Well, yes, thanks–I had a grand little vacation. Thanks to Stef for covering the blog for me. I hope everyone treated her nicely…

I am still wading through the various stuff floating around in email and on my desk but this caught my eye: just as I was thinking of canceling my Business Week subscription (it’s gotten pretty thin, for my taste, and the higher-ups went and dropped some good friends from the staff including labor reporter Aaron Bernstein), there’s a cover story entitled “Secrets, Lies, and Sweatshops: How Chinese suppliers hide the truth from U.S. companies.”

The thesis of the story is that Chinese factories essentially keep two
sets of books to mislead the outside auditors who look into sweatshop
conditions.

For more than a decade, major American retailers and name brands have answered accusations that they exploit “sweatshop” labor with elaborate codes of conduct and on-site monitoring. But in China many factories have just gotten better at concealing abuses. Internal industry documents reviewed by BusinessWeek reveal that numerous Chinese factories keep double sets of books to fool auditors and distribute scripts for employees to recite if they are questioned. And a new breed of Chinese consultant has sprung up to assist companies like Beifa in evading audits.

The article does a good job of giving background on the scope of the problem:

CHINESE EXPORT manufacturing is rife with tales of deception. The largest single source of American imports, China’s factories this year are expected to ship goods to the U.S. worth $280 billion. American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics. But factory managers in China complain in interviews that U.S. price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism. These standards generally incorporate the official minimum wage, which is set by local or provincial governments and ranges from $45 to $101 a month. American companies also typically say they hew to the government-mandated workweek of 40 to 44 hours, beyond which higher overtime pay is required. These figures can be misleading, however, as the Beijing government has had only limited success in pushing local authorities to enforce Chinese labor laws. That’s another reason abuses persist and factory oversight frequently fails.

Some American companies now concede that the cheating is far more pervasive than they had imagined. “We’ve come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn’t per se lead to sustainable improvements,” says Hannah Jones, Nike Inc.’s (NKE ) vice-president for corporate responsibility. “We still have the same core problems.”

And…

The problems in China aren’t limited to garment factories, where labor activists have documented sweatshop conditions since the early 1990s. Widespread violations of Chinese labor laws are also surfacing in factories supplying everything from furniture and household appliances to electronics and computers. Hewlett-Packard, (HPQ ) Dell (DELL ), and other companies that rely heavily on contractors in China to supply notebook PCs, digital cameras, and handheld devices have formed an industry alliance to combat the abuses.

A compliance manager for a major multinational company who has overseen many factory audits says that the percentage of Chinese suppliers caught submitting false payroll records has risen from 46% to 75% in the past four years. This manager, who requested anonymity, estimates that only 20% of Chinese suppliers comply with wage rules, while just 5% obey hour limitations.

Now, I have to say off the bat: I don’t believe for a minute that U.S. companies really are fooled by what Chinese suppliers do. But, more important, let’s remember the context here: the labor standard says that a facility has to comply with the official minimum wage…which is somewhere between $45 to $101 PER MONTH for a 40-44 hour work week (actually, the more common workweek, as the article points out, is 60-100 hours).

So, even if the local facilities were adhering to the rules, U.S. companies are still going to realize huge profits relative to wages here–and, therein, lies the real challenge. I’m all for eliminating “sweatshops” but let’s be truly clear that the global wage machine–that would be, the machine that drives down wages–will function just fine if it plays by the rules.