I told my students in my cultural diversity class here in Suzhou, China that I never owned an iPhone or an iPad. Those Apple devices make my students lives so much easier especially when it comes to social media and their school work.
These Apple gismos certainly have become extremely popular throughout the world including here in China. Most Americans are unaware of the fact that Apple’s products are assembled in China. My students quickly brought that fact up in my class last week.
The Chinese wages have been steadily increasing over the years as well but consumers throughout the world probably won’t see an increase in the price of the popular Apple products. The company that assembles the Apple devises in China also pledged to trim their workers hours and continue to raise the pay for the hardscrabble assembly workers.
You would think Apple would be concerned over this news but due to negative news stories on the harsh working conditions in the factories where the Apple products are being assembled. Apple is pushing hard to bring about positive changes in those factories in order to make the working conditions better for the assembly workers. Not to mention it would be a good Public Relations move on Apple’s part to make those changes a reality.
Wages have been steadily growing in China since 2010 due to China’s pledge to raise the standard of living for all its workers. Labor expenses though make up a very small portion of the total bill for the Apple products due to the fact that they are made in China.
Most manufacturers that use Chinese workers are less worried about the labor costs than they are about the cost of the parts that power their devices.
The Foxconn Technology Group assembles 40 percent of the world’s electronics including Apple’s iPhones and iPads. Foxconn is owned by Taiwan's Hon Hai Precision Industry Company they promised to limit the Chinese workers hours and keeping the total pay the same. This will give the assembly workers a higher hourly wage.
The second most valuable company in the world Apple, Inc., was forced to hire a labor auditor to review the labor practices and treatment of the Chinese workers in the Foxconn factories. The auditor’s report claims that the Foxconn factories are sweatshop assembly plants that force the workers to work more than 15 hour shifts and over 60 hour work weeks to keep up with the global demand for the electronic goods they are assembling.
The negative treatment of Foxconn’s workers is also having a ripple effect on Apple’s public relations image because of the company’s growing dependence on Chinese labor. Foxconn has also been assembling for a growing list of other technology companies including Microsoft Corp., Hewlett-Packard Co. and Dell Inc. These companies’ electronics have become household staples throughout the world. Foxconn currently employs 1.2 million workers and with their pledge to cut the workers work hours they intend to hire more assembly workers to supply the global demand for the electronic goods.
China is known for being a manufacturing base for the world’s best known brand names and the rising wages in china doesn’t seem to be negatively affecting the global demand for the Chinese workers. It is rather helping China increase the workers standard of livings. The Chinese Government also realizes that raising the standard of living for the average Chinese worker will impact the Chinese economy in a positive way because the workers will spend more money on Chinese goods.
The basic monthly salary for a Foxconn worker is 1,800 Yuan ($290) that is more than double what the Chinese workers made in 2008. Foxconn’s pay increase had a ripple effect on other manufacturing companies in China as well. Toyota Motor Corp. and other Japanese automakers also granted pay hikes following a wave of strikes that had tacit government support. Japan's Toshiba Group, which employs 32,000 workers in China who make products such as refrigerators and TVs, is planning similar changes to reduce overtime work, improve working conditions and increase their workers hourly wage at its factories.
China’s Government also promised to double the minimum wage in China by 2015 to keep the standard of living on the rise. The minimum wage in Shanghai, one of the world's most expensive cities, is about 1,200 Yuan ($200) a month after an increase of more than 10 percent last year.
The northern city of Tianjin raised its minimum wage to 1,070 Yuan ($175). China is trying to make sure at least at the lowest level of unskilled workers that they have greater protection in terms of earning a living wage. In many cities throughout China there is a lack of compliance with the minimum wage laws which China is now rigorously enforcing.
These wage increases have not dented the profit margins for the world’s electronic companies nor has it resulted in higher prices for the products being produced. The reason being the labor costs make up less than ten percent of the total bill. Apple pays less than $8 for the assembly of a 16-gigabyte iPhone 4S and $188 for its components. The phone sells in the U.S. for $649, though wireless carriers offer them at a subsidized $199 with a two-year service contract.
Apple could well afford to absorb a Foxconn wage increase by keeping the workers’ pay the same and cutting the workers work week from over 60 hours to 49, it would result in about $2 more to have an iPhone made. Apple makes hundreds of dollars in profits per iPhone.
Apple's latest iPad an extremely popular device worldwide costs slightly more to make than the iPhone. The tablet computer however is less expensive to assemble. The estimated parts cost roughly $325 and labor adds just $4 more to the bill. For most electronic companies the rising cost of the electronic components is a much bigger worry than the company’s labor costs.
Technology is constantly advancing and each new gadget seems to catch the imagination of the consumer. But most consumers know very little about their gadget’s components or how the electronic devices are assembled. Apple understands that the consumers are more concerned about the quality and the cost of the product rather than where and how the products are being made.
The world media outlets however have brought wages, workplace conditions, and the environmental impact of factories in Asia to the world stage. Scathing criticism from human-rights groups over the harsh conditions being forced on the Asian workers made many U.S. and European companies’ hyper sensitive to the media reports. Apple is now being faced with similar criticism over its dependence on Chinese factory workers working under harsh conditions. Apple however has the global clout to bring about change for the better in the Foxconn assembly plants.
Apple and other U.S. technology firms will be able to pressure Foxconn and other Chinese manufacturers into absorbing the higher labor costs on their own. As leverage, the U.S. firms can threaten to move the assembly work elsewhere, such as Mexico or Taiwan.
Many factory owners though especially in southern China have outsourced their manufacturing companies to Vietnam which has become a concern for the Chinese Government.
The outsourcing of U.S. manufacturing jobs to China has certainly had a negative impact on the American economy. It doesn’t look as if those manufacturing Job’s will ever return to the U.S.
If more manufactures in China outsource to Vietnam it will have a negative impact on the Chinese economy just as the outsourcing of manufacturing jobs to China had on America. The Chinese Government is also concerned over the negative impact the outsourcing to Vietnam will have on China’s economy.
Chinese workers especially the workers in the Foxconn factories who are getting higher salaries are worried that they will be unemployed. They are fearful that Foxconn will move its factories to Vietnam or elsewhere so that it won’t have to pay its workers those higher wages. The Chinese Government understands though how important it is to raise the standard of living for the country’s low wage workers but at the same time it doesn’t want to lose its country’s labor force due to outsourcing.
The changes that Foxconn promised to make in order to make the working conditions more bearable for its assembly workers is a good public relations move for their company and a descent moral choice as well. If these changes are actually implemented Apple will most likely take most of the credit in order to gain a public relations victory.
The bottom line though is that the Foxconn assembly workers will gain the most from the increased wages. Not to mention the positive effects on their personal lives from the cut in their overtime hours and this will most likely help bring about better working conditions in the factories.
Only time will tell though if Foxconn does in fact follow up on its promises to bring about the change for the better. My students here will most likely keep me informed on the continuing outcome of this story. They will also continue to encourage me to get an iPad so that I won’t have to lug my laptop computer around with me.
Since I’ve been living in China I have seen a huge rise in China’s standard of living especially in Suzhou and Shanghai. I believe a part of the rise in the standard of living is due to the enforcement of the minimum wage laws. As the minimum wage continues to be raised so too will the standard of living for most people in China and that of course is a good thing.
I feel the minimum wage in the U.S. should also be raised. I feel that the standard of living for the middle class in China is much higher than most of the middle class in the U.S. that is just from my own personal experience here in China.
Always with love from Suzhou, China
Thomas F O’Neill
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