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China’s “Living Wage.” What Is it?

Posted in China Business

Just read a CNN article entitled, “When will workers share in Apple’s wealth?” This article was written by Scott Nova, executive director of the Worker Rights Consortium, a “labor rights-monitoring organization that investigates working conditions in factories around the world. 

Nova attacks Apple on many fronts in his article, but it is the following that really got me thinking:

And if Apple genuinely “cared about every worker,” it would pay every worker a living wage — enough for workers to achieve a minimally decent standard of living, support their families and even save a bit toward a better future. Today, barely 1% of the retail price of an Ipad goes to the workers who make it; 33% goes to Apple’s profits. Apple’s profits are so high, and its global labor costs so low, that it could triple the wages of its 700,000 manufacturing workers and help them achieve a living wage (just a few dollars an hour in China), and still make $40 billion a year. A wage increase of 16% to 25% at Foxconn, announced today as Apple’s public relations blitz reaches a crescendo, doesn’t come close.

Where did Nova get his numbers regarding what constitutes a “living wage” in China. And what does constitute a living wage in China? Does that not depend on the city? What about the fact that Foxconn typically provides its workers with room and board, in addition to their salary.

Again though, what constitutes a “living wage” in China? What do you think?

UPDATE: Stan Abrams over at the always excellent China Hearsay did a post, entitled, Profit Sharing and China’s Living Wage, did a post taking Nova to task for, among other things, using “squishy language” and for the following:

This [calling for Foxconn to pay its workers a decent wage] sounds great and quite reasonable, but of course the writer has no idea what “minimally decent” means in China, in Shenzhen or anywhere else. He doesn’t know what it takes to support a family here, and I guarantee that the complex matters of health, education and housing expenditures and their related effects on savings are matters that he did not research prior to writing the Op/Ed.

FURTHER UPDATE (2-24-2012): The New York Times just came out with an article, entitled, “How Much Do Foxconn Workers Make?” that seeks to discern exactly what Foxconn employees make.

  • Mark

    I think the article you quote is just another example of “China bashing” in the U.S. I regularly visit Foxconn in Shenzhen and Chengdu and I can say I wish the working conditions in my first year out of college were as good. Foxconn’s factory workers have received 2 or 3 fairly significant pay raises in the last 2 years. For entry level jobs, Foxconn is a bit more than other employers hiring non-skilled workers in both Shenzhen and Chengdu.
    You pose a good question. I have never seen (I don’t think) any government statistics on what is considered “living wages.” This isn’t the U.S. after all.

  • Roger C

    In a few lines, this Article (not Dan’s comments) sums up pretty much all the issues in modern, globalized capitalism, while .
    - Companies aren’t people, and should’t be treated like or considered as people. They are transmission belts for goods, services, ideas and, of course, money. An Apple margin of 33% doesn’t go to some fat guy called Apple who messily devours it behind a desk made of the last mahogany tree on earth. It goes to new products and ideas, on top of Apple’s already enormous money pile, or to shareholders (although, to my knowledge, Apple hasn’t done a dividend since Steve came back in 1997). If Apple is going to pay more on sourcing product, either consumer prices will go up, or Apple’s spending patterns will shift. Either way, this will be political with Apple. Also, do we really want people to step in and dictate profit margins on enterprises?
    - If Apple triples the living wage in China, other companies will have to do so as well. This may render them less competitive, and in the end cause more unemployment. Also, Foxconn have already signalled their intention to automate their production line more, losing more Chinese jobs to machines. Wage hikes may cause inflation, which will shift the goalposts of what a living wage is.
    Now don’t get me wrong, I’m not in favour of sweatshop labour by a long shot, but the iPad and the concomitant brouhaha over Apple products we have seen in recent years is nothing more than a symptom of a wider lack of ideas on how to embed globalized companies into the local societies they’re part of. And this is, perhaps, much more important than a wage hike in one factory somewhere in China which will bring fewer benefit to fewer people than mr. Nova might think.

  • Lintex

    I think I know what you are getting at here and if I’m right, I agree with you. You seem to be saying that this article (like so many on Apple) is written as though the Foxconn employees are in Detroit or Seattle and not China. This article actually makes no sense at all because it is never clear on what Foxconn workers are paid, nor how that compares to other factories or to the cost of living where the factories are located. If someone would quantify these things I would listen but this guy is just pushing an anti-Apple/Foxconn agenda in an effort to push jobs back to the United States.

  • http://www.puddingandchopsticks.com Homer

    I have found that this not only applies to Foxconn but just about every place.
    At my factory where I work, everyday I hear someone complaining that they are not making enough money. When in fact they are making the same as all the other factories in the industrial area. They are also mostly unskilled labor and office workers.
    Just the other day I heard a few coworkers talking about wages and about the fact that one of their husbands makes over 100K a year. 8,333 a month. He is an architect. She also stated that there is a lot of people in this city making 200K a year. Which I think is true, but it’s not the average person.
    This doesn’t really relate to Scott Nova’s post, but I think that a lot of workers here are over valuing their own self. They expect 30% year after year in raises just because, I can only assume, they see the rich people getting richer and think they should too. Which could be true, but I don’t think that wages are actually rising that fast. Only in some areas.
    You can live very very cheaply in China. I’ve done it, I see Chinese do it everyday. I’m not sure what Mr. Nova is trying to say. Not everyone need to buy an iPhone, luxury purses, cars, etc. You can certainly live without any of those things.
    I know of two people that I work with that make the same as a Foxconn employee and both have a house, one has a car, they have new Android Chinese smart phones. they look like they are living to me.
    Perhaps Mr. Nova is saying that they are not living up to a America level of living. Well, to that I say, I making more money that I would in the States, can’t even live an American level of living. It’s too expensive. Everyday things that would be cheap anywhere else are doubled here because of taxes and the fact that only a small group buy it, namely the rich people, so that drives the cost even further. So even for an American in China, it’s hard to live an American level of living.

