Human cost behind bargain shopping

Dateline NBC

By Chris Hansen and Richard Greenberg

Americans love a deal, and these days, thanks to the fast-paced global marketplace and big discount retailers, products are better and cheaper than ever. But what price do people in faraway places pay so Americans can get their bargains in stores like Wal-Mart? One kind of women's sports pants, for instance, is sold under a brand owned by Sara Lee. Like most clothes they're foreign-made. In this case, they are made in Bangladesh. It's no secret to shoppers that cheaper labor is why the $12.84 pants are made overseas. Consumers have come to expect those low prices to make ends meet.

Dateline investigates what's behind the bargains American shoppers count on. With our hidden cameras we'll find out who sews those pants, and under what conditions. We'll see how problematic it can be for American companies to monitor the working conditions in foreign factories they don't control, where factory owners are under pressure to keep costs down, while still treating workers fairly. We also invite two of the shoppers we met at Wal-Mart, Vilma Matera and her sister-in-law Peggy Rocciola, to take a look at the results of our investigation.

Bangladesh, where those pants are made, is halfway around the globe, and to an American it can seem a universe away. It's a mostly Muslim country next door to India, where a handful of rich are surrounded by masses of poor. It's the most densely populated country in the world, a land overwhelmed by seasonal floods and frequent disasters.

Life there can be harsh. Jobs are hard to come by and the few there are pay very little. The average income is only $400 year. The biggest industry by far is the garment business, which employs nearly two million people and exports more than $5 billion of clothing a year, much of it to American companies like KMart and GAP. The top customer is Wal-Mart.

Twelve years ago, American companies were embarrassed by a Dateline expose about small children in Bangladesh making clothing for the U.S. Market. They vowed to stop that practice. And in fact, human rights groups and American companies agree that child labor is no longer a major problem in Bangladesh's garment factories, and Dateline found no sign of it either.

Kevin Burke heads the American Apparel and Footwear Association.

Kevin Burke: “For the amount of time that we're talking about here, we've made tremendous strides.”

But keeping children out of factories is only part of it. American companies now demand that foreign manufacturers follow strict rules, codes of conduct, and they even send in inspectors to check up on them.

Burke: “Making sure there's proper ventilation and heating, that people are getting breaks, that they're paying the workers the minimum wage based upon the laws of that country.”

But are American companies getting the true picture? Are all the rules really being followed? To find out, we create a fictitious company called Hansen Fashions, complete with our own Web site. And with our hidden cameras, we present ourselves as executives looking to do business in Bangladesh.

We ask Charles Kernaghan to act as a clothing buyer for our company.He's a labor activist who's done battle for years with American retailers over working conditions in foreign factories. In conjunction with Kernaghan, we call many factories, among them, companies being monitored by local labor groups for poor working conditions.

Our first stop is a large factory that's done business with several American giants.

Factory Manager: “We work for Sears, Wal-Mart, Kohls.”

We've brought along a denim shirt and ask if they could make one like it for our company, Hansen Fashions, to sell in the U.S. We explain that like other American companies we're not just looking for the lowest price.

Kernaghan: “Of course, like you, we have a certain reputation in the United States which we have to guard.”

We want assurances that their working conditions are humane and that they comply with those codes of conduct required by U.S. companies.

Kernaghan: “We're certain that the factory is in a hundred percent compliance, you know?”

Factory Manager: “Hundred percent. That's what I say.”

To try to prove their point, they take us on a factory tour. We see American companies' codes of conduct posted in a public area. And they say they go further. They have a medical office for employees, though on the day of our visit, the doctor isn't in. On the factory floor, they assure us they don't overwork their employees.

Dateline: “So how many hours normally do they work?”

Factory Manager: “Eight hours, 8 to 5 --

Dateline: “Really?

Factory Manager: “-- with one hour lunch break, plus two hours' overtime up to 7 p.m..

That's 10 hours a day. Based on a six day work week, that’s a total of 60 hours, the maximum allowed under Bangladesh law and most corporate codes of conduct.

At a second factory where we take our denim shirt, we hear the same kinds of promises about working conditions. And this executive boasts about his relationship with his employees:

Factory Executive: “They are very much happy with the management. Yes they love us.”

Dateline: “This is Fila?”

Factory Manager: “Yeah, yeah, for America.”

Most of what they make, they say, is headed for the U.S. They make NFL sportswear. At the second factory, we ask what kind of a deal they can give us on our denim shirt.

Factory Executive: “Five point five [$5.50]. It is final. No bargaining.”

