Foxconn plans to double the minimum wage of its mainland China workers by 2013 as part of a renewed attempt to soften the image of the ultra-secretive company, says Taiwanese site Want Daily. The outlet reports that Foxconn president and chairman Terry Gou said he wanted the firm’s Chinese workers paid at least 4,400 yuan (£441 …
With the increase in wages in China how long before they will be looking for cheap labour further afield?
With any luck they will begin to move production to the UK where the hourly rate will be lower, or better still, when Greece leaves the euro the opportunities for cheap as chips labour will be abundant.
India - the next China.
They will have to be careful
not to erode their price differential with the US or the EU otherwise some companies may well decide to switch their manufacturing back...
Well it is happening in some areas already. The wage increases in recent times for Chinese workers and the lead times of getting the items shipped from China has meant that some companies are starting to realise that having the workforce close to the consumer and the consequent reduction in time to get from manufacturing to the store can give them a competetive advantage.
That can outweigh the difference in wage costs.
Re: They will have to be careful
Manufacturing is a moving target though, years ago 'Made in Japan' indicated crap (possibly unfairly but let's not get into that), now it's a mark of quality, replaced by 'Made in Hong Kong' or China as 'Crap'.
China is starting to build a reputation for good quality manufacturing so inevitably the cost will rise, manufacturing won't 'switch back' for any significant period of time, it will move to other nations where labour is cheap (India, Africa maybe?) and they'll start producing the 'crap' quality low cost goods that China is starting to lose.
Re: They will have to be careful
in the event that any of the Western economies fall to the point where bringing manufacturing back here makes financial sense, at least initially you could be looking at a bitter and resentful workforce who a) remember the times when they got paid more and Johnny Foreigner did all the dirty manual labour and 2) have largely lost and will have to relearn the skillset for building quality goods.
In other news
The price of lodging in "Foxconn dormitories" (TM) and food in "Foxconn cafeterias" (TM) has increased by whopping 400%.
As noted by the ANALists all "Cheerful Foxconn Workers" (TM) are required to live in a dormitory and consume cafeteria food in order to be readily available to allow Tim Cook to get a priapic fit when he sees them raised from their doors at 1am to complete another quota of Shiny Shiny.
News at 10.
Re: In other news
Oh, you're just talking rubbish.
Re: In other news
Abused workers, overtimed, ridiculous pay, etc.
...It makes it all worthwhile!
100 Years Behind
Foxconn may have been converted to the benefits of Fordism by deciding to providing a wage which makes it more likely that its employees can actually afford the products they make.
Re: 100 Years Behind
That certainly may be part of it. However, it is almost certainly the case that the Chinese authorities are acutely aware that their only chance of retaining control over events in China in the medium term is if their agrarian and industrial working class (by definition the overwhelming majority of the population) begin to see some of the benefits of the modernisation of their nation. Foxconn's "seeing the light" is probably at least partly a result of being heavily prodded by central government.
Re: 100 Years Behind
Not that that is what Fordism was.
Try the numbers for yourself. Ford had an establishment of 13,000 workers who were being paid $2.50 a day. Model T sold for $500.
So, he doubles wages to $5 a day. Imagine, pretend, that all 13,000 workers then bought a Model T out of that extra money? On 250 working days a year that's an increase in wage bill of $8.125 million.
And an increase in sales of $6.5 million: note, that's sales, not GP and certaily not net proft.
So, increasing wages so that employees could purchase the goods they were makingis an obvious and simple net loss for Ford.
Therefore, because Ford was not an idiot, this obviously is not what he did or why he did it.
What was true was that Ford had a turnover of 50,000 workers in order to maintain that 13,000 establishment. With all the search and training costs that implies. That turnover slumped with the $5 a day wages. Raising wages actually reduced Ford's total wage bill.
Which is rather what I suspect Foxconn is doing. For, believe it or not, there is actually a shortage of manufacturing labour in China at present, at least in certain areas. Tbus in order to reduce turnover you quite logically set out to pay more than your competing potential employers.
@Tim Worstal. That actually makes a lot of sense and did not at first.........
.........occur to me in relation to Foxconn's own motivations, some very good points in fact. However, I do feel that the general political background I referred to in my posting is also part of the bigger picture.
Re: @Tim Worstal. That actually makes a lot of sense and did not at first.........
Sometimes in a big company something like what Tim says only becomes obvious after a while. i.e., there is turnover, and managers close to the ground see how constantly having to train new workers adds cost and reduces productivity, but the message gets lost as it moves up the management chain.
Having the bad publicity associated with the visibility of Apple fall onto your company, plus have your biggest customer (Apple) getting negative publicity and probably putting a lot of pressure on you to fix it ASAP or lose their business, may provide the initial impetus to give a look at things. They check out various scenarios to see what the effect on the company would be, one which is "give people a big raise", and perhaps only then do upper management fully realize how much turnover is costing them since they're looking at it much more closely than they had in the past.
Foxconn and bad publicity of Apple?
> Having the bad publicity associated with the visibility of Apple fall onto your company .., DougS
Foxconn also make Xboxes for Microsoft and Intel but somehow the media don't focus on that. Microsoft isn't even mentioned in the main report, Apple is though.
People already hated Microsoft, so no one would have cared if that had been reported. Most Android phones are produced in China as well (even Samsung is moving its production to Taiwan) but no one cares about that either. They aren't Apple.
Whether its fair to Apple or not is irrelevant, the fact is that the way it is been reported in the media makes Apple look bad, and thus they'll want to do something about it.
Not that simple.
In reference to the AC asking how long until manufacturing just moves to the next source of cheap labour:
It isn't as easy as that. The huge boom in manufacturing on the Chinese coast isn't just due to low wages. There has been massive investment in infrastructure in terms of factories, warehousing and transportation. Even moving from the coastal region to inner regions of China where labour is cheaper isn't an attractive option as it can add a week to transit times. To put that in perspective it takes a week for the goods to be shipped from the Chinese Coast to the USA so moving production inland means doubling your lead time on a new delivery.
Other countries have attractive labour costs but don't have the transport infrastructure to suit modern production. It is no good having cheaper staff if they sit idle half the time because deliveries haven't arrived.
Not all good news
If you recall this earlier story:
then you'll realise that half the workforce wont receive this seemingly-generous pay rise because they will be made redundant.
Foxconn to create workers' paradise?
Don't most UK hotels & restaurants treat their staff much the same way as foxconn and get away with it
Human exploitation at it's worst
Tim gets a $100,000 a day and the Foxconn workers get to work 12 hours per day for table scraps.