China is the largest producer of the denim jeans in the world . Not only is it the largest producer, but also the largest consumer of denim jeans. One of the reasons for this has been the low costs of production in China. However, over the last few years, it is felt that a large part of this advantage has been eroded as the costs of production , especially the labour costs have risen in China. While this is certainly true that the labor costs have risen in China, they need to be understood in more depth , specially in the context of denim jeans industry to understand closely how the Chinese factories work and how the labor gets wages. In this report we will try to analyse  the wage perspective of denim jeans industry alongwith a reference to minimum wages and other laws of the Chinese govt. related to the apparel industry . We will see how wages are actually given in some of the jeans factories and washing plants including their system of providing over time payments, piece rates etc. We shall cover 2 large denim jeans companies , 2 washing plants where dry and wet processing is done. Thus, this report includes :

• Detailed analysis of Chinese wage and over time standards.Minimum wages are stipulated by different provinces separately and some provinces like Guangdong have higher min. standards.
• Details of the 4 companies under purview.
• Analysis of actual wages / overtime/ piece rates being paid to workers for some important brands by these companies. Also how these rates can differ for different departments within the company.
• Normally what are the working hours of a jeans manufacturing/ washing plant.
• How a worker’s salary is calculated.
• An idea on the efficiency of Chinese workers related to denim production.
• Referential context to piece rates for processing and other deptts.

Chinese law states that a standard work week consists of
[private_special] 40 hours, totalling 174 hours per month, and requires that workers have one day off per week. Legally, overtime should not exceed 36 hours per month. Chinese regulations stipulate that overtime should be paid at a higher rate, with weekday overtime rates at least 1.5 times the average hourly rate and weekend overtime rates at double the normal rate. There are normally 11 official holidays and any overtime accrued during the 11 official holidays should be paid triple time. These regulations are almost always ignored except by some very limited companies which follow the rules by the book. Given the extent of overtime worked, this constitutes a significant non-payment of wages. Most factories seem to operate in 10 or 12 hour shifts with a meal break in the middle. After the shift workers have a second meal break, and then the overtime shift of 2-4 hours starts. It is believed that most employees worked between 12 and 15 hours per day on an average.

[Note:1 USD = 6.12 Chinese Yuan]
There are many different provincial, regional and local minimum wage regulations on the books. Shenzhen municipality and Guangdong province offer two of the highest minimum wages in China (up to ¥1,500 a month in Shenzhen ($245), for example, and ¥1,300($212) in Guangdong province). However, even within Guangdong province itself the rates vary significantly. An all too common practice in the garment industry and related manufacturing sectors is making the minimum wage the maximum wage. Workers then have to work vast amounts of overtime – for which they do not receive higher wages, but which they accept just to make ends meet. Although many international companies and media claim that labour costs in China have been on the rise in recent years, most workers continue to earn seem to find difficult to earn living wage because of rising costs of living there.. According to the Asia Floor Wage Alliance, the estimated floor wage in China in 2012 was established at ¥2,332 , without overtime. However its difficult to get these wages without overtime and very few companies in apparel industry would be giving this wage without overtime and piece rate calculations.

HOW A GARMENT WORKER’S SALARY IS CALCULATED

Normally the practice differs from company to company. Within the company too, there could be some employees getting the fixed salary while others get salary on piece rate system .Piece rate system is more prevalent and specially used more in the sewing and the processing departments. The salary on piece rate is normally more than the minimum wages which the company may guarantee and the calculation is taken as below :

Productivity (number of units) x unit price + attendance bonus + allowance – deduction for food and dormitory – deduction of social insurance (if any)

= monthly salary

We shall , in this report, look at the situation of wage payments in some of the denim manufacturing and washing units in China. as reported by various media . These units are :

1. Zhongshan Yida Apparel Ltd

Address: Shunjin Industrial Park, Banfu Town, Zhongshan City, Guangdong Province, China
Owner: Crystal Group
Website: www.crystal-yida.cn
Phone : 86-760-86503388
Fax : 86-760 -86509988
Email : service@crystal-yida.com
Estimated workforce: 4,000
Clients: Levi Strauss, H&M, Gap, Hollister, Wrangler, Old Navy, Faded Glory, Duo

