Barbie, Mickey Mouse, Optimus Prime, Thomas the Tank Engine: Who Else Continues to Exploit Toy Workers?

Executive Summary

China is the largest manufacturer of toys in the world, and Guangdong Province is the top toy manufacturing region within China. In 2007, China Labor Watch (CLW) conducted an in-depth investigation of toy factories in Guangdong that supplied to major international toy brand companies. The investigation revealed labor rights violations that included mandatory overtime, wages below the legal minimum, unpaid overtime wages, unpaid insurance, harsh and high-pressure working conditions, poor living conditions, and abusive management.

Between June and November 2014, CLW carried out another in-depth investigation of labor conditions in the toy manufacturing industry, this time targeting four facilities in Guangdong, China: Mattel Electronics Dongguan (MED), Zhongshan Coronet Toys (Coronet), Dongguan Chang’an Mattel Toys 2nd Factory (MCA), and Dongguan Lung Cheong Toys (Lung Cheong). CLW’s investigation confirmed that the factories produce for some of the largest toy brand companies in the world: Mattel and Fisher-Price, Disney, Hasbro, and Crayola, including famous toy brands like Barbie, Mickey Mouse, Transformers’ Optimus Prime, and Thomas the Tank Engine. According to company information, the factories also produce toys for other major toy companies and retailers likes Target, Kid Galaxy, Spinmaster, Kids II, Tomy IFI, and others.

CLW’s 2014 investigation once again uncovered a long list of labor rights violations, most of which existed in toy supplier factories in 2007, suggesting that over the past seven years, the state of labor conditions in the toy manufacturing industry has failed to improve. And relative to other industries, conditions may even be deteriorating.

Summary of Investigative Findings

A CLW investigator entered these four toy factories as a worker, laboring alongside other workers under the same conditions. Other CLW investigators also carried out follow-up assessments in October and November 2014. Through direct experience and hundreds of worker interviews, CLW’s investigation discovered a set of 20 legal and ethical labor violations, a summary of which is below. Individual lists of violations at each factory are located in the corresponding report sections.

1. Hiring discrimination: Restrictions on the age and ethnic group of applicants were found as well as a refusal to hire applicants with tattoos.

2. Detaining personal IDs: Two factories illegally detain workers’ personal IDs during hiring procedures, one factory for 24 hours, the other for five hours.

3. Lack of physical exams: Three factories do not provide any physical exams to workers before or after being hired, meaning that previous conditions are unknown before going on the job and if a worker contracts an occupational illness, she may not have the necessary evidence to prove that it was related to work at the factory. While one factory provides physical exams, workers are not given their exam results.

4. Lack of legally mandated safety training: Chinese legal regulations require 24 hours of pro-job safety training for manufacturing workers. In three factories, workers receive 30 to 120 minutes of pre-job training, much of which is unrelated to occupational safety. The fourth factory conducts absolutely no pre-job training.

5. Workers forced to sign training forms despite lack of training: Three factories force workers to sign forms certifying that they participated in health and safety training that they never actually receive.

6. Labor contract violations: Three companies make workers sign incomplete labor contracts while providing very little time to read the contract and rushing workers to sign it. Workers must wait one to two months after signing to receive a copy of their labor contract, which is a violation of China’s Labor Contract Law. A fourth factory fails to sign any labor contracts with temp workers or student workers, and only signs contracts with formal workers after a multi-month probation period.

7. Underpayment of legally mandated social insurance: All four factories pay workers’ social insurance at a rate below legal obligations.

8. Excessive overtime work: All of the factories investigated have workers accumulate at least 100 hours of overtime a month, with one factory’s workers laboring over 120 hours of overtime a month, over three times the statutory maximum of 36 hours per month.

9. Unpaid wages: Two factories fail to pay workers overtime wages for daily mandatory work meetings before and after their shifts. The other two factories do not pay workers during mandatory training.

10. Frequent rotation between day and night shifts: One plant rotates workers between day and night shifts once a week and another plant once every two weeks. Such frequent shift rotation may be harmful to workers’ health.

