You don't need to pay more
They are making record profits
Last quarter Apple churned out extraordinary profits: $13.06bn of them. But according to a New York Times article, Apple achieved these amazing profits on the backs of Chinese workers, who are subjected to punishing work conditions to ensure high-quality iPhones and iPads at the lowest possible price. While the company claims …
Apple's situation is interesting. They clearly operate on the lines of charging the very most that the market will accept and are making hay whilst the sun shines. Clearly at some point in the future this will come to an end. The market (in size) will no longer be prepared to pay their premium and they will once more become niche. Their competitors currently do not innovate as much as they need to and the company itself is once more becoming a touch too arrogant. End it will, but who knows when. I speak as someone who has bought their products but is rapidly getting pissed off by their attitude.
really, they could take a marginal hit on their profit margin and make a huge difference for their work force, but they won't. We have a system which rewards good quarterly and end of year results at almost any cost. OK, I'm pretty sure they don't lubricate the assembly lines with the blood of murdered puppies, but you get the idea. Bluntly, they'll do the minimum they can get away with.
No, actually they'll do less than the minimum. After the explosion at Foxconn, Apple moved some of their iPad manufacture to Pegatron - who have an even worse record for workers' rights, if such is possible. Apple don't give a damn, so long as their devices are made for the cheapest price and they make the most money.
Incidentally, during the trial production run at Pegatron there was another minor explosion. It is believed that both explosions were caused by aluminium dust catching fire. Other manufacturers use aluminium backs on their tablets, so why is it only Apple who have assembly-line fires?
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If they had to pay more to the workers it would not only impinge on prices for consumers it would impinge on Apple's profits because less people will buy and Apple want as big a cut as possible. I would imagine Apple have a pretty hefty markup on their goods. Apple like any other company looks to sell something built as cheaply as possible at the highest price people are willing to stomach. If Apple were to sell their wares at prices only marginally higher than the cost of manufacture and shipping I doubt it would be anywhere near what they actually charge for it.
It's simple really. People want cheaper electronic goods. Company X wants as much profit as possible. Why do you think they make it over there in the first place? Labour costs are much much smaller obviously. If you want to even up things then perhaps you should be asking them to make the damned goods in America and boosting US jobs instead.
So nothing to back up your claimed cost (and remember iSupply etc were talking about the raw cost of parts, not the assembled, packaged, delivered cost, along with software, licensing and certification expenses on top of that) and you ignore that the UK price is actually £499, £99.80 of which is VAT (sales tax for the folks from the US). The margins are nothing like those you are claiming.
Whether the BOM costs $180, $188 or $203 isn't really the issue here... its the fact that they're only paying $8 for the whole of the manufacturing process - this is what the factory workers get paid from...
I work in electronics in the UK and that's an incredibly low figure - it should be more like 10-15% of the BOM costs - so more like $18-25 to be reasonable and 'fair'.
If you want "fair trade" then talk to Apple about social responsibility and corporate responsibility and paying a pair amount to get the assembly work done... if they took $10 from the sticker price and moved it to the manufacturing cost they (Apple) would still make billions and those that actually 'make' it, working on the shop floor, would be hugely better off AND the price would stay the same.
The Economist quotes $275 as the total production cost of an I-pad, 2 % of which goes on Chinese labour:
Doesn't strike me as to wild to think of I-phone costing around a quarter of this to make.
Matt Asay talking out of his arse by saying that better standards would push the price up. What is saying is is that he is open to some emotional black mail. Foxconn can double everyone's salaries and it would add at most $10 to the price. Call it a round $100 and everyone's happy. Well, except the Foxconn employees who still cannot bring their kids to the city or take part in the local healthcare scheme. But that must be good as we all know universal healthcare is the spawn of the devil. I'll put it in terms that even the reddest of redneck might understand: Foxconn employees have to shop at the company store.
Much as I detest economists who think that economics has the solution to all problems, I detest even further half-baked business plans by people who have not the slightest grasp of the subject.
So, you want *Apple* to do this, but you're pretty much indifferent to all the other tech giants doing the same thing?
