even met its less lenient standard of reducing work weeks to 60 hours. Further, Apple has not met its commitment to ensure workers in its Chinese supply chain have a true voice in the workplace. And the more intensive study of working conditions, as undertaken by the FLA, has involved less than one-fifth of the workers in Apple’s supply chain, a figure far short of what Apple had promised.”

In all likelihood Apple could make good on all these promises using only a fraction of the resources Carl Icahn is requesting should go to a buyback. To illustrate, say Apple were to dedicate $15 billion—or one-tenth of the Icahn request—to improve the conditions of the workers making its products. A few billion of that amount could certainly cover all retroactive pay commitments; the promised intensive studies across the supply chain; resources to advance the ability of workers to voice complaints about (perhaps equip them with iPhones and a special app) and negotiate remedies to abuses; and systematic, independent and transparent monitoring to ensure implementation. The remainder could cover much if not all of the promised wage increases for several years or more.

Given the inherent difficulty of obtaining information about the workers in Apple’s supply chain in China, and the ongoing lack of transparency from Apple about the labor rights initiatives it may be undertaking, if any, it is hard to be more precise about what the costs of a full remedy might be. Accordingly, as you have met with Mr. Icahn to discuss his proposal, you should have a public meeting with workers in the supply chain and independent labor rights monitors to discuss the nature and scale of an Apple commitment to remedy labor rights abuses.

As you well know, long-term stockholders in Apple have reaped enormous gains. This is not to judge whether more than the already-committed $100 billion in Apple’s capital reserve program—$36 billion of which has already been allocated in dividends and stock repurchases—should be provided to shareholders, but it is to underscore that the one million workers in your supply chain that are directly responsible for producing your products should be given priority consideration. At relatively modest cost, Apple could fulfill its promises to remedy the abusive living and working conditions many of these workers still face.

In a conference call just a few days ago on Apple’s fourth quarter earnings, you said Apple is “proud to be a force for good in the world beyond our products,” and after referencing areas such as working conditions, the environment, and human rights, said “Apple is making substantial contributions to society.”  When it comes to the rights and working conditions of those individuals making your products, this claim is questionable at best. But with just a fraction of what has been or may be returned to shareholders out of Apple’s ample cash reserve, that admirable ambition can be achieved.

Sincerely,

Isaac Shapiro, Research Associate, Economic Policy Institute

Li Qiang, Director, China Labor Watch

The first of the China Labor Watch studies was an in-depth investigation of conditions for workers making the new iPhones at Apple’s second largest supplier, Pegatron. The study, released July 29, found Pegatron in violation of 17 specific commitments made in Apple’s supplier code of conduct, and 86 labor rights violations overall in areas such as hiring practices, wages, hours worked, and living conditions. As one illustration, Apple has touted its success in ensuring that workers in its supply chain work no more than 60 hours a week, a dubious accomplishment at best, since the limit under Chinese law is 49 hours a week. China Labor Watch found even this weak standard has not been achieved.  At the three Pegatron factories examined, the average number of hours worked ranged from 66 to 69 hours per week, and in at least one factory these excessive hours were concealed because workers were forced to sign false time sheets.

The second China Labor Watch investigation (pdf), released September 5, examined conditions for workers at a factory in China making plastic covers for the new iPhone 5c. This factory, owned by the U.S. company Jabil Circuit (headquartered in Florida), also routinely worked its employees well over 60 hours per week, with overtime hours triple that allowed by Chinese law, and generally operated in a manner inconsistent with Apple’s code of conduct (which Apple has promised to implement). The other violations include forced overtime, unpaid overtime, grossly inadequate training regarding health and safety issues, arbitrary worker punishments, and poor eating and living conditions.

The latest China Labor Watch report, issued September 10, followed up on Pegatron’s disturbing treatment of student workers, a category of workers that Apple has repeatedly promised to protect. China Labor Watch found that Pegatron’s production of the new iPhones relied on thousands of student workers this summer, exploiting them through a series of wage abuses. The CLW findings, based on explicit confirmations by 100 students, indicate that students commonly worked unpaid overtime, and if they were considered “interns”, were paid 20 percent less than other workers performing the same tasks, even though this work was typically unrelated to their studies. Further, students could only work two months, since that is the extent of their summer break, but they were forced to sign three-month work agreements.  Then their wages for these two months were reduced by the equivalent of eight work days because they did not—they could not, as the company well knew—comply with this agreement. (Apple has responded to the CLW information by pushing Pegatron to rectify some abuses, but Apple has not implemented a systematic solution.)