11. Lack of protective equipment: All factories investigated failed to provide workers with sufficient protective equipment despite their coming into regular contact with harmful chemicals.

12. Ill-maintained production machinery: Three plants failed to conduct regular safety inspections of production machinery, based on a lack of inspection records.

13. Poor living conditions: The toy factories investigated generally maintain poor living conditions for their workers, including crowded and hot dorms with 8 to 18 people per room, five shower rooms for 180 people, lax dorm management leading to frequent theft, and fire safety concerns.

14. Fire safety concerns: One factory locks emergency exit doors, and fire escape routes are blocked. None of the factories provide sufficient fire prevention training to workers.

15. Environmental pollution: Industrial waste water is discharged into the general sewer system and a failure to separate industrial waste from general waste was found.

16. Lack of effective grievance channels: Some of the factories investigated have a complaint hotline, but the number is out of order or workers are often told by the operator to simply tell their supervisor about the problem.

17. Lack of union representation: The factories have unions, but most were in name only, failing to actually represent worker interests. One factory had a more active union, but it usually led social activities with workers. Moreover, union representatives are not elected by workers and the union chairman is a member of the company’s management team.

18. Illegal resignation procedures: Three factories require workers to obtain management approval before resigning, but Chinese law only requires workers to give notice, not apply for resignation.

19. Abusive management: Management is sometimes verbally abusive to workers. For example, a supervisor in one factory told a worker with sick parents that "even if someone dies in your family you’ll not be allowed to resign."

20. Auditing fraud: Two companies were found to use deceptive methods during social audits. In one factory, workers are made by management to hide the truth about working conditions. Another factory even creates a special area for inspection that has better conditions than its other production facilities.

These violations suggest that labor conditions have failed to improve in toy industry supplier factories over the past seven years. And relative to other industries, conditions may even be deteriorating. For instance, over the past few years, workers at electronics manufacturer Foxconn have seen an increase in overall compensation and reduction in working hours. Before calculating overtime wages, the average monthly wage of workers in the four toy factories investigated is 1,335 RMB ($218). But even after illegally excessive overtime hours, working at least six days a week in 12-hour shifts, these toy workers earn between 2,500 RMB ($409) and 3,000 RMB ($490) a month. In comparison, a worker at Foxconn, despite excessive overtime of 80 hours per month, will earn 3,500 RMB ($573) or more.

Worker Exploitation in the Toy Industry

Intense business competition and demand for cheap products drives toy companies to suppress manufacturing prices. Toy sellers, especially international brand companies, have largely moved their manufacturing base from their home countries to developing countries in Asia and Latin America to utilize cheap labor. In order to mitigate investment risk, instead of building their own factories in these regions, toy companies often contract their manufacturing to local factories via intermediary supply chain firms. Supplier factories have little choice but to accept the production price put forward by the toy company. Sometimes, in order to receive the business, factories will even reduce the cost further. But toy companies maintain strict demands on material and product quality, so labor costs ultimately become the only flexible factor. Workers, situated at the bottom of this system, are forced to bear the cost.

Multinationals are keen to benefit from this system. While it reduces their investment risk, it also enables them to distance themselves from factories that act in unethical or illegal ways. The multinationals that do not directly employ workers making their products often rely on this fact when blaming factories for poor or illegal labor conditions.

Many toy companies divide their toy orders among dozens or hundreds of factories in order to ensure that their orders in any given factory only consists of a small proportion of that factory’s total orders—usually no more than 20 percent. Toy companies will also use this as a basis for avoiding responsibility for poor labor conditions. For example, if CLW uncovers labor rights violations at a Disney supplier factory in China, Disney might respond that it only maintains a small number of orders in the plant and is unable to influence the factory’s behavior. Disney will blame the factory or could even blame other clients of the factory. If public pressure is too intense, toy companies will claim that the factory failed to respect their code of conduct and, on this basis, end business with the plant. In this way, toy companies can make a public show of standing up for workers’ rights while reducing their own risk and costs to their business. Instead of acting with a true sense of responsibility, most major toy companies will use coping and delay tactics when faced with labor violations.