  • ryan

    I like the questions you ask. I have the same ones. This article is just bashing but the issues it raises are real.

  • http://www.joyceyland.com Joyce Lau

    http://www.pcworld.com/article/250298/foxconn_to_increase_workers_wages_in_china.html
    According to the above link, Foxconn workers in Shenzhen now make 2200-2500 RMB / month.
    The legal minimum wage is 1500 RMB.
    If rent, food and other basic needs are cared for, that’s 2200-2500 RMB for personal spending or savings.
    A few posts down, this blog listed salaries in major mainland cities, where a junior secretary would make 2500 RMB / month. And she wouldn’t have rent and food covered.
    So an unskilled Foxconn factory worker, living and eating for free in a dorm, makes as much as an office worker in Shanghai?
    Plus, if the legal minimum is 1500 RMB — and there are reports of local factories paying below that — then the Foxconn guys have it good.
    I’m not saying Foxconn is totally right, or that I advocate underpaying or mistreating workers. But in the context of mainland China, this doesn’t sound terrible.
    That said, I don’t think the above article is “China bashing.” It just sounds like vague writing and sloppy reporting.
    From the outside, 2500 RMB per month sounds awful. Never mind America. Even in Hong Kong, that would be considered grossly underpaid. Even migrant Filipina maid make almost 4000 RMB per month, and they have room and board covered.
    But the cost of living is so vastly different — you can’t compare apples with oranges.

  • http://www.stonestreetadvisors.com Jordan S. Terry

    Sounds like another ignorant causehead. #’s I’ve seen – which seem more accurate (but who knows – I included here http://www.forbes.com/sites/jordanterry/2012/02/19/so-what-if-apple-has-a-chinese-labor-problem/
    Also: 1. what about the market for labor? Supply and demand and all? As far as I know, no one is forcing Chinese to go work for Foxconn, while the working conditions may not be up to U.S. standards, seems fairly free-market-ish, at least for such a rapidly expanding emerging market.
    2. So Apple, with a fiduciary duty to shareholders, should just triple the amount of money its supplier pays its employees? Just because they “deserve” it and because Apple can afford it? Yea, ok.

  • BT

    Why are we talking now about a living wage? China’s wages are rising so fast companies are going to leave and pay a less than living wage elsewhere?

  • http://buxiebuxing.livejournal.com Phil

    I think there’s a difficulty with the idea of a living wage, which is that in the past, it was assumed that it would cover housing. Today, that doesn’t really seem to be the case anywhere. I don’t know many people whose wages could really cover the cost of buying a house if they didn’t get a boost from the sale of another property, or a donation by their parents. Not in the UK and certainly not in China. If you wanted a living wage that allowed a person to actually live in a home, rather than a dormitory, in China, you’d have to at least triple what factory workers make.

  • Skippy

    Dan, this piece is so weak I don’t know why you even bothered with it. There’s no definition of a living wage anywhere, much less in China. It’s a leftist construct that is used to criticize big companies no matter what they pay, which is exactly how it was used here.

  • Richard

    “…enough for workers to achieve a minimally decent standard of living, support their families and even save a bit toward a better future.”
    The entire basis for migrant labor in China is that many workers do indeed earn enough to support their families back home, which is more than many would have earned had they stayed in their villages with no job prospects.
    A new Western restaurant just opened up near me in Guangzhou. Starting monthly wage for waitstaff is 1600 RMB/month. Meanwhile, that same unskilled person can now walk into hundreds of factories in the PRD and easily start earning 2500 RMB/month, with free room and board and free or subsidized food. Some factories (including those of my employer, and probably Foxconn as well) have medical clinics on-site offering some level of free healthcare. Due to the labor shortage, many factories are offering massive pay hikes or other incentives to workers who will agree to stay for more than 12 months. Some factories are doubling pay within 1-2 years for longer term workers. Right now, it is a very pro-labor market in South China due to the labor shortage.
    Yes, there are still sweatshops in China with terrible working conditions and underage labor. Foxconn is not one of them, nor are the vast majority of other foreign-invested factories. MNCs have led the way on working conditions and labor rights in China. The Chinese workforce knows this very well. Why doesn’t American media?

  • Hua Qiao

    It’s less a slam memo on China than it is an attack on free market. While Mr. Nova is at it, why does he not demand that Apple take care of the other shortcomings of the PRC regime that adversely impact quality of life? After all, isn’t that what we are really interested in? Quality of life?
    How about Apple ponying up for affordable housing, health care, efficient and cost effective transportation, environment, and education too?

  • http://www.foarp.blogspot.com FOARP

    Even back in ’06, hundreds of new workers would arrive at the gates of the Foxconn factory every day. On pay-day, each post-office on the campus would be thronging with people sending money home to their folks. If they weren’t being paid a “living wage”, why would so many people come to the factory? If they weren’t making a living wage, why would so many be sending money home?
    Don’t get me wrong, I’m not an apologist for Foxconn, but a lot of the reportage coming out of late assumes terrible treatment and goes from there. Actually the Foxconn plant is, compared to many of the factories surrounding it, a much safer and nicer place to work, and invests far more in raising the skills of its workers.
    In a company with a work-force the size of a small country, it is inevitable that examples of over-work and workplace abuse will be found – the real issue is whether Foxconn takes sufficient steps to prevent this, or whether higher-level management either ignores or condones such behaviour. As yet, no evidence of this has come out.
    Particularly when I see people in Europe or the US complaining of the 15-hour days that Foxconn workers put in (as voluntary over-time), I have to wonder whether these people have experience of working in factories in their own countries. I have, and I can tell you that Foxconn, the factory floor of which I used to walk through every working day, seemed little worse than the average factory estate in the UK.