In late August, Scott and I considered the essential question of whether Apple has achieved the reform commitments it so publically made in early 2012, given that the generous 15-month compliance period established by Apple’s chosen investigator, the Fair Labor Association, had ended. The lack of information provided by the FLA and Apple complicated our assessment, but the available evidence suggests that Apple has not fulfilled several fundamental commitments. The evidence that Scott and I reviewed indicates that Apple has not met commitments to ensure that workers in its supply chain receive retroactive compensation for working unpaid overtime, has not ensured promised wage increases, and has not, through the FLA, provided an assessment of the livable wage standard for its Chinese workers. Apple also has not met its commitment to reduce overtime work hours to the level allowed by Chinese law; it has not even met its less lenient standard of reducing work weeks to 60 hours. Further, Apple has not met its commitment to ensure workers in its Chinese supply chain have a true voice in the workplace. And the more intensive study of working conditions, as undertaken by the FLA, has involved less than one-fifth of the workers in Apple’s supply chain, a figure far short of what Apple had promised.

All of this suggests that Apple’s next rollout should relate to new and improved working conditions for the more than one million workers in its supply chain, instead of to its next new and improved product. Apple, and most of the attention on Apple, continues to be one-sidedly focused on whether its new products take the world even further into the breathtaking technological future, while largely ignoring the fact that the working conditions under which these products are made reflect some of the worst practices of the industrial era.

That deadline has now passed, strangely unremarked upon by Apple and its chosen labor rights monitor, and Apple has not made good on its commitments. It is clear from interim verification reports by the FLA and from independent assessments that progress in Apple’s supply chain has fallen far short of the sweeping change promised early last year, particularly in the areas of unpaid compensation, inadequate wages, illegal overtime, violations of workers’ rights to freedom of association, and the scope of the reform efforts within Apple’s full (and massive) supply chain. The FLA’s August 2012 and May 2013 interim reports claimed great strides, but included concrete findings that often belied this positive spin (as we discussed here and here).

The FLA reports helped obscure a number of disturbing realities.

Apple and its suppliers have not implemented promised pay reforms for low-wage workers, even as Apple has amassed nearly $50 billion more in profits.

The 15-month period between the FLA’s initial report in March 2012 and the July 1, 2013 deadline for reforms to be completed coincided with Apple’s last five financial quarters, in which its profits totaled $47 billion. A modest fraction of those profits—and an even smaller fraction of its $147 billion cash reserve—would have been sufficient to fund every corrective action pledged by Apple and the FLA. Instead, Apple failed to fulfill the following promises:

• A promise to provide retroactive compensation to hundreds of thousands of workers who were paid nothing for some of the overtime hours they worked. No such compensation has been reported and the FLA has indicated that it will not be paid.

• A promise that wages would be increased enough to offset planned reductions in work hours, thus ensuring no loss of income for workers. While wages have increased somewhat at Foxconn factories, largely coinciding with hikes in the legal minimum wage, there is no evidence to indicate action by Foxconn to raise pay sufficiently to protect workers’ net income and the FLA has been silent on this issue since its initial report in March 2012.

• A promise to conduct research to determine how much workers need to be paid to meet their basic needs. The FLA carried out a worker opinion survey in which nearly two-thirds of Foxconn employees reported that their wages did not meet their basic needs. Since the FLA code of conduct, which Apple is supposed to follow, requires payment of a “living wage,” the FLA announced that it would conduct a study to determine the proper wage level of Apple workers in China. The study has apparently not been carried out.

The workers in Apple’s supply chain in China still work overtime hours in violation of Chinese labor law.

