Magazine article Workforce

Nike Gives Indonesian Workers a Raise

Magazine article Workforce

Nike Gives Indonesian Workers a Raise

Article excerpt

Nike Inc., a sports equipment and apparel retailer based in Beaverton, Oregon, announced in October that the organization is raising the minimum wage 25 percent for its Indonesian footwear factory workers retroactive to October 1. According to Vada Manager, a Nike spokesperson, the firm is hiking wages in response to the Asian financial crisis and because of an ongoing commitment to evaluating its pay practices. The Associated Press reports that Nike also is responding to criticisms of its labor practices.

Nike is raising the monthly wage to 250,000 rupiah-about $23from the government-mandated monthly minimum of 198,000 rupiah, or $18. Currently, about 30 percent of Nike's 70,000 contract workers in Indonesia are paid minimum wage, and approximately 20 percent earn in the 300,000-rupiah range. "We did the pricing models for how this would impact our competitors and what impact it would have upon benefiting the workers," says Manager. "We decided that the benefit to the workers far outweighed any reduced profit margins that the company will receive as a result of taking this step."

Nike's announcement follows a similar move by competitor Reebok International Ltd., based in Sloughton, Massachusetts, which raised its Indonesian wages 20 percent over the government minimum. "We have the opportunity to help workers who have been hurt by the economic downturn in Indonesia," says Doug Cahn, vice president of human rights programs for Reebok, which employs approximately 100,000 workers in Indonesia. These types of pay raises for nationals in other countries are applauded by human rights groups such as San Francisco-based Global Exchange. Medea Benjamin, a spokesperson for the group told The Associated Press: "This is great progress. Just a year ago, the subcontractors were not even paying minimum wage."

However, such practices raise red flags for others-particularly compensation experts and HR professionals with experience in compensating local nationals. "There's a whole series of reasons why you shouldn't overcompensate in low-cost markets," comments John S. Maxwell, director general of The Global Remuneration Organization, Ltd. (GRO), an organization based in Scottsdale, Arizona that does training in remuneration and benefits management. …

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