Why Nike Is the Problem, Not the Solution

By Robert Reich, Robert Reich's Blog

08 May 15

omorrow President Obama will be giving a speech promoting the Trans-Pacific Partnership. Paradoxically, he’s chosen to give it at Nike headquarters in Oregon.

Nike isn’t the solution to the problem of stagnant wages in America. Nike is the problem.

It’s true that over the past two years Nike has added 2,000 good-paying professional jobs at its Oregon headquarters, fulfilling the requirements of a controversial tax break it wrangled from the state legislature. That’s good for Nike’s new design, research and marketing employees.

But Nike’s U.S. workers make only a tiny percent of Nike’s products.

In fact, Americans made only 1 percent of the products that generated Nike’s $27.8 billion revenue last year. And Nike is moving ever more of its production abroad. Last year, a third of Nike’s remaining 13,922 American production workers were laid off.

Most of Nike’s products are made by 990,000 workers in low-wage countries whose abysmal working conditions have made Nike a symbol of global sweatshop labor.

As wages have risen in China, Nike has switched most of its production to Vietnam where wages are less than 60 cents are hour. Almost 340,000 workers cut and assemble Nike products there.

In other words, Nike is a global corporation with no particular loyalty or connection to the United States. Its loyalty is to its global shareholders.

I’m not faulting Nike. Nike is only playing by the rules.

I’m faulting the rules.

Trade agreements like the Trans Pacific Partnership protect corporate investors but lead to even more off-shoring of American jobs.

They make it safer for firms to relocate abroad – the Cato Institute describes such investor protections as “lowering the risk premium” on offshoring – thereby reducing corporate incentives to keep jobs in America and upgrade the skills of Americans.

If the Trans Pacific Partnership goes into effect American wages will be dragged down by further losses of manufacturing jobs.

All workers with similar skill levels face downward wage pressure when Americans displaced from better-paying manufacturing jobs join the glut of workers competing for non-offshorable jobs.

Jobs being lost to imports pay Americans higher wages than the jobs left behind. Government data show wages in import-competing industries (e.g. manufacturing jobs) beat those in exporting industries overall.

We can’t educate our way out of this. American workers with a four-year college degree are also highly vulnerable to job offshoring, according to a study by Princeton economist Alan Blinder.

He found that the one out of every four American jobs in finance, information technology and professional services could be offshored in the foreseeable future.

Bottom line: we need new rules for the global economy that allow Americans to win.

Instead, the Trans Pacific Partnership – which includes 12 nations, including Vietnam, but would be open for every nation to join – would lock us into an expanded version of the very policies that have failed most American for the past twenty years.

The White House says the TPP includes strong labor and environmental standards. But these are the same standards included in George W. Bush’s last agreements.

No doubt Nike is supporting the TPP. The corporations would get a tax cut on its Vietnamese and Malaysian-made goods. But even with the tariffs in place, Nike’s current expense for those $100-plus shoes is less than $10 per pair. So don’t expect that tax cut to result in cheaper prices for American consumers.

Needless to say, the TPP wouldn’t require Nike to pay its Vietnamese workers more. Nikes’ workers are not paid enough to buy the shoes they make much less buy U.S. exported goods.

Nike may be the perfect example of life under TPP, but that is not a future many Americans would choose.