$5.50 per shirt is less than half what it would cost to make at a factory in the U.S. We tell him we're interested, and the next day we return, saying we're ready to close the deal, but only if he'll agree to sign a basic code of conduct. The terms include what many American retailers ask for, to obey local laws by guaranteeing one day off per week and a maximum of two hours overtime per day.

And he signs.

We also want to make sure he's paying his employees at least the minimum wage, which in Bangladesh is extremely low, less than 20 cents an hour. So we're stunned when he says he pays 10 times that amount.

Factory Executive: “$2 per hour.”

Kernaghan: “Per hour, $2, here?”

Factory Executive: “Yes.”

$2 an hour sounds much too high to be true. We wonder if he understands us, so we ask again. He doesn't know that over a two-week period, we've been monitoring his factory with our hidden cameras. We've been documenting the real working conditions and speaking with some of his workers.

It turns out not all of his promises were true, something we'd discover only with our hidden cameras and from candid conversations with some of his employees who were introduced to us by a local labor group, like this young woman:

Masuma: “My name is Masuma. I work for the Wills Garment Company. I am a sewing machine operator.”

Masuma says she's around 21. She doesn't seem to know for sure. Like most women here she's barely literate.

Masuma: “I went to school for first grade. Then my parents could not afford to keep me in school any longer.”

On a typical day, she heads to the factory by 7:30. She has to be at her sewing machine by 8 a.m. sharp.

Masuma: “If I am one minute late, my supervisor scolds me and gives me a hard time.”

Remember those striped pants that sell for $12.84 at Wal-Mart? It's Masuma who sews the stripes on them. And she sews them, hour after hour with only a few breaks sitting on a stool that has no back.

Masuma: “I have to sit in front of the machine the whole time. I can't move. I can't even go to the bathroom without my supervisor's permission. After sitting for so long, I feel pain throughout my body.”

Conditions like these might seem unacceptable to Americans, but they're common in a poor place like Bangladesh. Extreme heat for instance. Factories like Masuma's aren't air conditioned, and even in a well-ventilated factory, we found temperatures can easily exceed 90 degrees.

Masuma says she has a quota: 80 stripes an hour. That means more than one stripe every minute, and they have to be perfectly straight. If she doesn't meet the quota, she says, she has to work extra for no pay. The factory director said his employees work a maximum of 10 hours a day and get out by 7 p.m. But Masuma told us her typical day ends later than that.

Masuma: “Usually I work until at least 8 pm, but often they will keep us and make us work until 10 p.m.”

And she says she frequently has to work Fridays, the Muslim holy day, which by law is supposed to be a day off. On average, she says she works more than 70 hours a week. At least 10 hours more than allowed by the local law. It's not hard to confirm that many factories exceed that limit.

Kernaghan: “You can see them working right up here.”

Just take a drive at 10 p.m., says labor activist Charles Kernaghan.

Kernaghan: “It's 10 o'clock at night and they're still going.”

We see lights on, people still at work at factory after factory, including the one that happens to be the first factory we visited as Hansen Fashions. A few days earlier they told us they don't overwork their employees. Yet on the night we check, quitting time is three hours later than they said, 10 p.m., and the workers are being frisked to make sure they haven't stolen anything.

If you think 10 p.m. is late, try 1 a.m. That's when video was taken with our hidden cameras inside a factory that makes clothes that end up at KMart and Wal-Mart. The workers, who are racing to meet a production deadline, have been on the job since 8 a.m. the previous morning and they won't get out until 3 a.m.

Kernaghan: “So they'll be working 18 to 19 hours straight and they have to be at work the next day at eight o'clock in the morning.”

And one man, introduced to us by a local labor group, asked us to protect his identity. He is a supervisor at a large factory in Bangladesh. He says that when American companies send inspectors to check on the codes of conduct, they don't always get the real story because some workers are coached to lie.

Factory Supervisor: “You're supposed to say that this factory is closed on Fridays and that no one works here at night. If anyone tells the buyer otherwise, then the company will fire them.”

He says they go so far as to make up phony records, including time cards showing a normal 10 hour shift ending at 7 p.m., even though the workers themselves say they were on the job until much later -- something he says they don't want American companies to know.

Factory Supervisor: “They hide the extra overtime from the buyer. The reason is that they want to show the buyer that they treat the workers well and follow all the rules.”

And when they do work those extra hours of overtime, sometimes into the middle of the night, many workers complain that they are short-changed, not paid all the additional wages the local law requires. Some are so exhausted during the day they grab sleep whenever and wherever they can, even at their machines. And some say they face verbal and physical abuse on the job. One man says when he took too long to return from a break, his boss struck him with a shoe.