About: Yida is a part of the Crystal Group. Crystal Group is a garment manufacturer based diversified multinational corporations, created in 1970 in Hong Kong. Its headquarters are in  Hong Kong with multiple offices around the world.  Group’s annual production and trade 2 hundred million garments, with annual sales of over one billion U.S. dollars. It has over 30,000 employees of different nationalities. The group has customers all over the world, including Levis, Lee, Wrangler, A & F, Gap, JCP and other world-class leading denim brand.According to the China Textile Exporters’ Association statistics, in 2011, Zhongshan Yida Garment Co., Ltd. exports to the U.S. market jeans in the industry, has been ranked No. 1 in national ranking .Over the years, the company has adhered its focus of green production,  technological research and development. Zhongshan Yida Garment Co., Ltd. has been adhering to the "people-oriented" management philosophy, committed to building a caring enterprise.

2. Conshing Clothing Group Co Ltd

Address: Conshing Industrial Park, Shapu, Xintang Town, Zengcheng, Guangzhou City,Guangdong Province, China
Website: www.conshing.com.cn
Phone : 86-20-82958888
Fax : 86-20-82958999
Email : public@conshing.com.cn
Estimated workforce: 3,000
Clients: Lee, Wrangler, Jack & Jones, Only, Phard, CLRIDE.n, Vero Moda, Lee Lang,Cabbeen

About : Conshing Group Ltd is one of the largest cowboy casual clothing manufacturers in China. It keeps sound and rapid development since the establishment in 1992. Now it has more than 3000 employees. It is a collection of designing, cutting, sewing, washing, pressing, packing and selling, with the production capability of more than 50,000 pieces per day. It includes two leading brands– cowboy casual series " Conshing" and lady fashionable series" HITWON". The sales cover more than 30 provinces, municipalities and autonomous regions in the form of franchised store and have been well received by a vast number of consumers

3. Dongguan Tianxiang Garment Co Ltd

Address: Xinji Industrial Zone, Machong Town, Dongguan City,Guangdong Province, China
Estimated:workforce: 400
Clients: Hollister and American Eagle
Phone : 86-769-22605871
Fax : 86-769-22767453
Contact Person : Li Fang He (CEO), Zou ago Yang (General Manager)
Tianxiang’s polishing department employs about 100 workers divided evenly over two 12-hour shifts, with a total of 30 more working in the fringe-polishing department, where workers use sandpaper and wire brushes

4. Dongguan Golden City Washing Sandblast & Brush Factory

Address: Huayang Industrial Park, Machong town, Dongguan, China
Estimated workforce: 300
Clients: Levi’s (also second tier subcontractor of Dongguan Gloss Mind Apparel Co Ltd, upstream and Zhongshan Yida Apparel), Yishon, Zhenzhi Jeans; 50% of total production is for export, while all products for Gloss Mind and Yida are for export .

5. Dongguan Gloss Mind Apparel Co Ltd

Address: Xialingbei Industrial Area, Liaobu Dongguan, China
Website: www.gm-apparel.com
Phone : 852-27854113
Fax : 852-27423295
Email : glossmind@gm-apparel.com
Estimated workforce: 500-600
Clients: Levi’s IHLO interviewed some 10 workers from various departments in spring 2012.

6. Weiqiang Washing Plant

Address: Zhetai Industrial Park, Baoan, Shenzhen, Guangdong Province, China
Phone : 86-20-82787531
Owner: Hong Kong enterprise
Estimated workforce: 200
Clients: Yida, Hungying Garment Factory and Baolifa Garment Factory.Weiqiang has previously been a supplier to Lee and (through Yida) to Levi’s.Over 80% of Weiqiang’s total workforce of some 200 employees are involved in the washing processes, while another 30 workers are involved in the hand-brushing and sanding processes.