  • Paul

    “What is a ‘Living Wage’?
    Ask Newt Gingrich….
    I would add that a Living Wage should also include an income sufficient to pay off student loans hoisted upon defrauded law school students by the Education Industrial Complex and the law school scam.
    From Wiki:
    In public policy, a living wage is the minimum hourly income necessary for a worker to meet basic needs (for an extended period of time or for a lifetime). These needs include shelter (housing) and other incidentals such as clothing and nutrition. In some nations such as the United Kingdom and Switzerland, this standard generally means that a person working forty hours a week, with no additional income, should be able to afford a specified quality or quantity of housing, food, utilities, transport, health care, and recreation. In addition to this definition, living wage activists further define “living wage” as the wage equivalent to the poverty line for a family of four.
    The living wage differs from the minimum wage in that the latter is set by law and can fail to meet the requirements of a living wage – or is so low that borrowing or application for top-up benefits is necessary. It differs somewhat from basic needs in that the basic needs model usually measures a minimum level of consumption, without regard for the source of the income. A related concept is that of a family wage – one sufficient to not only live on oneself, but also to raise a family, though these notions may be conflated.
    The ILO uses various criteria to recommend minimum wage levels: the needs of workers and their families, the general level of wages in a county, the cost of living, social security benefits, the relative living standards of social groups and economic factors such as economic development and employment maintenance. The living wage focuses more on the needs of worker units, social security benefits and cost of living.
    Poverty threshold is the income necessary for a household to be able to consume a low cost, nutritious diet and purchase non-food necessities in a given country. Poverty lines and living wages are measured differently. Poverty lines are measured by household units and living wage is based off of individual workers.

  • http://chinese-culture-symbols.com/ Sam Reeves

    In all honesty, as you so rightly pointed out, the living wages do change from city to city.
    China can keep the wages down to a degree, as their are always ten people behind each person waiting for their job. Most Chinese nationals know this and so value a secure job.
    The fact is, Apple like all the major companies using Chinese workers, do not own the factories in China, they simply give contracts to certain Chinese owned factories; thus removing them of a certain degree of responsibility.
    Most Chinese are at least happy with a job, much happier than they would be if Apple, due to pressure and raising payment (which is technically nothing to do with them anyway), relocated to India… which will be the new production center due to low outgoings within ten years.
    Nike has already started the process in India I believe, along with a few others.

  • http://www.inpraiseofchina.com Godfree

    Let’s bring some Foxconn employees to our Southern slaughter houses (or Florida tomato fields) and ask them if they’d like to do a straight job swap?
    Or, to where I was today, small farm rice paddies in Thailand and ask if they’d prefer an open-air job as a farm laborer, up to their knees in muddy water for 12 hours a day?
    As a guilty iPad/iPhone owner, I support the projection of my guilt to anyone, or any corporation, other than myself.

