Apple’s labor costs should be higher

I don’t really know what conditions are like in the factories where Apple’s products are assembled in China. On one hand, you have Apple’s supplier responsibility page. On the other hand, you have suicides at Foxconn factories where Apple products are assembled.

Today I noticed some manufacturing estimates for the iPhone 5. Apple is rumored to have placed an order for 15 million iPhone 5s from Pegatron, a manufacturer with factories in China. Apple sold 18.65 million iPhones last quarter. I can’t help but wonder how much better working conditions would be if Apple spent $5 more per iPhone on labor costs. Apple has at least $60 billion in cash and had profits of around $6 billion last quarter. Spending $5 more per iPhone would cost them less than $100 million per quarter.

I realize that Apple doesn’t set the pay rates in its suppliers’ factories, but of course they can put anything they want in their supplier compliance agreement. They could limit hours per week worked or require manufacturers to offer paid vacation. I wonder what Apple’s costs would look like if they required overseas manufacturers to comply with all U.S. labor laws except our minimum hourly wage?

The excuse has often been made that low margins in the electronics business lead to the poor working conditions in overseas factories. Apple’s margins aren’t low — I’d like to see them do even more in terms of helping out the people who assemble the gadgets we all love so well. And to be fair, I’d be glad to pay a bit more for gadgets if the money were going directly to the people on the assembly lines.

5 thoughts on “Apple’s labor costs should be higher

  1. such a boring comment: need a close anchor for that chinese labor story!

    (otherwise, agree on all points!)

  2. If you get the chance to see Mike Daisey’s “The Agony and Ecstasy of Steve Jobs”, I highly recommend it. He does a great job of telling the twin stories of him growing up (and remaining) an Apple enthusiast, and of him going over to China and doing undercover journalism at Foxcon.

    Apple is by no means the only offender – probably every major maker of Android phones (certainly HTC) is guilty of allowing bad labor practices to continue. But as you say, they make visibly high margins and aren’t shy about doing it, so you’d think they could lead on this issue.

  3. “But as you say, [Apple] make visibly high margins and aren’t shy about doing it, so you’d think they could lead on this issue.”

    Not only that, but I would think Apple customers as a whole would be more interested in such efforts over the general population.

  4. I don’t think it’s as simple as Apple mandating that their suppliers pay higher wages. If they do that, a legitimate question arises; to whom do the higher wages actually accrue?

    Somebody at the suuplier has to decide which workers get to work on the (higher paying) Apple production lines. There would then be a tremendous incentive for either a) that person to demand a kickback from workers who want in on the Apple production line, or b) said workers to bribe the decision maker to guarantee placement on an Apple production line.

    I don’t think this is an easy problem to solve. Apple guaranteeing working conditions is much easier, because working conditions can be observed. How can you prove that a bribe didn’t take place though? It’s the old problem of proving that something doesn’t exist.

    The best way to raise wages for Apple’s factory workers is to raise wages and living standards across all of China. And there might be no way around that being a multi-decade process. It was in the U.S. and it looks like China is already moving through the process much faster than the U.S. did.

    Not to say that nothing can be done, but I think the question of who the benefits from increased wages accrue to is a significant problem. Anybody got any good ideas?

  5. I think Apple should build an assembly plant in Oakland. Oakland has massive unemployment, vast swathes of industrial land that could be repurposed, it has the 2nd largest container port on the West Coast right there, tons of freeways and rail lines, and it’s driving distance from Cupertino.

    Per-unit labor costs would not be higher enough to make a dent in Apple’s profit and it would do wonders for the Bay Area’s economy to not have Oakland be so economically depressed.

    Within 3-10 years inflation in China is going to make the US directly price-competitive on wages given shipping costs. Time to get ahead of the game.

    Of course, the same goes for many other US electronics makers and so on.

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