Just Pay It: Nike Creates Fund for Honduran Workers

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It's no secret that the global economy hasn't exactly been a boon to the labor movement. But globalization can be cruelest to the Third World employees it was supposed to raise out of poverty. As developing countries compete for investment from large foreign corporations, they all too often push workers' wages, benefits and rights so low that many of them ought to be called sweatshop nations today instead of banana republics.

Case in point: In January 2009, 1,800 laborers lost their jobs in Honduras when two local factories that made shirts for the U.S. sports-apparel giant Nike suddenly closed their doors and did not pay workers the $2 million in severance and other unemployment aid they were due by law. Following proper public-relations protocol, Nike lamented the situation — while insisting that it wasn't responsible for the actions of the plants it contracts. Nike did not match its regrets with dollars; the company was, in effect, taking advantage of the cover that the rules of globalization tend to afford so many companies like it today.

This week, however, Nike finally tossed that disingenuous defense like a worn-out pair of Air Jordans. Under pressure from fair-labor groups, the Oregon-based company announced on Monday an agreement with one of Honduras' largest trade unions to create a $1.54 million "workers relief fund" for the factory employees laid off in 2009. Under the deal, Nike says it will work with its suppliers in Honduras to get still unemployed workers vocational training and hiring priorities as jobs open up. The value of Nike's total contribution to the Honduran workers will probably be more than $2 million. But what matters more than the money — petty cash compared to Nike's $19 billion in revenues last year — is the precedent, one that could help make globalization a fairer game. "This is a significant departure from past industry practice," says Scott Nova, director of the Worker Rights Consortium in Washington, D.C. "It's a testament to these workers' courage."

True, but it was due as much if not more to the business pressure applied on Nike by groups like the Worker Rights Consortium. They convinced scores of U.S. universities whose athletic programs and campus shops buy Nike shoes and clothes — and which effectively make their students walking billboards for the corporation's products — to threaten cancellation of those lucrative contracts unless it did something to rectify the Honduras mess. Another labor watchdog, United Students Against Sweatshops, staged demonstrations outside Nike shops while chanting "Just Pay It," a play on Nike's commercial slogan, "Just Do It."

While it's good to see that college campuses haven't lost their idealism, the Nike agreement is in reality just a first step in addressing a problem that "costs workers around the world hundreds of millions of dollars every year," says Nova. A big question now, for example, is whether Nike will require that all its subcontracted factories worldwide set aside escrow funds to make sure that severance and unemployment obligations are met. On Tuesday, Nike would only refer to its corporate statement, which said it hoped to "develop long-term, sustainable approaches to providing workers with social protection when facing unemployment."

Even if Nike was to mandate escrow funding or some similar economic backstop in countries like Honduras, there's no assurance that other companies would follow its lead. And it's hard to see Congress passing legislation requiring U.S. corporations to adopt a practice that only benefits foreign workers. But Nova argues that Nike's move is important as it "will give labor advocates a stronger basis in the future. They can point to this precedent now and say that no less a brand than Nike agreed that companies have an obligation to do more than just cajole these factories."

Someone also needs to cajole governments like Honduras' into enforcing their own labor laws. Technically, Honduras, like so many other developing countries, requires companies to provide unemployment aid like severance. But the two Nike contract suppliers in this case, Hugger and Vision Tex, were apparently able to flout that code as easily as a military coup was able to oust then Honduran President Manuel Zelaya last year.

Again, the root of the problem is globalization's unwritten code: politicians in impoverished countries like Honduras, which has a near 70% poverty rate and whose economy is run by a small clique of wealthy families, get elected by writing strong labor laws, but they're convinced that they get foreign investment by allowing weak enforcement of those laws. Nike has at least made a strong start in correcting that perverse principle.