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Apple pledge likely to boost China factory wages

Associated Press Modified: March 30, 2012 at 8:30 pm •  Published: March 30, 2012
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BEIJING (AP) — Consumers probably won't have to pay more for iPads, iPhones and other popular consumer electronics despite a Chinese company's pledge to trim work hours and raise wages for its hardscrabble assembly workers.

The paychecks have already been steadily growing even before this week's pledge, and labor expenses remain a small portion of the total bill for most gadgets made in China.

At most, the cumulative wage increases could crimp the profits of major technology companies. Manufacturers have a bigger worry in finding ways to save money on the parts that power the devices.

Nonetheless, assembly costs are likely to escalate because of Foxconn Technology Group, which assembles an estimated 40 percent of the world's electronics, including the hot-selling iPhone and iPad.

Foxconn, owned by Taiwan's Hon Hai Precision Industry Co., promised to limit hours while keeping total pay the same. That commitment will translate into higher hourly wages.

The pledge came after Apple Inc., the world's most valuable company, hired a labor auditor to review the practices and conditions in Chinese factories run by Foxconn. A report on the audit, released Thursday, evoked images of a sweatshop and said Foxconn routinely violated overtime laws by assigning its assembly-line workers to toil for more than 60 hours per week.

Foxconn's concession is expected to have ripple effects not only because it involves Apple, one of the world's most scrutinized companies, but also a major Chinese employer that cuts a broad swath.

Foxconn has about 1.2 million workers and either currently or has assembled products for a long list of technology companies including Microsoft Corp., Hewlett-Packard Co. and Dell Inc. Those companies' smartphones, computers, video game consoles and other devices have become household staples around the world.

"I think whatever Foxconn did will have an impact, certainly, on all Chinese workers in all trades," said Willy Lin, managing director of Hong Kong-based Milo's Knitwear, which makes clothing in three factories in China for European clients.

Japan's Toshiba Group, which employs 32,000 workers in China to make products such as refrigerators and TVs, said it already plans similar changes to reduce overtime work and improve working conditions at its factories.

China has long been a low-cost manufacturing center for goods stamped with some of the world's best-known brands.

But wages there have been steadily rising for years as companies compete for workers.

IHS iSuppli analyst Thomas Dinges believes China's communist leadership also realizes that the country's economic evolution requires raising the standards of living so more factory workers assembling the devices will eventually be able to buy them.

After the 2008 global financial crisis triggered a freeze in the minimum wage to help exporters compete, Chinese workers have received big pay increase over the past two years, though salaries remain paltry by Western standards.

Foxconn responded to a spate of suicides by employees in 2010 by more than doubling its basic monthly salary to 1,800 yuan ($290). That year, Toyota Motor Corp. and other Japanese automakers also granted pay hikes following a wave of strikes that had tacit government support.

China's leaders have already promised to double the country's minimum wage from 2010 levels by 2015.

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).

Beijing has tightened enforcement of wage and hour rules "because there has been a general lack of compliance — greater than in other countries," said K. Lesli Ligorner, head of the China employment group for the law firm Simmons & Simmons. "China is trying to make sure that at least at the lowest level of unskilled workers, there are greater protections in place for them."

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