BEIJING – Wal-Mart’s insistence on low prices for customers harms Chinese workers when its suppliers cut corners on health and labor standards to make the bottom line, a labor-rights group charged in a new report issued this week.


In a report that studied five of Wal-Mart’s suppliers in China, New York-based China Labor Watch said the world’s largest retailer places utmost importance on the cost of its products, which often hurts thousands workers in China who make those products. Wal-Mart wasn’t immediately available for comment due to the Thanksgiving holiday.


However, Reuters reported that Wal-Mart has launched an investigation into the five factories referenced in the report. “We take reports like this very seriously, and we will take prompt remedial action if our investigations confirm any of the alleged findings,” Wal-Mart spokesman Richard Coyle said, according to the Reuters report.

In addition to its massive supply chain here, Wal-Mart operates 250 stores in China. “This is not about a single factory, but about Wal-Mart’s inability to implement its standards,” the group’s executive director, Li Qiang, said in a news release that called Wal-Mart’s pricing structures “unsustainable.” “Wal-Mart leverages its massive product orders to purchase goods at low prices, and workers suffer the financial burden,” China Labor Watch’s news release said.


China Labor Watch found multiple violations of Chinese labor law in Wal-Mart’s supplier factories, including unpaid overtime, with workers in all five factories studied putting in at least three hours of overtime per day to complete holiday orders. Some workers said they had their wages illegally withheld for failing to meet production quotas, the China Labor Watch report said.

“Workers’ low wages are further undermined by excessive fines and unpaid days off or maternity leave, and some workers cannot even purchase social security,” said China Labor Watch.

The report underscores ongoing concerns about massive supply chains in China. Retailers that conduct sourcing and manufacturing with contracted factories here often face huge hurdles in monitoring contractors for adherence to labor, safety and environmental codes. The workers in question do not work for Wal-Mart, but the company’s demand to keep costs low shaves already thin profit margins.

While thousands of factories have been shuttered amid the global financial crisis, the working conditions for those who remain may have worsened amid the downturn. Workers earlier this fall in Dongguan, China’s manufacturing hub, told WWD that more factory employees throughout the Pearl River Delta are now working without required labor contracts because factories want to save money and pay cash with no benefits.

Wal-Mart earlier this year pledged to hold its suppliers in China to high standards, vowing to end its supplier contracts with factory that did not meet strict codes of compliance on labor and environmental laws. But China Labor Watch said its investigation showed the new promise has not worked.


Such promises, it said, much be backed with financial commitments to improving factory conditions, which might mean higher prices for customers in the end.


“The case of Wal-Mart, the world’s largest retailer, shows that corporate codes of conduct and factory auditing alone are not enough to strengthen workers’ rights if corporations are unwilling to pay the production costs associated with such codes,” the group said in its report.

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