And for the lazy sod who claimed this: "I would imagine Apple have a pretty hefty markup on their goods. "
If that were so, the PC clone manufacturers should be able to apply their one and only business model and undercut the iPhone and iPad on price for the same quality and specs. So where are these devices, then?
Apples margin for the entire company (profit/revenue) is 44.7%. This is not unit margin, this is after all the overheads and indirect costs are taken into account. So the unit margin (gross profit/revenue) will be considerably higher. It's all in their last annual report.
As for the cloners. There are two big differences between Apple and the PC world.
1. Superior design and marketing - no one's been able to match their products, although the various android vendors are getting closer
2. IP and patents - which Apple guard viciously. Just ask Samsung
you're catering largely to people who like to buy the expensive product (a variant on the 'you get what you pay for' demographic, that presumably believe expensive and rip-off are mutually exclusive terms), so the market for cheaper high-quality products likely isn't so great that these other exploiters of human vice would want to spend more than they do for the products they already make.
Fuck off with your tl:dr, you've obviously come to the wrong place, Reg readers are not put off by an article with more than 140 chars.
PS Is "citation needed" the end of research as we know it?
PPS I could find out myself, but it's much easier to append "Citation needed" & let some other fucker do it for me :-)
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I've had a lot of outsourcing/BPO experience in the last five years and if you saw the quality of some of the operations I've seen, you'd be giving Apple a pat on the back.
Lets get one thing straight. These aren't Apple employees, they're simply a company servicing Apple. It's really the responsibility of the outsourced company owners to ensure workers are getting a fair deal. Regardless of this, Apple steps up to the mark, carries out inspections, sanctions itself and improves the conditions of those companies.
Look at how many companies outsource the making of their products and have absolutely no idea about the working conditions of the employees. They simply pay that outsourced company a specific amount per manufactured item.
Yes the working conditions might not be ideal but Apple are trying to make things better. A lot of commenters don't seem to realise that they're often risking a LOT of peoples jobs by "helping" these poor employees have a better working life. The better the conditions, wages, benefits, and so on, the less money the company has. If they increase prices by too much then they're likely to lose the contract because they're no longer undercutting US manufacturing enough to make it worth the hassle of outsourcing. With fewer contracts and less money coming into the company, employees start getting laid off. So great, you've improved the life of 30 employees but 70 other people have just lost their jobs.
tldr: Apple are doing above and beyond what they're obliged to and a hell of a lot more than a lot of other companies. Credit where credits due.
And also wonder why these complaints only stick to Apple, and not FoxConns other customers. After all it's FoxConn who run the factories, employ the staff and are responsible for everything... And it was a Microsoft production line that prompted the mass suicide threat.
Do Apple have a role - sure, but lets not forget they aren't the ultimate bad guy here. If apple pay Foxconn more I doubt they'd do nothing different but pocket the change.
This is all being stuck to Apple because... they're making more money than oil companies at the moment. To quote others "with great power, comes great responsibility". The 99% are all looking at Apple's billions and asking why they can shell out a couple of extra dollars per unit on the Chinese workers that make their products.
In an ideal world we'd all pay attention to these things all of the time. Truthfully, if you have no idea if your product is even going to sell, you probably don't want to spend months of your life making sure your entire supply chain is ethical - you just buy parts and services from other (hopefully) legit companies. Once you're making money though, you have a moral obligation to be a bit more diligent.
Of course, we're dealing with Corporate America here, so morals and ethics aren't big on the list. We'll see if Apple end up doing any more than the absolute bare minimum.
Apple is so sweet and kind.
Companies outsource in part so they can ignore how costs are reduced through working conditions. The very same mentality that allowed for prison labor. "I don't care how you do it, just meet the target output numbers."
Apple may be doing more than they are legally obliged to do, but that doesn't avoid moral obligations and avoiding responsibility by outsourcing or subcontracting.
Unfortunately, the dominant world financial systems don't quantify these extra costs, and the dominant legal systems allow responsibility to be passed off to someone else, anyone else.
I simply don't agree. Companies that outsource to third world countries are creating a lot of employment opportunities and really improving peoples lives.