Apple pledged, through the FLA, that it would put an end to illegal overtime in its production system in China by July 1, 2013. Apple’s code, like the FLA code, requires compliance with local law. However, the FLA has consistently reported that, despite some reductions in hours, Foxconn employees still work hours well in excess of legal limits (roughly 49 hours per week in China)—whose purpose, it must be noted, is to protect workers from the physical and psychological consequences of excessive hours of grinding manual labor. The July 1, 2013 date has now passed without any claim that Foxconn has stopped breaking Chinese overtime law and it is virtually certain such violations continue on a significant scale at the three Foxconn factories covered by the FLA’s original report, and at other Chinese factories supplying Apple.

The promised “genuine voice for workers” has not been established.

One of the feature commitments the FLA said it secured from Apple and Foxconn in March 2012 was to “establish a genuine voice for workers,” i.e., to create mechanisms through which workers would have genuine collective representation in the workplace and the ability to influence labor practices—as required by the FLA code of conduct and international standards. Since then, the FLA has claimed progress, but the “reforms” it has reported are so weak as to belie those claims. For instance, the FLA’s most recent verification report touted an increase in the number of workers, as opposed to managers, in the leadership of factory-level unions. According to the FLA, worker representation increased from a range of zero to 10 percent in the three Foxconn factories in June 2012 to 29.5 to 41 percent in January 2013. The FLA, however, ignores the central point: in all of these facilities, the majority of the union leadership is still composed of factory managers, thus ensuring that the union that is supposed to represent workers and press managers for better wages and conditions is controlled by those same managers. Moreover, the FLA does not assess the actual influence of these committees; even if the majority of the members of these committees are eventually workers, standard practice in China suggests it is far from clear that will they have any significant voice when it comes to decisions made at these factories. An analysis by SACOM raises plausible concerns that sham unions may be the outcome even if workers eventually lead the committees.

Contrary to what Apple indicated, the FLA process has covered fewer than one-fifth of the workers in Apple’s supply chain. Other information suggests severe labor rights abuses continue throughout Apple’s supply chain.

Apple’s February 2012 announcement stated “Similar inspections [to those of Foxconn] will be conducted at Quanta and Pegatron factories later this Spring, and when completed, the FLA’s assessment will cover facilities where more than 90 percent of Apple products are assembled.” Yet the FLA has only presented information on three Foxconn facilities, now employing 178,000 workers, fewer than one-fifth of the more than one million workers Apple says are in its supply chain. No reports have been issued by the FLA on Quanta, Pegatron or any other Apple production facility. Moreover, it is clear from independent reports that serious labor rights violations are rampant in other Foxconn factories and throughout Apple’s supply chain (a reality also revealed, in significant respects, by Apple’s own annual “supplier responsibility” report). For example, China Labor Watch released a report in July 2013 on Pegatron, Apple’s second largest supplier. It found that Pegatron violates 17 specific commitments made by Apple in its code of conduct, ranging from widespread hiring discrimination, to the significant misuse of underage workers and pregnant women, to forced and uncompensated overtime.

***

It has been 17 months since the FLA released its findings on the egregious workplace violations at Apple’s leading suppliers, and seven years since Apple first pledged to address labor rights abuses such as excessive overtime that independent researchers had found in its supply chain in China. Apple has had more than enough time to clean up these abuses. The highly-touted FLA process, announced by Apple in early 2012, bought the company a stay from criticism, as many in the media gave respectful coverage to Apple’s reform pledges. However, the aggressive communications push around the launch of the FLA remediation program also defined, very concretely and very publicly, the progress Apple would have to achieve by its self-imposed deadline in order to prove the sincerity of those pledges. Now, the deadline has passed. The pledges have not been fulfilled. The time to temper criticism, if such was ever appropriate, is now over.

For more information on the working conditions in Apple’s supply chain see AppleLabor.com.

The CLW study examined three Pegatron factories with more than 70,000 workers combined. Pegatron is Apple’s second largest supplier, and CLW gathered information by placing undercover investigators at the factories. The study describes 86 labor rights violations, including relying on scurrilous dispatch labor companies that exploit placed workers, widespread hiring discrimination, the significant misuse of underage workers and pregnant women, low wages, forced and uncompensated overtime, and harsh working and living conditions. It discusses 17 specific commitments in Apple’s supplier code of conduct that Pegatron violates.

