The 25 percent minimum wage increase comes in response to the Asian financial crisis, but critics say the company has a long way to go

October 16 1998
By Cristine Gonzalez of the Oregonian staff

In response to the Asian financial crisis, Nike Inc. announced Thursday a 25 percent minimum wage increase for Indonesian factory workers.

The monthly wage rises to 250,000 rupiah, or $27, from the government-mandated 200,000 rupiah, or $22. The increase is retroactive to October and is based on an exchange rate of 9,000 rupiah to $1.

Labor activists, who have been critical of labor practices in the Asian factories where most Nike shoes are made, applauded the Beaverton shoemakers decision but added that the company has a long way to go.

"Were pleased this is happening, said Jeff Ballinger, founder of Press for Change, a labor rights monitor based in New Jersey. But I really think when you look at the size of the increase they gave vs. inflation, its not going to keep these workers ahead of the absolute minimum living standards, unfortunately.

The increase applies to 21,000 employees, or 30 percent of Nikes total work force of 70,000 in Indonesia, according to Vada Manager, a company spokesman.

Nike, which had fiscal 1998 revenues of $9.6 billion, will split the $105,000 cost of the increase with a dozen factory subcontractors. The increase does not affect the companys practice of subsidizing housing, medical expenses and meals in many of its factories.

"Given the fact that the cost of basic commodities such as milk, fish and other foodstuffs has gone up, we felt it important to increase wages, Manager said. And were committed to constantly evaluating that.

About 85 percent of the athletic shoe giants footwear is made in Indonesia, China and Vietnam. Indonesia has been the hardest hit of those countries by declining currencies and other financial problems in Asia.

The remainder of Nikes Asian products are manufactured in South Korea, Thailand and Taiwan. The company will continue to evaluate wages in all the countries as the financial crisis continues, Manager said.

Nike had foreshadowed the move at its annual meeting last month in Memphis, Tenn., where Maria Eitel, vice president for corporate responsibility, said Indonesian pay would be raised to 15 percent more than the government minimum.

"We want to applaud Nike for taking the first step because Nike wasn't paying minimum wage until last year, said Medea Benjamin, co-director of Global Exchange, a human rights group based in San Francisco. This is a big improvement, and I think what were starting to see now is the shoe companies competing over who can pay better wages.

Indeed, competitor Reebok International Ltd. of Stoughton, Mass. announced a 20 percent wage increase in Indonesia from the government minimum earlier this month. But Benjamin said Nikes increase fails to meet her groups estimate of a monthly living wage. Last month it conducted a study that concluded 350,000 rupiah a month was necessary for staples such as rice and fish.

"What motivated them is that their stocks are plummeting, and they've got a black eye because of their labor practices overseas, she said. Its funny that it took them this long to come to their senses and recognize that dollar for dollar, this makes more sense.

Nike stock closed Thursday at $39.9375, up $1.0625. Its 52-week high was a year earlier at $52.6875.