  • http://www.workersrights.org Scott Nova

    As the author of the Op Ed, I would be remiss if I did not respond to some of the points made on this site:
    I did not provide a detailed discussion of the wages paid at the various Foxconn facilities throughout China, and their relationship to a living wage, due to space constraints. The piece is a 900-word Op Ed, not an academic article or a legal brief. Here is some data that may be helpful to those genuinely interested in the issues:
    After the wage increases announced Friday (partly in response to public pressure), entry level workers at Foxconn in Shenzhen will now make 1800 CNY per month. Entry level wages at Foxconn’s other facilities (e.g., in Chengdu, Zhengzhou, and Chongqing) range from 1350 to 1550 CNY. Foxconn claims that 75% of non-entry level Shenzhen workers now make at least 2200 CNY; independent researchers are skeptical. However, even if this is true, since only about a third of Foxconn workers are in Shenzhen, and the percentage there is dropping, this means that a large majority of Foxconn workers, including most of those making Apple products, make less – as little as 1350 CNY and no more than 1800 CNY. 1350 CNY is US$214, or $1.23 an hour; 1800 CNY is $1.63 an hour.
    It is important to note that the cost of dorms and food for each worker (400 to 500 CNY/month) is deducted from these wages. Contrary to Dan’s statement, Foxconn does not provide workers with room and board in addition to their wages. They used to; this changed last year, after the minimum wage in Shenzhen was increased to 1320 CNY (it is now 1500).
    SACOM, a highly credible Hong Kong-based research group, estimated a living wage in the various cities where Foxconn’s facilities are located as ranging from 2700 to 3000 CNY, last year. With 5% overall inflation and 10% inflation in food prices since they published these estimates, an updated range would be 2850 to 3300 (about $3 an hour at the top end). Our organization’s own estimate, which relies on World Bank data on purchasing power parity to extrapolate from detailed studies we have done in other countries, puts the figure at close to 4000 CNY (about $3.60 an hour). In any case, even using the substantially more conservative – and locally researched – SACOM estimate, there are no Foxconn workers who are paid a living wage for the statutory work week. Moreover, the vast majority make around half of a living wage. Again, this is after the substantial wage increases just announced. Some Apple suppliers in China pay less; as do most in other countries. Note that $3 or $3.60 an hour is not a living wage in the US; it is a fraction of a living wage in the US. No one is arguing that Chinese manufacturers should meet US wage standards.
    Generally, “living wage” is understood to mean a net wage, for regular hours, sufficient to enable a worker to afford decent food, housing, clothing, health care, transportation and education for a family of average size, with some funds left for savings, retirement and discretionary expenditures. While no consensus exacts as to calculation method, there is no reasonable approach that would place most Foxconn workers close to a living wage.
    And, no, living wage is not just a “leftist construct that is used to criticize big companies no matter what they pay.” Living wage is a concept, and a moral imperative, embraced by large majorities of people in every nation where opinion surveys on the subject have been conducted. Here is that bastion of leftism, the New York Post, reporting on a poll that found that a large majority of Republicans in New York City support living wage as a legal obligation for city contractors: http://www.nypost.com/p/news/local/percent_support_increase_in_living_Jo6l3sjkn6brXoogRfMmZK. Living wage is also a concept endorsed by the International Labor Organization and its tripartite governance structure. The most respected moral leaders and philosophers of the 20th century embraced the concept (Gandhi, Martin Luther King, Nelson Mandela, among others – you know, the kind of people Apple used to put in its advertisements to underscore its commitment to humane leadership and forward moral thinking). Also officially supporting living wage as the proper wage standard for responsible corporations? The Fair Labor Association, of which Apple is now the largest dues paying member.
    Indeed, well paid corporate lawyers who have never missed a meal are probably among the very few demographic groups worldwide that does not evince majority support for the idea that a hard day’s work ought to be compensated with a wage sufficient to feed and support a family.
    Also, to the individual claiming that any “unskilled person can now walk into hundreds of factories…and easily start earning 2500 RMB…with free room and board…” I must respond that this is nonsense. As noted above, the most a worker can make upon starting at Foxconn in Shenzhen – the city with the highest wages in China – is 1800 CNY, less room and board. Due primarily to labor shortages, wages have risen a good deal in China over the last five years, but they remain very low relative to cost of living. If you have examples of these hundreds of factories where an unskilled worker can walk in off the street and immediately start at a wage no less than 2500 CNY a month, plus free housing and meals, I invite you to provide examples, so that I may relay these to worker advocates in China who can then inform workers of these hitherto unknown opportunities.
    As to this: “Calling for Foxconn to pay its workers a decent wage sounds great and quite reasonable, but of course the writer has no idea what ‘minimally decent’ means in China, in Shenzhen or anywhere else. He doesn’t know what it takes to support a family here, and I guarantee that the complex matters of health, education and housing expenditures and their related effects on savings are matters that he did not research prior to writing the Op/Ed.”
    I am not sure how the author of this statement would be in a position to have the first notion of what level of knowledge I have in this area, but, as it happens, he is wrong. I do have an idea what “minimally decent” means in China. My understanding comes from the interviews that our organization’s representative in Hong Kong, and the Hong Kong-based research groups we work with, have conducted for many years with workers in industrial areas of China. And SACOM, the research group whose living wage estimate I referenced above, has indeed looked at “complex matters of health, education, and housing expenditures” in China, as part of their living wage research. I would venture to guess that they have looked at these matters in more detail, with a more nuanced understanding of the issues involved, and with more academic rigor than the author of the statement – who is described on his site as an intellectual property lawyer and who, I presume, is not an expert on labor rights issues or on the economic lives of working people, in China or anywhere else.
    The purpose of my article was not to “bash” China. My purpose was to call for Apple to treat the workers who make its products, in China and elsewhere, with a modicum of fairness and human decency. Nor is my goal to bring these jobs back to the United States. The fundamental conflict here is not between workers in the United States and worker in China; it is between workers in both countries and corporations like Apple and Foxconn that amass vast wealth for a relative few at the expense of millions. I am at a loss to understand how anyone can construe my argument as “China bashing.”
    On this point: “The fact is, Apple like all the major companies using Chinese workers, do not own the factories in China, they simply give contracts to certain Chinese owned factories; thus removing them of a certain degree of responsibility.” As I assume the person making this assertion is aware, Foxconn works at Apple’s direction, making the products Apple asks for, using the methods Apple chooses, with the inputs Apple specifies, for the prices Apple is willing to pay, meeting the deadlines on which Apple insists. All of this has a profound, and in many respects, decisive impact on the working lives of the Foxconn employees who make Apple products. In moral terms, Apple is responsible for ensuring that these workers are paid fairly, afforded dignity and respect, protected from avoidable workplace dangers, and treated like human beings, not factors of production. Even Apple does not believe it can get away with pretending that it lacks the power to affect what happens to workers in these factories. You will notice that Apple, its communications agents, and its lawyers are not making that claim.
    I am sure it is comforting to believe that most factories in China serving foreign buyers and investors have transcended sweatshop practices. They have not. Nor have their counterparts in most countries in the Global South. Domestic governments and business cultures play a role here, but the primary cause is the buyers and investors themselves. There is simply no way that most factories can meet the price and delivery demands of companies like Apple without violating both domestic labor standards and international norms. Read the story that the former Apple executive recounted to the New York Times (1/26), about the warm feeling it gave him when Foxconn was able to drag 8,000 workers out of bed at midnight and force them onto the production lines to implement a last-minute iPhone design change without any delay in delivery. This story perfectly encapsulates the corporate mentality in the US and Europe, and the resulting buyer-supplier dynamics, that perpetuate sweatshop abuses. If you do not believe that labor rights violations are rampant in factories serving the needs of US and European multinational corporations (multiple, ongoing violations of applicable labor law and standards in a workplace is the definition of a sweatshop), read the reports of credible labor rights groups – or, better yet, read Apple’s own “corporate responsibility” reports, which acknowledge serious and persistent violations of overtime law and other abuses at its Chinese facilities. Or look again at the events in Chengdu, which I referenced in my Op Ed, in which four workers died and many more were injured in an explosion that would have had zero chance of occurring had Apple required Foxconn to utilize such exotic safety precautions as “ventilation.”
    Oh, and to the poster who said: “MNCs have led the way on working conditions and labor rights in China. The Chinese workforce knows this very well. Why doesn’t American media?” To the extent that MNCs have actually taken steps to improve working conditions and labor rights in China – and some have, in limited but significant ways – the primary reason they have done so is because of pressure from labor rights advocates, communicated in part through the US media. I won’t take the time to review the history, but I do not know of any serious observer who denies that fear of reputational damage was both the catalyst and the primary long-term driver of such efforts. I can’t think of a more obvious example than Apple. Does anyone who posted a comment believe that Apple would have taken many of the steps it claims if there had been no criticism from labor rights groups and no negative reports in the US press? You can’t have it both ways. If you genuinely believe that corporate efforts to improve labor conditions in China are a good thing, then you must also acknowledge the value of the activist pressure and media criticism that motivated these efforts. Praising the efforts of multinational corporations to improve labor practices while simultaneously criticizing the US media for raising these issues doesn’t make any sense.
    Then, of course, there are the usual references to the ostensibly immutable laws of something called the “free market,” as the rebuttal to any and all arguments that corporations should treat their workers decently. There is no substantive response to these assertions; they are essentially philosophical. I can only tell you that for several hundred years, human beings have been using various means, public and private, to try to protect the common good from corporate excess: government regulation, private legal action, the formation of unions and collective bargaining, activist campaigns. In these contests between large corporations and those acting on behalf of workers, consumers, and ordinary citizens, popular support has in most cases been with the latter, usually by overwhelming margins. This is not an accident. Despite all of the efforts, over many years, by large corporations and their ideological and political allies to convince the public that a corporation’s sole obligation is to maximize shareholder return, most people don’t buy it and don’t want to live in the world that would exist if that philosophy were put into action.
    I am curious: Is there anyone who commented who has a shred of doubt as to whether it is morally appropriate for Apple to reap $43 billion in pre-tax profits and refuse to use a penny of it to raise wages at its supplier factories above the low level the labor market in a place like China would otherwise allow. Apple has the wherewithal to reward these workers, for a great deal of hard and sometimes dangerous work, in a way that would vastly improve their families’ lives and prospects for the future – millions of people. Apple could do this while still maintaining unprecedented profit margins and without increasing prices a penny. Is anyone on this site moved in any way by this possibility?
    This is not a rhetorical question.