Take the area of hours spent working. Apple’s website features apparently substantial progress made in this area, claiming that just one percent of workers in its supply chain now work more than Apple’s usual maximum standard of 60 hours a week. And indeed, available evidence suggests there has been real progress at reducing excessive work hours at some of Apple’s supplier factories, though that progress has to be assessed in the context of China’s legal work week limit of 49 hours. Moreover, the CLW report suggests that excessive overtime remains far more common than Apple has claimed. In the three factories it examines in this report the average number of hours worked each week ranged from 66 hours to 69 hours. (CLW also references a forthcoming report documenting average work weeks exceeding 60 hours in four other factories.) A partial explanation for the discrepancy between Apple’s claim and CLW’s finding is that the workers in one factory were forced by Pegatron to sign time sheets indicating they worked less overtime than they actually did.

The CLW study is a powerful reminder of the significant abuses that continue to this day in Apple’s supply chain. Apple put out a statement claiming that it is taking the study’s findings seriously. What would be really encouraging would be for Apple to report soon on how each of CLW’s troubling findings has been remedied, and that CLW or other independent monitors would be allowed to verify such claims.

In a blog post, Jared Bernstein asked about how we can stop this sort of international tax avoidance. The simplest and most direct way of taxing offshore income would be to simply end deferral entirely. Taxing the overseas income of U.S. multinationals would raise revenue, helping ease current budget pressures, and eliminate incentives for complicated tax avoidance schemes.

Not only do millionaires have low tax rates, so do many corporations, with some large corporations paying less in taxes than the typical middle-class American taxpayer. So how do large multinational corporations avoid paying taxes? The full answer is as complicated as the tax code; the short answer involves profit-shifting and deferral.

Multinational corporations shift profits from relatively high-tax countries (such as the United States) to low- or no-tax countries (tax havens). One method used to do this is transfer-pricing—the pricing of intellectual property rights and other assets when transferred from the U.S. parent company to an offshore affiliate. The problem as noted (in lawyerese) by the Joint Committee on Taxation (pdf) is a multinational’s “profits may be artificially inflated in low-tax countries and depressed in high-taxed countries through aggressive transfer pricing that does not reflect an arms-length result from a related-party transaction.” In other words, the companies put a great deal of effort into bending (just short of breaking) the tax rules regarding transfer pricing.

Once profits are offshore, they are not subject to U.S. taxes until they are brought back to the United States; that is, repatriated as dividends from the foreign subsidiary to the U.S. parent company. This is known as deferral, and taxes can often be deferred indefinitely. The Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Governmental Affairs notes that U.S. multinationals have over $1.7 trillion in undistributed foreign earnings (pdf).

Congress simply needs to change the law to end deferral. If these earnings were taxed at an effective corporate tax rate of 27 percent (approximately the U.S. effective corporate tax rate), then corporate tax revenues would be increased by over $400 billion—almost two-thirds of the projected 2013 budget deficit.

“….comprehensive [corporate tax] reform should:

• Be revenue neutral;
• Eliminate all corporate tax expenditures;
• Lower corporate income tax rates; and
• Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.”

So, the first and third prongs of this reform agenda are to raise no additional revenue and to lower corporate tax rates. The second prong (eliminate corporate tax expenditures) has some merit, for sure.

The fourth one might sound oblique, but it’s clear what Cook is arguing for here: a repatriation “holiday” for earnings currently held abroad to defer U.S. tax payments. The U.S. provided such a holiday in 2004, allowing corporations to return offshore profits with a deep tax discount. Remember the economic boom of 2004 and 2005? Neither do I, and we should expect similarly bad results should Congress decided to grant another tax holiday to corporations that have sought to defer paying taxes on overseas earnings.

Calling for this repatriation holiday is a hobby-horse for Apple. But hopefully yesterday’s news will remind policymakers that U.S. corporations don’t really need new tools to avoid paying their fair share of taxes—they’re doing just fine with the tools they have. Real corporate tax reform would end the ability of corporations to defer taxation on earnings held abroad, and wouldn’t give them a “holiday” when they eventually bring the earnings back to the U.S. After all, if there’s any group in the U.S. that can afford to cough up a bit more revenue, it’s corporate share-holders.