In October 2022, workers at the Pou Chen Myanmar factory in Yangon producing adidas shoes conducted a strike to demand a pay increase among other demands. However, instead of negotiating with them, the factory owned by the Taiwanese conglomerate, Pou Chen Group, brought in the Myanmar military to break up the strike and fired several of the workers who participated in the strike.
On its website, the Pou Chen Group says that it is the "largest branded athletic and casual footwear manufacturer in the world". The Pou Chen Group also boasts that it can "produce over 300 million pairs of shoes per annum". At the end of December 2022, Pou Chen employed over 300,000 workers globally. Just for nike and adidas alone, Pou Chen employed close to 100,000 workers spread across five countries.
In 2022 as a whole, the Pou Chen Group earned net profits of NT$12.6 billion. In fact, for the first quarter of 2022, the Pou Chen Group posted its second-highest net profit in the company's history. In the same quarter, Pou Chen shipped about 70.9 million pairs of shoes, and the average selling prices of its shoes went up to US$19.65 per pair from US$17.79 a year before.
In other words, Pou Chen was likely charging
its buyers an additional US$1.86 for each pair of shoes it was selling. Yet, when workers at its Myanmar factory asked for a wage increase of only US$1.50 a day, Pou Chen not only baulked at it, it aggressively broke up their strike and fired workers for participating, in retaliation.
After Clean Clothes Campaign (CCC) and other partner organisations raised visibility of this case by public campaigning and organising a press conference in Pou Chen’s home country Taiwan, adidas and Pou Chen were compelled to respond. The workers’ key demands have largely not been met, with the focus instead having being pulled towards ensuring the workers who were unfairly terminated were reinstated or received full wages and severance if they chose not to return.
Why did Pou Chen’s workers demand a pay increase? Workers earning less today than they were in 2019, in real terms while cost of living has spiked
On 25 October 2022, after Pou Chen Myanmar management repeatedly refused to negotiate with the workers on their demands, the factory union conducted a work strike which 2,000 of the 7,800 workers at the factory joined. However, just three days later, Pou Chen called in the Myanmar military to suppress the strikes, and then fired 26 of the workers, of whom 16 were union members.
Since 2018, Myanmar’s legal minimum wage has not increased, something which has been prevented since the military coup in February 2021. By law, Myanmar’s minimum wage should be reviewed every two years. After the law was introduced in 2013, a daily minimum wage of 3,600 kyats (US$1.70) was implemented in 2015, and then increased to 4,800 kyats (US$2.30) in 2018. However, in spite of the escalating consumer prices since the coup, the minimum wage has not been revised.
Compounding this, consumer prices have enormously escalated. Inflation shot up and got even worse after the military coup. In June 2022, Myanmar’s inflation reached a record high of 12.93%, which was further compounded by global food prices also hitting a record high in 2022.
Accounting for inflation, this means that Myanmar’s minimum wage of 4,800 kyats is only equivalent to 3,354 in 2018 terms. Moreover, given that the kyat’s official value has fallen by 34% between May 2018 and March 2013, the Worker Rights Consortium (WRC) calculated that a worker earning 7,300 kyat in 2023 would only be earning the minimum wage of 4,800 kyats based on 2018’s exchange rate.
In other words, instead of US$2.30, the brands purchasing from factories in Myanmar would only be paying US$1.70 after adjusting for 2023’s exchange rate and would be benefitting from this “coup dividend” and profiting even more. Clearly, the brands can and should pay more.
The World Bank reported that in Myanmar, “about 40 percent of the population is living below the national poverty line in 2022”, and “in July and August 2022, almost half of all households in the country reported income losses.” As a result, “families have been reducing food and non-food consumption in response,” it further explained. The United Nations Office for the Coordination of Humanitarian Affairs estimated that about 12 million people in Myanmar are moderately food insecure, comprising about 22 percent of the population. Moderate food insecurity results from insecure access to food and can result in malnutrition and serious consequences to health and well-being.
Pou Chen’s labour union head Phyo Thida Win pointed out that the factory almost doubled its production targets, requiring Pou Chen’s workers to produce 220 pairs of shoes an hour, up from 120 pairs in 2018, however the workers’ wages were not correspondingly increased, and in fact they have decreased in real terms so that garment workers today are earning less than they were in 2018.
Given this backdrop, the Pou Chen Myanmar workers therefore organised themselves to demand for a wage increase from 4,800 kyats to 8,000 kyats (US$3.80), or an increase of only US$1.50 a day. However, as noted above, after adjusting for inflation, an increase to 8,000 kyats would still only be an increase of 700 kyats when compared to the real value of the minimum wage, of 7,300 kyats. In order to achieve higher wages, the workers first tried to negotiate with Pou Chen, but Pou Chen decided to give them shopping vouchers which could only be used at only a small range of stores, while refusing to issue a wage increase.