In addition to maximizing profit via suppliers, some toy companies will directly manage a number of factories in order to guarantee product quality and inventory. But poor and illegal labor conditions are a universal problem in the toy manufacturing industry, and even these directly controlled factories violate workers’ rights. Despite this, the companies who manage these factories will push off responsibility for labor violations to others, claiming that it’s an industry problem.

ICTI CARE Process

The International Council of Toy Industries (ICTI) is the organization ostensibly tasked by many toy companies with laying out labor standards for toy manufacturers and inspecting for compliance with those standards. ICTI’s code stipulates that in toy factories, working hours, wages, and overtime pay must abide by standards set by law. Yet in Chinese toy factories, most workers’ overtime hours add up to more than 100 hours per month, far in excess of the 36-hour monthly overtime limit set out by Chinese law. Some factories will even use questionable wage calculation tactics to shift regular working hours to the weekend in order to reduce workers’ overtime pay (see, for example, the report on Coronet Toys).

ICTI certifies factories for compliance with its code of conduct, and it maintains a number of ranks for factory certification. Even if a factory does not comply with Chinese law or ICTI’s code, however, it will often receive ICTI’s certification. Factories that have excessive working hours, for example, might receive a certification that indicates that the factory is in the process of improving. The toy industry can forever employ this “improvement in-progress” stance to delay real reforms to labor conditions.

The toy industry has also set up a worker hotline through ICTI, but it has failed to be effective. This was portrayed in a 2010 suicide case. That year, 45-year old female worker Hu Nianzhen jumped to her death at the factory where she worked, Taiqiang Toys in Shenzhen. Taiqiang is a major supplier of Mattel Toys. A worker in the same production room said that after being yelled at by management, Hu Nianzhen went to the fourth floor and jumped to her death. Through interviews with Hu’s family members and co-workers, CLW learned at the time that Hu was yelled at by factory management for producing too slowly, and they even threatened to fire her. Management demanded that she resign on that day, leading to Hu crying in the materials room before making her ways upstairs to tragically commit suicide, leaving behind her husband and three children.

On the same day Hu committed suicide, Hu’s family contacted the ICTI hotline, but for many days afterward they never received a response. The family subsequently protested for justice outside the factory gate; the factory retaliated by calling a group of thugs who violently beat many of the protesting family members.

Seven days after her suicide, and only after media reporting of the case had increased, ICTI contacted Hu’s family.

As part of this year’s four-factory investigation, CLW’s investigator attempted to contact the ICTI hotline, only to be told by the operator that she couldn’t do anything to help resolve the complaints raised, which involved insufficient safety measures and training. Since the tragedy occurred, and as late as this year, CLW has contacted and requested Mattel to intervene in the matter, but Mattel has ultimately done nothing for Hu’s family.

In summary, ICTI’s code is not enforced, which suppresses the labor standards of the entire industry. When labor violations occur in a brand company’s supply chain, the company will push responsibility off to the entire toy industry, saying that the entire industry has the same problems. If labor conditions in the toy industry are to really be improved by brand companies, they must implement a set of enforceable labor standards.

Actionable Steps in the Toy Industry

1. Working conditions in the toy industry must be made transparent. And when labor violations occur, toy brand companies and factories must publicly respond to the problem with a detailed corrective action plan instead of long-winded explanation of its principles or how it will follow-up with investigations.

2. Guangdong Province is in the process of implementing union election reform pilots and is promoting directly elected unions across the region. Multinational brand companies which manufacture toys there must encourage the companies making their toys to support direct election of union representatives by factory workers. These representatives must represent the interests and needs of workers in carrying out collective bargaining with factory management and strengthen the respect for labor rights.

3. Factories should have an effective worker hotline. This grievance channel should be accessible to workers and, critically, be able to ultimately assist the workers in resolving their grievances and defending their rights.