You keep pushing for better working conditions, wages, benefits etc and you'll drive up prices so much that outsourcing wont be cost effective anymore and then the people you're trying to 'help' will all be unemployed.
I'm fed up with how many people complain that X employee is only paid $y a day and how terrible it is. If you take into account cost of living, food expenses etc. then you'd realise that it generally balances out. We may get paid more in the UK but then we pay more for our rent, food, and so on.
If that were the case, why not look closer to home first? You'd be saving the shipping costs and helping people who are more likely to appreciate your efforts since they're a lot closer to home. It says things both ways about us, but people everywhere have some degree of "hometown pride" in them.
So, again, if companies are creating jobs, why aren't those jobs at home, where unemployment is a going concern?
Reducing costs doesn't always mean increasing profit. Some companies get to the point where they're making a loss and the only way to even continue is to outsource. Yes some people will lose their jobs but then a lot of others will keep their job BECAUSE the company is able to continue operating by outsourcing.
Yes I think we need to focus more on helping ourselves but it's hard when there are so many (low paying) jobs that are going untaken because people see signing on as a better prospect that earning minimum wage doing a terrible job.
Apple reduces operating costs and gives a tonne of jobs to people who are barely getting through life. A tonne of jobs that most people in the UK simply wouldn't be prepared to do in the UK because the wage wouldn't be high enough to make it worth them getting up each morning.
Y'know, back in the day the coffee and sugar industries created a lot of work for poor, uneducated African folk. Gave em free travel to the new world, gave em an opportunity to be part of a new nation! The fact that European (and eventually US) merchants made a tidy profit from the arrangement seems only fair, given the investments they had made, and the cost of feeding and housing their workers. Right?
If you think that outsourcing your legal, financial, environmental and ethical responsibilities is fine so long as you chuck a few pennies the same way, then you represent the most unpleasant face of globalisation. You'd best be trolling.
with people justifying slavery.
As for unemployment - if Apple was serious about spreading the sunshine around it would be following the old Fordist model of paying workers a higher wage so there's more money in the economy and more people with the spending power to afford consumer goods.
But since Foxconn's workers think they're lucky if they - literally - get an extra biscuit at tea time, it's obvious that empathy and compassion aren't the prime motivators here.
I'm sure the workers were thrilled when Foxconn's CEO compared them to animals and said that managing them gave him headaches. (It must be *terribly* hard for him.)
Isn't that just making a virtue out of being a little bit less shitty than others? It's not virtuous; it's still shitty. The fact that Apple make their suppliers wade through shit that's only waist high as opposed to chin high doesn't alter the fact that everyone is still covered in shit.
I've no real idea how much margin Apple makes, but I am willing to bet that kicking 10% of that back down the chain would make a monumental difference to people's lives. But that's not what it's about is it?
And then we're surprised when people set up camp outside St. Paul's.
Currently, Foxconn are contractually obliged by Apple to meet certain workplace conditions, which, ostensibly at least, they seem happy enough to comply with so there's no reason why employee pay can't be among those obligations. What are Foxconn going to do, tell them to shove the order up their arse? I think not.
As you pointed out, Apple do seem to get an unhealthy share of the blame, partly due to them being an easy target for internet-shouty-man (they're popular and successful, which he, well, isn't) but also because the brand image they've spent ungodly amounts of time and money buffing to a wallet emptying perfect sheen demands that they be cool, or suffer under the label of duplicity. Sweatshops and worker exploitation just aren't cool any more (even if the exploitation is allegedly mitigated by relative local conditions).
The problem with any discussion about 'ethical capitalism' is that it's always met with a sort of weary cynicism that says there's no point in even thinking about making things better because the problem is too big, the players too powerful, and the home-truths a little too uncomfortable. It's a fair enough argument; you can't change things overnight. But you can make small incremental steps in the right direction. An organisation like Apple has the money, influence and marketing talent to not only 'do the right thing' but also loudly point out that they're 'doing the right thing' and make money off that fact.
Will Apple 'do the right thing'? Possibly not. But there's certainly no harm in suggesting that they do.