Calculations by the Clean Clothes Campaign East Asia Coalition (CCC EAC) found the total wage increase of 682,464,000 kyats (approximately NT$9.65 million) among all the workers if met, would only account for less than 0.7% of Pou Chen’s net profits of NT$16.6 billion in 2021. Pou Chen is more than capable of paying higher wages to the workers. Not only that, in 2021, adidas also earned a net profit of €1,492 million or close to NT$50 billion, so a wage increase for the workers would barely register on their financial statements.
While Pou Chen claims that it “strives to provide a safe, healthy and friendly working environment to its employees as well as to promote harmonious labor/management relations,” the reality is far from the truth.
Clean Clothes Campaign Calls On Adidas to Support the Wage Increase
With news of the crackdown reported widely in the media, adidas responded by saying: “adidas has objected strongly to these dismissals, which are in breach of our Workplace Standards and our long-standing commitment to upholding workers’ freedom of association.”
Under adidas’s Workplace Standards, it states that “business partners must recognise and respect the right of employees to join and organise associations of their own choosing and to bargain collectively,” as well as “publicise and enforce a non-retaliation policy that permits factory employees to express their concerns about workplace conditions directly to factory management or to adidas without fear of retribution or losing their jobs”.
On all counts, Pou Chen, a significant and established supplier of adidas, failed.
In fact, on its own code of conduct, the Pou Chen Group said that, “employers shall recognise and respect the right of employees to freedom of association and collective bargaining.”
In other words, Pou Chen not only breached its buyers code of conduct, it even acted against its own code.
After the suppression of Pou Chen’s union, adidas also said: “We are investigating the lawfulness of the supplier’s actions and we have called on Pou Chen to immediately reinstate the dismissed workers.”
However, Pou Chen refused to do so and wanted the workers to sign a voluntary resignation letter or lose their October salary. The workers declined and asked to be reinstated. But in exchange for reinstatement, Pou Chen instead wanted the workers to sign a new contract which required them to give up their demands and forbid them from joining future union strikes.
Under adidas’s Workplace Standards, it also said: “Workers have the right to compensation for a regular work week that is sufficient to meet workers’ basic needs and provide some discretionary income. Where compensation does not meet workers’ basic needs and provide some discretionary income, business partners must take appropriate actions to progressively raise employee compensation and living standards through improved wage systems, benefits, welfare programmes and other services.”
This was echoed under Pou Chen’s code of conduct as well: “Where compensation does not meet workers’ basic needs and provide some discretionary income, each employer shall take appropriate actions that seek to progressively realise a level of compensation that does.”
As such, Pou Chen needs to comply with the workers’ demands for the wage increase, and adidas needs to ensure Pou Chen pay their workers adequately.
It should be noted that even if the wage increase demand was met, based on estimates by the CCC EAC, it would still fall short of the amount needed for a basic standard of living for the workers.
CCC has also raised awareness of this case on public platforms and social media as well as via other communication channels with Adidas, to demand that Adidas abide by their Workplace Standards and ensure that workers are paid a fair wage that corresponds to their basic needs and living standards.
Under the the United Nations Guiding Principles (UNGP) on Business and Human Rights endorsed by the United Nations Human Rights Council in 2011, businesses have a responsibility to assess the human rights impacts in their operations and supply chain in consultation with relevant stakeholders, in order to use their leverage to implement effective actions in the supply chain, so as to mitigate the severe human rights impact being conducted as part of their production.
Given the clear violations committed by Pou Chen and the remedies available, adidas needs to act decisively and consistently with its workplace standards, and ensure that its business partner Pou Chen “take appropriate actions to progressively raise employee compensation and living standards through improved wage systems”.
Clean Clothes Campaign Successfully Supported Demands that Pou Chen Reinstate Its Dismissed Workers
After Pou Chen’s repeated attempts at rebuffing the workers, the CCC EAC held a press conference on 7 February 2023 in Taiwan, to expose the case to the audience in Taiwan, and to put pressure on Pou Chen on addressing the demands of the workers.
The press conference was moderated by CCC EAC board member and Director of Taiwan’s Youth Labor Union 95, Ray Cheng, and was attended by Taiwan legislator Sun-Han Hung from Taiwan’s Democratic Progressive Party. It also included CCC’s global partner, Bent Gehrt, Southeast Asia Field Director of the Worker Rights Consortium, and local stakeholders, You-Lian Sun, General Secretary of Taiwan Labor Front and member of the Taiwan Free Burma Network, and Hsin-Hsuan Sun, researcher at the Environmental Rights Foundation.