  • Anon

    This all makes me sort of nostalgic for the hunter-gatherer days.

  • Twofish

    Nova: SACOM, a highly credible Hong Kong-based research group, estimated a living wage in the various cities where Foxconn’s facilities are located as ranging from 2700 to 3000 CNY, last year. With 5% overall inflation and 10% inflation in food prices since they published these estimates, an updated range would be 2850 to 3300 (about $3 an hour at the top end). Our organization’s own estimate, which relies on World Bank data on purchasing power parity to extrapolate from detailed studies we have done in other countries, puts the figure at close to 4000 CNY (about $3.60 an hour
    Those numbers are crazy. Most likely they assume that the worker is paying market rates for rent, food, and health care which no one working at a factory does. Factories get their land at below market rates from the government which allows them to subsidize rent.
    Also factory workers strike at a drop of a hat. The second wages start dipping, either everyone leaves, or they stop work.
    Nova: I would venture to guess that they have looked at these matters in more detail, with a more nuanced understanding of the issues involved, and with more academic rigor than the author of the statement
    It’s blindingly obvious to anyone that has any experience in southern China that they didn’t.
    Nova: Read the story that the former Apple executive recounted to the New York Times (1/26), about the warm feeling it gave him when Foxconn was able to drag 8,000 workers out of bed at midnight and force them onto the production lines to implement a last-minute iPhone design change without any delay in delivery.
    And the workers did it because they got overtime and time off. I’ve worked in jobs in the US where I got called up at 2 a.m. If it pays enough (and it does) then sure.
    Nova: I am curious: Is there anyone who commented who has a shred of doubt as to whether it is morally appropriate for Apple to reap $43 billion in pre-tax profits and refuse to use a penny of it to raise wages at its supplier factories above the low level the labor market in a place like China would otherwise allow.
    Apple is doing a wonderful job at raising standard of living in China, and if Apple were to pump more of its profits back into factories in China, it would be a *bad* thing. Apple makes a ton of money from iPhone products because of branding, but most other manufacturers don’t have such huge profit margins. If Apple raises the price of wages in China, then Apple will be the only company that can afford to manufacture products in China, and that will *kill* local companies that operate with much, much lower profit margins. There are a lot of local brands of no-name cell phones and no-name laptops that serve the local markets, and if you raise the cost of labor, it will *kill* all of those local companies, since they operate at much lower profit margins than Apple does.
    Ironically, much of Chinese industrial policies has been to make sure that MNC’s don’t end up running the Chinese economy. MNC’s get a lot of their profits because they are more efficient than local companies, so if you change the situation so that MNC’s put the profits back into local factories, then only MNC’s will be able to afford to purchase from those factories, and not only do you *kill* local businesses but also you leave the Chinese economy even more dependent on MNC’s.
    This is all extremely obvious to anyone that has the slightest bit of experience in the PRD, and one reason I get annoyed at Western labor activists is how utterly clueless they are. (And yes that’s intentionally strong language.) Yes they mean will, but so did George W. Bush when he invaded Iraq.
    The only good spot about this is because what they are saying is so utterly laughable to anyone that has any experience with China, that no one here takes them seriously.
    Nova: Apple could do this while still maintaining unprecedented profit margins and without increasing prices a penny. Is anyone on this site moved in any way by this possibility?
    Apple could do this, but the thousands of cell phone stalls that are in Huaqing Bei Street would shut down instantly. For that matter Apple is a premium brand in China. If you lower the margins then it becomes a non-luxury item, and then all of the stalls that sell Apple phones at a huge markup go out of business. There’s also a huge market for second-hand Apple phones, and those go out of business. And they there is also a whole industry of people selling Apple sell phone covers, Apple cell phone protectors. They there are all of the jobs that get generated from data services.
    Outside of every single electronics store in Beijing are migrant workers that for a small amount of money will apply the plastic cell phone protector, and next to them are people that are selling cute phone accessories. Do you want to put them all out of business?
    Then you have to add the fact that the Chinese government loves Western multinationals, because Western multinationals actually pay their taxes. Local companies find ways around them.
    This is all *bleedingly obvious* to anyone that actually lives in China, and you’d think that if Chinese workers were being exploited that there would be this massive boycott of Apple products in China, but there isn’t. Because profit margins on Apples are so *high* there are a ton of people all over China that are making money from associated services.

