Temporary workers in the electronics industry: consequences and potential solutions

The global electronics industry is one of the largest industrial sectors in the global economy. It is highly competitive, innovative, and fast changing with short product cycles. Some estimate that the industry employs the most workers and generates more revenue than any other sector in the world. In 2010, it was estimated the industry had 18 million workers worldwide. Many if not most of the jobs in the electronics industry take place in factories in developing countries that have been outsourced by companies, in particular brand firms, from developed countries. The first countries to receive outsourced electronics manufacturing factories were Taiwan, Singapore, Malaysia and Thailand during the 1970s and early 1980s. These countries were followed by the Philippines, Indonesia, China, and more recently India and countries in Eastern Europe such as Hungary, Poland, the Czech Republic and Romania. The signing of the North American Free Trade Agreement also led to the development of large manufacturing facilities in Mexico during the 1990s. Today the majority of subcontracted and outsourced electronics manufacturing is done in Asia for its low costs, an established supply base, and close proximity to key consumer markets. China is the fastest growing electronics production country in the world. It is the world’s largest computer hardware producing country and undertakes 80% of basic component production for electronic goods. More than 60% of mobile phone production is also done in China.

Consumer electronics face especially short product life cycles that can range from 3 to 18 months with a quick end-of-life- timeframe. The Apple iPhone is an example. When the iPhone was unveiled to the public in 2007 the time it took manufacturers to bring it to the consumer market was six months. Five years later, the time to market was less than two weeks.

The following graph on the sales of different Apple products illustrates the volatility or the peaks and dips in short production life-cycles.

Comparison of quarterly sales of the iPad (beginning third quarter 2010), iPhone (beginning third quarter 2007), and iPad (beginning third quarter 2007)

ipodiphoneqtr

Source: http://aaplinvestors.net/stats/iphonevsipod/

Firms in developing countries that are outsourced by electronic brands such as Apple or Hewlett Packard can face delays in orders which further shortens their production times and often leads to increased use of over-time hours and temporary workers. As will be discussed in more detail below, the use of temporary workers has negative consequences on labour conditions.

In Mexico around 60% of the electronics industry workers on average were estimated to be on temporary contracts from 2006-2007. During production peak times up to 90% of workers in some factories were on temporary contracts in 2011. In Hungary it was estimated that around 14% of workers in the electronics industry were on temporary contracts. During production peak times, individual factories have reported having up to 40% to 60% of its workforce made up of temporary workers. In these same factories, only 15-20% of the workforce was on temporary contracts during low production times.

Temporary contracts in the electronics industry have been reported to be as short as one day or one week to three months to one year. Many temporary contracts are renewed continually resulting in workers remaining a temporary worker for many years or even a decade (which has been reported by some workers in Mexico). In Malaysia, for example, many temporary workers are foreigners from countries such as Bangladesh, Nepal, and Cambodia that are employed on temporary contracts that last between three to five years.

Companies utilise temporary workers also to lower their costs of production. Temporary workers often do not receive equal pay, benefits, and treatment like permanent workers. Temporary workers receive lower wages than permanent workers (this is also the case in other sectors beyond the electronics industry). This was the case in Hungary where temporary workers received wages that were up to 30% lower than permanent workers with the same job and qualifications in the same factory. Temporary workers also miss out on receiving wage increases, lack pension payments, and often receive no compensation for job loss or for death on the job.

Temporary workers that are hired through temporary worker agencies (TWAs) can face high recruitment fees. In Malaysia, there are cases of foreign temporary workers having significant portions of their wages taken away from them in order to pay off recruitment fees to TWAs. Some workers even enter into debt after the end of their temporary contracts or have not been able to leave their jobs in order to earn enough money to repay their debts – resulting in bonded labour.

Temporary workers, particularly those with contracts from TWAs can face various violations to their rights. For example, temporary workers are often prohibited from joining a trade union. Some temporary foreign workers face serious human rights violations by having their passports retained by TWAs or companies. This has been a common practice in countries like Malaysia.

At the most basic level, workers on temporary contracts face job insecurity on whether their contract will be extended or renewed. Insecurity over continuous income presents difficulties for managing a household that require regular payment of services (electricity, school fees, etc), food and clothing purchases, and family planning. This is particularly difficult for workers who have dependents. Evidence also shows a gendered aspect to temporary employment. Women tend to stay on temporary contracts longer than men. Job unpredictability and insecurity for women can lead to conflicts at the household level for example over division of household tasks, create relationship pressures, lead to domestic violence, increased stress, and negative health implications, and force premature independence of their children. Women on temporary contracts in the electronics industry also often do not get their contracts renewed if they become pregnant, get married, or reach a certain age. This is the case in countries like China, Thailand, Indonesia, and Malaysia. During economic downturns, temporary workers tend to be the first ones fired.
Companies also invest less on temporary workers for training and job skills development. This can have long-lasting detrimental effects on young workers who miss out on receiving the necessary training and skills early in their careers that are needed throughout their working lives.

Ways to reduce the use of temporary workers in the electronics industry will likely require a multi-pronged approach. First, brand firms that outsource to suppliers can better coordinate their planning of orders in order to reduce or minimise production volatility. There is currently however very little interaction between buyers or brand firms and suppliers on the use of temporary workers. A recent study conducted by Not for Sale and Baptist World Aid Australia, found that out of 39 electronics brand companies surveyed only 12 monitored the use of temporary workers by their suppliers. More fundamentally, buyer-supplier coordination must confront the implication of short product cycles on labour conditions. Second, is to set a limit on the use of temporary workers in factories. There have been suggestions made of setting a ceiling of 30% temporary worker usage outside of production peaks by an electronics industry group and nongovernmental organisations. However, maintaining this limit continually (i.e. throughout the production cycle) would better help prevent temporary worker abuses and poor labour conditions from occurring in outsourced factories. Third, is to allow temporary workers to join trade unions so they can exercise their right to engage in freedom of association and collective bargaining for equal treatment on pay, benefits, and working conditions. Fourth, is to develop government legislation on the use of temporary workers. The European Union recently passed a Directive on Temporary Agency Work (2008/104/EC) with equal treatment clauses (though with exceptions and deviations) on working conditions, pay and other issues concerning temporary workers employed by TWAs. In the United States President Obama recently signed the Executive Order – “Strengthening Protections Against Trafficking in Persons in Federal Contracts” which prohibits the use of forced labour, including bonded labour (this would include workers that have their movement restricted by having their passports taken away from them or by other means), in any goods or services used by the US government that is procured by federal contractors and subcontractors in the US and abroad.

These issues will be discussed by companies, trade unions, and governments at the Global Dialogue Forum on the Adaptability of Companies to Deal with Fluctuating Demands and the Incidence of Temporary and Other Forms of Employment in Electronics from 9 – 11 December 2014 at the International Labor Organisation in Geneva, Switzerland.

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