Minimum wages

The minimum wage in Zhongshan, where the Yida factory is located, is ¥1,100 a month,which serves as the base salary for Yida workers. Conshing offers the same basic ¥1,100 minimum wage as Yida. All of its production line employees, except the packing department and the security guards, are paid a piece rate, so that an employee’s total monthly salary depends on their productivity and on the piece rate. The piece rate is not, however, something that workers have agreed to, and even the most experienced workers can only estimate the actual piece rate.

Conshing workers reported that the piece rate in the processing department ranged from ¥0.25 to ¥1.00. Some 60% of the garments produced have a piece rate of ¥0.25, with most workers polishing 400-500 pairs of jeans per day. However, the actual income can vary from time to depending on the orders in the factory. Workers can earn upto 300¥ a day and can go as low as 30¥ a day . Most workers in the processing department earn ¥2,000-3,000 per month, while the more experienced and efficient among them may earn ¥4,000 working around 12-15 hours a day, most days a month. The monthly salary for hand-brushing and sandblasting workers at Weiqiang varied from ¥3,000 to ¥4,000 depending on piece rates and the season, with employees vying for the higher piece rate garments. For instance, workers working on Lee products had received piece rates of ¥0.70-0.90, while those producing Levi’s products for Yida had received just ¥0.55-0.70 for similar work. So it also depends on which brand the factory is working for. Weiqiang’s flexible schedules mean that most employees work a basic eight-hour day with little or no overtime, while some of its employees are on call, waiting for large orders to come in. During the low season, some employees may end up working only 15 days per month; during high season they may work the entire month including weekends.
Tianxiang’s production workers are paid piece rates with contracts stipulating a basic minimum monthly salary of ¥1,100 in cash. However, the contract also sets a limit of 22 working days per month while in reality, during high season, employees work non-stop with no days off unless they fall sick or have urgent personal issues to attend to. Some employees receive a fixed wage. For example, quality control personnel receive a fixed salary of ¥2,500 per month with no option to earn extra piece rate wages. The working day is 12 hours, excluding meal breaks. Most of the production crew are, however, paid piece rates with monthly salaries of ¥3,000-4,000,depending on productivity and total working hours Yida’s new hirelings are usually paid on a time rate rather than piece rate because they are less efficient. Working a 60-hour week, they can earn about ¥2,100 per month. Most of the sewing, polishing and washing department employees earn over ¥3,000 per month. The most efficient and energetic workers may earn ¥5,000, but this implies a lot of overtime as well.

At Golden City, where Yida’s orders (including those for Levi’s) are now being processed by hand rather than sandblasted, strict quality control requirements have been passed onto the workers. This means that if a worker makes an error and a garment needs to be redone, penalties can reach up to ¥700 per error – which is huge – and it forces workers to be highly focused during their work time.

The salary normally made in cut/sew has been less than the finishing operations including dry and wet processing. Conshing offers higher salaries to fill the sandblaster positions. They reportedly earn a higher salary, some ¥300 per day compared to ¥100-200 for others.

Penalties :
Some of the companies impose strict penalties for wastages and errors in production . Eg in Golden City if a worker makes an error and a garment needs to be redone, penalties can be very high. Penalty for losing/destroying a Levi’s could be about ¥500. Yida fines its workers mainly for being late and which is deducted from their salary. Conshing has more stricter penalties – absence without permission could lead to ¥50-100 fine , ¥20 for messing up on the floor and many other penalties. Factories can fire workers with immediate effect if they find that the offence is serious enough.

The Chinese law is heavily loaded in favor of the industrialists. As a result the workers have limited options except to keep on working hard and hoping that the owners would pay them well. China has thus far refused to ratify ILO Conventions 87 (on Freedom of Association) and 98 (on Organising and Collective Bargaining. China removed the right to strike from its Constitution in 1982, and Chinese legislation prohibits freedom of association, with only one workers’ organisation being legally recognised by the state: the official All China Federation of Trade Unions (ACFTU). It is not uncommon for independent trade union and labour activists, and workers who engage in strikes for better working conditions, to be taken to task by the govt. authorities.

Source: Information has been taken from some  published sources as well as  industry sources. Though we have taken care an caution in checking and cross checking various facts and figures with different sources , we do not give any guarantees on the 100% accuracy of the info.  [/private_special]

(more…)