  • Twofish

    Nova: I can’t think of a more obvious example than Apple. Does anyone who posted a comment believe that Apple would have taken many of the steps it claims if there had been no criticism from labor rights groups and no negative reports in the US press?
    Absolutely yes.
    Wages in southern China are rising extremely rapidly. All Foxconn did was to issue press releases to announce wage increases that it was going to make anyway.
    Also third party auditors are something of a joke, because when auditors show up, both the workers and the managers put on a show to keep them happy. If things really get bad, then the workers just leave and go to another factory or call up local government officials (who are surprisingly responsive because they don’t want a strike on their hands.)
    Nova: If you genuinely believe that corporate efforts to improve labor conditions in China are a good thing, then you must also acknowledge the value of the activist pressure and media criticism that motivated these effort.
    I think that activist pressure and media criticism is counterproductive because…..
    1) all of those pressure plays into the hands of people in the US that want the factories in China shut down for good.
    2) because labor activists are *totally clueless* about conditions in China, people in China end up having extremely negative opinions about the goals of said activists. This in turn transfers to other things like human rights and political reform. When you have Chinese people listen to labor activists tell about all of the wonderful things that they can do for them, and they look like *total idiots*, they get ignored or laughed at. But then the next speaker is someone from Amnesty International or someone that supports multiple party elections, and the opinions that people have toward labor activism gets transferred over to these other groups.
    “Crying wolf” has a lot of bad effects.
    Look. I don’t doubt the fact that the people involved are well meaning, but well meaning people can do a lot of damage, and when I use terms like *stupid*, *idiotic*, and *totally insane*, it’s because I want to knock some sense into you so that you actually look at what’s going on.

  • Twofish

    Nova: Generally, “living wage” is understood to mean a net wage, for regular hours, sufficient to enable a worker to afford decent food, housing, clothing, health care, transportation and education for a family of average size, with some funds left for savings, retirement and discretionary expenditures.
    Which is absolutely the wrong standard for Foxconn workers. Most of the workers are migrants from the interior, who do not have family in southern China. What they do is to make money in the factories and then they send the money back home to other provinces, where they end up supporting families in places where the cost of living is much cheaper. The wages that a worker makes in a factory in Shenzhen is not enough to support a family in Shenzhen, but it is enough to support a family in Hunan with a lot left over. No one I know plans to work as a line worker forever, and what typically happens is that people work for a few years, send the money home, and then they have enough saved up to not have to work again.
    Wages have been increasing because the situation in the interior has been improving so people are no longer motivated to make the trip to Shenzhen. Also, Chinese workers are perfectly able of taking care of themselves. The Pearl River Delta is this constant hotbed of strikes, work stoppages, and protests, which push wages higher. You never hear about these in the Western news, because bringing the in the media just makes things more complicated and benefits neither the workers and the managers. Workers in PRD are not well organized into official unions (those are a joke), but usually all of the workers come from the same village and so it’s not hard to form collective action.
    By keeping these wages low, you allow people to set up *other* businesses that can support a family. If you make cheap cell phones, then you can open up a retail stall. The really big money is to be made in high technology design and engineering. There are also some amazing cell phone repair people. Once people start opening up retail businesses, retail stalls, and cell phone repair shops, then they get hungry and you have people opening up beauty salons, dim sum shops, coffee houses, and office supply stores.
    Kill the factories, and all this falls apart. In particular, most of these shops are “mom-and-pop” shops that have low profit margins. If you force Apple to have low profit margins, then these shops all will go out of business.
    One of the frustrating things about labor activists is how totally misinformed they are about how the Chinese economy works. As I said before, the one good thing is that no one in China takes them seriously, which means that there isn’t that much damage they can do in China. They can do a lot of damage through well-meaning but stupid policies in the United States, and so I start jumping up and down so that they start seeing what is actually going on.
    If it’s a lost cause and I can’t get them to look at the situation, they at least maybe I can convince disinterested third parties in the United States not to take any of them seriously. If you are an American consumer, and feel the slightest bit guilty about buying an iPhone, don’t. The people that are trying to make you feel guilty have no clue what they are talking about.
    The more iPhone’s you buy and the fatter the Apple corporation’s profits are, the better off China is.

  • Twofish

    Question to Scott Nova. Have you ever *been* to China?
    I find that people that haven’t been there thing that China is some mix of a sweat shop and concentration camp, which isn’t that way at all. Also people assume that China looks like Chinatown which it for the most part doesn’t.
    If you go to Dongguang on a Sunday, you’ll see all of those “oppressed factory workers” at the mall buying clothes and eating frozen yogurt. OMG, they have malls in China? And frozen yogurt?
    Scott Nova: I am not sure how the author of this statement would be in a position to have the first notion of what level of knowledge I have in this area, but, as it happens, he is wrong. I do have an idea what “minimally decent” means in China.
    Frankly, I don’t think that you do. You think that you do, but thinking that you know something that isn’t true is more dangerous than being wrong. One good thing is that unlike Iraq, lots of people from the US have visited China, and for the most part, the impression that they get is that labor activists are talking nonsense.
    People shouldn’t feel guilty about buying Apple. They should feel *good* about buying Apple.