But the big question is, how much are workers really paid? It turns out starting wages can be as low as 10 cents an hour. That was something the manager at that first factory acknowledged.

Factory Manager: “About 10, 11, 12 cents.”

Kernaghan: “And like a senior operator?”

Factory Manager: “Roughly about 19 cents.”

But remember, Masuma's boss told us he pays his employees two dollars an hour. If that was the case, Masuma would be taking home an astonishing $140 a week. What does she say?

Masuma: “If I earned that kind of money do you think I would be dressed like this? I would have much nicer clothing.”

Masuma says she's paid more like 17 cents an hour, a perfectly legal wage here, and more than many Bangladeshis earn. So for a 70-hour week, she brings home about $12. What kind of life does that buy?

Masuma showed us her home, two small rooms where she says she lives with her mother, two year old daughter, and a couple of other garment workers. There's no table. She makes and eats breakfast on the floor. Their only water comes from a pump they share with neighbors. After paying the rent, Masuma says she cannot afford very much. Her typical diet is rice and lentils. Fish and meat are too expensive, she says. One chicken costs more than she's paid for an entire day.

Masuma: “Sometimes we go without food.”

And sometimes, when the heavy rains come and there are floods, they have to go without a home.

As bad as she has it, Masuma is better off than many of the people she works with. A bamboo walkway leads to a slum built on stilts where many garment workers live over a swamp, and where they sleep on the floor. More than 30 families share one cooking area.

What do our bargain hunters make of it all?

Vilma Matera: “That's slave labor.”

Hansen: “Slave labor?”

Matera: “Absolutely slave labor.”

It’s slave labor perhaps by American standards, but in Bangladesh, where 40 percent of the population lives in abject poverty, Masuma's earnings are higher than average. Regardless, Masuma says she's too tired to dream of a better life. or even think about something as simple as where the clothes she makes end up.

Masuma: “I don't know anything about America, except that it's a faraway place.”

But that's about to change. Masuma is about to make a journey into a new world, where she'll follow the fruits of her labor to their destination and find out just how much Americans pay for the clothes she makes.

Masuma says she's barely surviving, but a spokesman for the garment industry in Bangladesh says that, as poor as Masuma and her coworkers are, it could be a lot worse.

Lutfor Rahman: “If they were jobless, then what standards they will maintain? What standards they can maintain? Then no standard at all.”

Lutfor Rahman, who has a couple of factories of his own, says that the industry is doing what it can, setting up health clinics and a model private school for workers' kids. But he says it's hard to do more when American companies are constantly pressing for lower prices.

Rahman: “We are trying to reduce price, at least to keep the factory running.”

He admits factory workers sometimes do have to put in extra long hours, for instance when deadlines are looming and fabric deliveries are late. They have little choice, he says, meet the deadline or American companies could take their business elsewhere.

Rahman: “Simply, that will be a disaster.”

When we were undercover as Hansen Fashions, an executive told us that he wanted to pay higher wages, but he claims Wal-Mart wouldn't agree to pay even a penny more per garment.

Executive: “A few years back, I told Wal-Mart, "Give me one cents more a piece, one cent. I will use that money for these poor people.’ He says, ‘No, give us two cents less.’"

What would a worker like Masuma think if she could see just how much the clothes she stitches sell for? We got a chance to find out.

After she was interviewed for this report, Charles Kernaghan's organization decided on its own to bring Masuma to the United States as part of the group's campaign to improve working conditions overseas. When she arrived, we asked Masuma, along with a translator, to come with us to a Wal-Mart in Connecticut.

Translator: “She's amazed at the size of the shop from the outside. So she's like really excited about going in.”

Inside, Masuma can't believe there's so much for sale, all under one roof.

Translator: “This one?”

And then, in the women's clothing section, a familiar sight: clothes she made.

Translator: “She has done this.”

Hansen: “So you have actually sewn these stripes on these pants in Bangladesh?”

Translator: “Yes.”

She's curious about everything, but more than anything...

Translator: “She wants to know the price.”

Hansen: “$12.84, so $13.”

Masuma: “Oh my.”

She's shocked because the price of the pants is equivalent to one week's pay for her.

Translator: “She is like, what can I think? What can I say? This is beyond anything I'd ever thought of.”

She says the price of the pants leaves her feeling taken advantage of. If she was paid 25 cents an hour instead of 17, a 50 percent raise, she says she could lead what she considers a decent life.

Translator: “So these few hundred taka would mean I could have a diet that consisted of more than lentils and rice, I could buy a few good vegetables, fish. I could buy more food products for my daughter.”