At the conference, CCC showed an estimated calculation of the basic cost of living needs of the workers accounting for rent, transportation, food, water, electricity, communications, and other expenses, and pointed out that even if the workers’ demand for a wage increase is met, it would still not be enough to meet the basic standard of living due to the soaring prices in Myanmar.
Other than the key demand for the wage increase, the press conference also made the following three demands:
- Pou Chen should immediately and unconditionally rehire the 26 workers who were dismissed at the Myanmar Pou Chen factory on October 28, 2022, and reinstate them in their previous positions, enable them to perform their previous job content and receive their previous remuneration.
- The Myanmar Pou Chen factory should recognise the union status of the Myanmar Pou Chen Basic Labour Union, and immediately start negotiations with the union on its demands during the strike from October 25 to 27, 2022.
- Taiwan's Executive Yuan should propose a draft law to ensure companies abide by their human rights due diligence obligations, and send it to the Legislative Yuan for consideration.
The publicity surrounding the press conference pushed Pou Chen to respond, even as it denied suppressing its workers’ rights.
Nevertheless, CCC was informed that after the conference, 13 of the dismissed workers were reinstated while 13 of them accepted severance pay. While the initial demands of the union have not been fully met, the actions taken successfully pressured Adidas and Pou Chen to respond, and half of the dismissed workers were rehired.
The workers are continuing to demand that Pou Chen respect their rights to collective bargaining as there are ongoing attempts at dissuading workers to join the union or to threaten them with repercussions if they do so. Workers across Myanmar are also demanding a sectoral increase to the minimum wage given that they are now earning less than they were in 2018. CCC is continuing to monitor the case and consider ways in which to support workers achieve a desperately needed wage increase
Taiwan Needs to Ensure Taiwanese Companies Abide by Their Human Rights Responsibilities
Taiwan’s government did not respond to the press conference. President Tsai Ing-wen has repeatedly said that her government is “committed to working with like-minded partners worldwide to defend freedom and democracy”. She also said that “securing Taiwan’s democracy is imperative to ensuring freedom and human rights for the collective future”.
As Taiwan’s government, and President Tsai continues to champion Taiwan’s democratic role in the region and globally, there is a need to ensure that Taiwanese companies operating overseas also play a role in enshrining such commitment to democracy, freedom and human rights, and in ensuring that the right of workers in Taiwanese companies to the freedom of association and collective bargaining is respected.
Other countries and region are taking far more concrete steps to ensure companies based within their borders operate with a respect for human rights and labour rights. For example, on 23 February 2022, the European Commission adopted a law on corporate sustainability due diligence, which seeks to hold European companies accountable to ensuring sustainable practices and a respect for human rights not only within their own companies but also throughout their supply chains globally. The law requires companies to enact policies and plans to integrate such due diligence into their operations and supply chains and to monitor its impacts and effectiveness, otherwise which these companies may be fined under the laws of their respective countries.
Indeed, under the United Nations Guiding Principles (UNGP) on Business and Human Rights endorsed by the United Nations Human Rights Council in 2011, governments should develop legislation which require businesses integrate human rights into their operations and supply chain, as well as report on human rights aspects in a transparent manner. Accordingly, the Organisation for EconomicCo-operation and Development (OECD) adopted the Due Diligence Guidance for Responsible Business Conduct in 2018 to provide practical support for businesses in the implementation of due diligence. Not only that, the guidelines also include a grievance mechanism where National Contact Points (NCPs) have been established in each of the OECD member countries, as well as other partner countries, to allow individuals and businesses to report on businesses which did not observe the guidelines and violated human rights, in order that mediation can be conducted with an aim of resolving the issues. To date, 51 countries have set up NCPs.
As a champion of democracy and human rights, Taiwan’s government needs to take the lead in Asia to implement similar legislation and grievance mechanisms in Taiwan, so as to ensure that there is a legal mechanism that holds Taiwanese companies accountable and compliant to their corporate sustainability due diligence, and the respect of human and labour rights in the regions they operate.
Since the military coup in Myanmar, the regime has declared 16 unregistered trade unions and civil society organizations to be operating as “illegal labour organizations”. The workers and unions in Myanmar who continue to demand for fairer wages and better working conditions are bravely doing so, in spite of the threats and intimidation they face both from their companies and the military. Taiwan’s government must show stronger leadership to ensure that Taiwanese companies like Pou Chen are not party to and beneficiaries of such oppression.