  • Twofish

    I’m in fact rather sympathetic to “anti-corporate” arguments, but my point is that forcing Apple to lower their margins will cause “Walmart-ization” which is quite bad. If you look at the Chinese economy, there are large numbers of mom-and-pop shops in retail. This is good because it creates a market of small businesses rather than an economy that’s dominated by a few large corporations. If you are unemployed in China, it’s not incredibly difficult to open up a small shop somewhere and sell cell phones or laptops or whatever, and if you go to the electronic markets in Shenzhen, you’ll see that most retailers are small owner-operated shops.
    This isn’t possible in the United States because the large retailers like Walmart and Target have squeezed margins so low, that there is no way that you can set up a shop and make money. The fact that population densities are low, and the US is an auto economy doesn’t help. Anti-trust laws don’t help much, because they just prevent things from going to one manufacturer whereas you don’t want 3 companies, you want 3000.
    So local small businesses are able to make small profits because big multinational businesses can make huge profits. Cell phones are cheap, so it’s possible to buy/manufacture them cheaply wholesale, and then open up a small stall and sell them with a small markup. Now if you force big businesses to squeeze their margins, then only the biggest will survive, and you’ll kill all of the small businesses. Once you’ve killed the small businesses, and all you are left with are big businesses, then they can exercise monopoly power. What small businesses are left, you can sue out of business using various mechanisms (IP laws, zoning laws, “health and safety” laws etc. etc.) Health and safety laws are something that you have to be careful about, because I can think of several examples in which big businesses have used health and safety as a excuse to shut down small businesses (i.e. street food vendors and hawkers in Hong Kong or the lack thereof.)
    So bashing Apple for it’s behavior in China doesn’t make any sense, because if Apple does what the labor activists want it to do, you’ll end up “Walmartizing” China which I think is a bad thing. You’ll be in a world in which the margins are so low, that only big companies can survive, and that’s *not* the type of world that I want to live in.
    Now if you want to complain about Apple’s aggressive use of IP, that’s another issue.

  • Twofish

    One other problem with the concept of a living wage is that it doesn’t take into account the way that families are structured in China. Typically, the factory worker comes from the countryside, and the factory wages are more than enough to support a family in the interior provinces. Now since these factory workers are often women, the suddenly a girl is no longer considered “expendable” and that drastically changes the social status of women.
    Factory workers are willing to put in a lot of overtime, not so much because of pressure from managers, but from a ton of social pressure from the family back home. However, this phase of Chinese manufacturing is growing to a close. The factory owners I know think that the new generation are spoiled brats, and there is an element of truth in that.
    But suppose they want to stay in the city. What you’ll find with people that want to stay in the city is that to raise a household, you had to end up being dual income. As long as there is reasonable child care available (and child care creates more jobs for nannies if the grandparents aren’t available), you can make it with a double income household. The other thing is what is a family of “average size”? Chinese families are one child families, and lots of people are forgoing kids.
    And the fact that you need both partners to make money to support a household also dramatically increases the status of women.
    The other thing is that before you bash shareholders. People tend to hold Apple shares in retirement portfolios and pension funds. If you dramatically decrease corporate profits, then people in the West that think they will be able to retire with their IRA’s and 401(k) will find that they’ll have to work a lot longer than they thought.
    Scott Nova: Our organization’s own estimate, which relies on World Bank data on purchasing power parity to extrapolate from detailed studies we have done in other countries, puts the figure at close to 4000 CNY (about $3.60 an hour)
    Except that if you have to extrapolate using PPP, then you have to use a different deflator based on the fact that Chinese currency is extremely undervalued.
    As far as morality, I’m extremely nervous about people who don’t have much understanding of what is really going on, going in to fix a problem that doesn’t exist, and then making the situation a lot worse than it is. I also have a healthy distrust of “experts” that have no real experience on the ground and come up with solutions which make things worse, based on information that people on the ground consider wildly, wildly inaccurate.

  • Rafael

    Mr. Nova,
    Thank you for coming on here with some explanations. Would you please come back to respond to the various comments left since you were on here last? This is a great debate and I for one would like to see it continue.

  • Andeli

    @Twofish
    You make good points, but go easy on the “you don´t understand China” rhetorics. Mr Nova makes a pretty good presentation. He has done his homework to a satisfactory degree.
    @Scott Nova
    I am missing the social security payment numbers. If Foxconn has to add 41% to the wages that is required by law, and I am pretty sure they do, then the workers are getting more benefits then mentioned here.

  • http://www.workersrights.org Scott Nova

    Rafael,
    Thanks for inviting further comment. I am swamped at the moment, so I can’t offer anything in reply today. Perhaps I will be able to do so tomorrow or over the weekend. I would be more inclined to comment further if someone besides “Twofish” replied to my previous points. The prospect of trying to unravel his economic logic gives me a headache (if Apple reduces its profit margin modestly in order to sharply boost wages for workers at supplier factories in China, this will cause the immediate closure of mom-and-pop stores that sell iPhone accessories?!?).
    I will leave people with one additional question: You know the story about Henry Ford raising his workers’ pay so they could afford to buy his cars? You think he was crazy?
    Best,
    Scott

  • Alessio

    I think Mr. Nova made a pretty convincing rebuttal of all the commenters and the author of this blog. I’m surprised there’s been nothing other than TwoFish’s overt generalizations and non-nonsensical statements in response.

  • http://www.workersrights.org Scott Nova

    Andeli,
    I am not including the value of mandatory benefits in my wage numbers, since workers do not receive those benefits as cash. From the employer’s perspective, these are certainly part of overall labor costs and, as wages rise, so does these costs (assuming, of course, the employer obeys the law and pays as required). As you likely know, these benefits include elements in addition to pension and health, but your figure of 41% of wages is roughly correct for the aggregate cost, which varies a bit by region.
    Best,
    Scott