We wondered what a shopper at this store would think about Masuma's situation, so we stopped one and introduced her to Masuma. Would she be willing to pay more for her clothes so Masuma could earn more?

Hansen: “What do you say to a woman like Masuma who makes pennies an hour?”

Customer: “I wouldn't settle for it, but again, what’s the flip side of the coin, you either take -- it's like I have to take what I get or I don't eat.”

Hansen: “But here's the deal: This stuff is very inexpensive here, because she only gets paid pennies an hour.”

Customer: “I know, but like I said, I'm doing the reality part of the deal here.”

Hansen: “It is what it is?”

Customer: “It is what it is, you know. I can't tell her, ‘Don't put the stripes on the pants.’"

While she feels for Masuma, she says her budget is tight. She cleans houses for a living. It’s the debate over globalization in its simplest form.

Hansen: “So if this was 25 cents more, though, would you pay it?”

Customer: “You notice they had some for $18 and I passed the $18 one.”

Hansen: “So this means a lot for you that you can buy these products for this price. You're counting your pennies as well?”

Customer: “Of course I have to, because I got a mortgage to pay and a car payment and everything. You know, I feel sorry for people, but what can I do?”

Outside in the parking lot, Masuma lashes out at her situation.

Translator: “They make us work so hard, and they cheat us so much and we're human beings. I'm not an animal. I'm a human being. Of course I'm angry. This is really shocking.”

Then her anger turns to tears.

But she might take heart from other shoppers. After seeing some of what we found in Bangladesh, Vilma Matera and Peggy Rocciola say they would be willing to pay 25 or 50 cents extra for a pair of pants.

Vilma Matera: “And I would still have a bargain.”

Hansen: “Are we, as consumers, partly to blame for their plight because of the demand we've placed on retailers to keep prices low?”

Peggy Rocciola: “I would say yes. I would say yes, to be truthful. We're all looking out for ourselves.”

Wal-Mart declined to be interviewed on camera, but in e-mails to Dateline the company says: "We strongly believe that our business… and the wages and benefits we provide have helped improve the lives of many thousands of workers in many parts of the world."

As for the allegation by that factory owner who told us Wal-Mart insisted on paying two pennies less instead of one penny more for his goods, Wal-Mart says "It is a totally unsubstantiated claim that should be given no credibility," and Wal-Mart says it "discusses prices with suppliers in a responsible manner that takes many factors into consideration."

The company also says it considers itself an advocate of lower prices for the customer and makes no apologies for driving a hard bargain with its suppliers. A spokesman adds that Wal-Mart inspects more factories than anyone else, more than 12,000 a year worldwide, including Masuma's factory, The Wills Group. Wal-Mart says it inspected the factory in 2004 and "identified numerous violations of standards" and "worked with the factory to ensure better performance."

The company says "ensuring proper workplace standards is an ongoing challenge" and it will "discontinue business with factories that will not take corrective action."

Enforcing codes of conduct is the responsibility not only of retailers like Wal-mart, but also of companies that supply products that end up in those stores. Apparel maker Sara Lee, for instance, which owns the brand of pants Masuma makes, says it, too, sent inspectors into the Wills factory, and the inspectors found "the plant meets appropriate standards.”

The Wills Group itself did not respond to our request for comment. The other factory we showed, The Rising Group, says it abides by all laws on working hours and conditions.

Back in the U.S., Kevin Burke represents Sara Lee and hundreds of other American apparel makers. He says the inspection process has made things better, but he acknowledges it's not foolproof.

Hansen: “In Bangladesh, the work week is supposed to be 60 hours, but when we were there, we saw factories routinely violating that. If we can find that, why is it so difficult for American companies and their representatives to find that?”

Burke: “The goal is to make the workplace a better place, so you don't find conditions like you describe. Now, are there conditions out there? Of course there are. Do we like that? No, we don't. We want to see that eliminated.”

Burke says over the long haul, American business is good for poor countries like Bangladesh.

Burke: “The fact is, we're creating--helping to create jobs that hopefully over time will increase their economy. Now, this doesn't happen overnight. This is a change that goes over a generation or two.”

But for those living in Bangladesh, a generation is a long, long time. And the struggle could get even worse. Competition from China may be forcing some factory owners in Bangladesh to lower prices even more and that means workers pay might not be going up any time soon.

In the meantime, since we first met Masuma, she's started a new job as a labor organizer, trying to help improve the lives factory workers in Bangladesh, and she continues to keep some hope alive for the future.

Masuma: “We want the jobs. It's not that we don't want work in Bangladesh, but we want to be treated with respect.”