  • Twofish

    Nova: The prospect of trying to unravel his economic logic gives me a headache (if Apple reduces its profit margin modestly in order to sharply boost wages for workers at supplier factories in China, this will cause the immediate closure of mom-and-pop stores that sell iPhone accessories?!?).
    Not so much the closure of mom-and-pop stores (although this is a problem), but there are a ton of local-branded laptops, desktop computers, and cell phone manufacturers that work on small profit margins and rely on cheap wholesale components to stay in business. If you increase the wholesale cost of their supplies, you put them out of business. There are *massive* electronics markets in China (Huaqiang Bei Lu in Shenzhen and Haidian in Beijing) with high technology factories that consist of a very small number of people doing assembly work.
    This is bad, because the whole point of the game is to create the Chinese equivalents of Apple. Most of the small businesses will stay small, but hopefully a few of them will become “tomorrow’s Apple.” Now the mom-and-pop shops that sell accessories are also important because those are low-tech, low skill jobs that let people start their own businesses. The mom-and-pop shops tend to be located next to the “shanzhai” stores so that if you kill the off-brand products, then you also put the computer accessory people out of business.
    There is stuff going on in the Pearl River Delta that most people wouldn’t believe. If you go to some parts of the world you see people with stalls selling fruits and vegetables. If you go to Shenzhen, you see rows after rows of people selling computer chips and cell phone parts as if they were nuts or vegetables. And then there is an entire ecosystem of repair and recycling shops.
    Now, if the workers at the factories were being whipped and beaten, then none of this matters, because at that point you could argue that the moral cost of the system outweighs the economic benefits, but that *isn’t* the situation. You can usually tell when someone is being abused, and the factory workers that shop the malls of Dongguan on the weekends don’t seem to be hiding any trauma. If you walk along the streets, people *seem* happy, since they they aren’t onsite, I don’t see why they would pretend.
    The people that have worked factory lines have traditionally been migrants from the interior. They’ve been sending money back which gives people back home the capital to start businesses which causes good things to happen in poorer parts of China. There are two major compliants that factory workers have, and for the most part overtime isn’t one of them. The two big complaints are unpaid wages and workplace harassment, and most multinational corporations have excellent reputations in these two areas.
    Part of the reason I’ve commented so much is that I’ve been fighting labor activists for close to two decades. You guys are well meaning and passionate, but I honestly believe that your policies would be economically disastrous for China. I started fighting you guys in the 1990′s over MFN, then WTO, now consumer boycotts. If you guys had gotten your way in the 1990′s, then China wouldn’t have gotten as far as it has.
    I should note that one problem with NGO labor activists is that they really don’t form a hugely politically powerful group in the US, so their agenda gets easily hijacked. I do think that most NGO people really don’t want to put Chinese factory workers out of work, but whenever labor standards enters the US political process, that’s what’s going to end up happening. It’s actually a lot less bad now that it was in the 1990′s. In the 1990′s, labor unions were out to stop US-China trade, but today the most unionized industries are benefiting from US-China trade.
    The longshoremen are very pro-China trade, and even the auto workers depend on cheap Chinese workers and massive China market in order to pay pension and health benefits.
    Also if you really want to kill Apple’s profit margins, it’s an IP issue rather than a labor issue. If you weaken copyright and trademark laws and also weaken some of the laws that restrict minimum price contracts and employments, the Apple’s profit margins will decrease. The type of mini-factories that are in southern China couldn’t exist in the US because of IP laws, and most Americans have never heard of them because you can’t buy those phones/tablets/laptops in the US because of IP restrictions.
    Nova: I will leave people with one additional question: You know the story about Henry Ford raising his workers’ pay so they could afford to buy his cars? You think he was crazy?
    In fact, he didn’t have a choice. Assembly line conditions are so bad that you have to pay people large amounts of money to do the work. Also, if you have the power to set pay in that way, you probably have too much power, and you are going to end up abusing it in some other way. I don’t trust the captains of industry to be altruistic. You can talk about public shaming, but journalists and NGO’s are humans too and they have their own agendas.
    If you have big companies and cheap workers then you are not going to create a middle class, which is where the people that own their own businesses come in.
    You guys are well meaning and passionate, but so am I, and I suspect most people in China have views that are closer to mine then yours. No one in China is even thinking about boycotting Apple, and it would be a perfectly absurd idea.

  • Twofish

    Let me tell you what is going to happen…..
    Apple is not going to end up sharing any of it’s profits with Chinese workers. Apple has a legal monopoly on the sales of the IPhone, and it’s spent enough marketing to maintain it’s image. This allows it to charge huge margins which it will continue to do. The only thing that Apple is really worried about is brand image, and a media campaign will take care of that, because Apple really is doing nothing wrong. But none of the money is going to make it to Chinese workers, because Apple has huge bargaining power, and it’s just going to impose prices on its contractors.
    Chinese workers aren’t getting a bad deal, however. Because of the booming economy, there are a lot of competing jobs, and so wages are going to keep going up.
    The people that are going to end up getting squeezed are the factory owners and managers. What’s going to happen is that they are going to end up having to spend extra time and expense dealing with labor certifications and auditors, and they are going to end up eating this cost. On the other hand, it’s a tough job. Chinese factory managers and owners end up working as hard or even harder than their workers, and they don’t get overtime. This is just going to be another headache. For the big factories like Foxconn, they’ll just deal with it and it’s not going to be a big bother, but for smaller factories, it’s just going to make a difficult economic environment more difficult.
    But in the end, it’s not going to change much, and in fact it’s a good thing that it’s not going to change much. Part of the reason no one other than me seems to care, is that the big battles (WTO and MFN) were fought and won a decade ago, and I suppose keeping labor activists busy doing something that isn’t going to make a difference is a good thing since it prevents them from doing anything that might actually change things and cause any real damage.
    Also campus activism has changed in the United States. In the 1980′s people on college campuses were worried about South Africa and in the 1990′s, it was trade globalization. The impression that I get is that “kids today” really don’t care about labor conditions in China, because they are worried about their own futures in the United States. If they hear about workers getting jobs in China, the reaction among college students seems to be “I wish I were them.” All this concern about multi-national dominance is misplaced, because in China there is a pretty large SME sector, and the government does keep MNC’s in line, which is not the situation in the US where the SME sector has been gutted.
    One thing about going to the Pearl River delta, is that people are in a good mood. You go in the malls in the weekend and the workers are mostly of the belief that next year is going to be better than this year. (Factory owners and managers are going nuts, but that’s a different group of people.) That’s not the feeling that you get in the US, where most people are glum, and people are worried about the future.