I'd be willing to pay more if it was built in the West, but if it is being built in the emerging markets then no I am not.
Sounds harsh, but we have to look out for our own. Our economies are becoming weaker because places like China will accept low wages. If they are going to earn a developed countries wage, then I would want it to be built in a developed country. Jobs are being lost for cheaper products and if they are not cheap, then why have jobs taken away from nations like the UK and US.
It's not Apple, it's the consumer. Time after time we see that people would rather buy a crap product for 90% of the price rather than pay extra for a good one. We get this sort of twaddle when ever protectionist tarrifs come up. The tarrif (in this case paying more to workers) gets passed onto the consumer. If the consumer was willing to pay it companies would already be manufacturing localy and not dealing with transportation costs, unstable governments (lets give congress the benefit of the doubt for now) etc. But they are not. Fix the consumer and the companies will follow. As long as we collectively don't care where our cheap widget came from..
This topic has been in the news lately, but I don't recall seeing any kind of informed opinion or well educated estimate of how much the price of an iDevice would increase if assembly were moved to the US.
That still leaves the component manufacturing happening overseas for Apple to address later, but would assembling iPads in the US add twenty dollars or two hundred dollars?
Workers are not interchangeable, except to the extent they are wholly owned and in bondage. You must believe in Social Justice before you can do the calculation and neither Apple nor anybody else in Silicon Valley believes in Social Justice. In China they have Slavery, in Silicon Valley they have Indentured Servitude ("no poaching"). The Business question (cost minimization) can be solved if you assume the culture permits slavery, and the answer you get presumes slavery - there is no reasonable way to back out the assumption.
St. Steven parked in Handicapped Spots. Are you surprised now, or were you then.
Apple is THINKing no DIFFERENTLY than anybody has for the last 6,000 years about a business method which has existed no differently for the last 6,000 years.
If you want to really think differently, try this:
The cost per unit wouldn't increase much more, but then allow for the shortages, because we'd make half in the same amount of time, then all the returns because it was made on a Friday. Mondays are out because half the staff would fail to turn up for work and throw in the odd strike every now and then for good measure.
Could be worse could be made in the Med....or the US.
There, have I insulted enough people yet?
Americans haven't given a damn about quality for at least 12-15 years that I remember. All they care about is price. Given a choice between a good tool/boot/laptop for $100 and a crappy one that'll break in a week for $95, they'll take the $95 one in a heartbeat. I've seen friends buy 3 of a crappy $60 car jack, when the $80 one would not have broken.
This is why places like Walmart prosper.
It makes it difficult for folks like me willing to fork out a little extra for something that'll last and function well. For example, Sears now stocks mostly off-brand crap tools and the good Craftsman stuff is now hard to find because it doesn't sell.
There is an "unnamed co-conspirator" also bearing responsibility for the situation mentioned in this article and it is the Chinese government itself. They are *easily* capable of passing laws which, if not remedying the situation entirely (they after all do not want to discourage investment and economic growth) would at least ameliorate the worst of the abuses.
A good question to ask is what is preventing the Chinese workers from unionizing. Is it because the workforce is too closely surveilled and any such activity is immediately met with sackings (or threats and intimidation of various kinds), or are there laws there prohibiting them from organizing)?
Western consumers can (and I am sure that many of them do) shield themselves with the idea that products which they buy have appeared on the shelves of retail stores, both physical and virtual, by a long process of legal actions and transactions in many legal jurisdictions, and that each of those jurisdictions have outlawed any egregious abuses, or have given their workers the ability to unionize and thereby ameliorate the abuses themselves - although obviously they do not explicitly reason it out like this. In an ideal world, this chain of reasoning would be admissible and correct. But in the real world...
And it's a bad one for the West to deal with. China is overpopulated. It's a known bullet point in Chinese government concerns, and it's well known they're trying to put a cap on it. In their eyes, they have too many workers, and that makes them expendable. Look at the way they operate their mines. Instead of lots of high tech, they just use lots of workers. In one of the deadliest industries known.
For both the reasons you mention. There is an official union, which is just a branch of the ruling communist party and is just another instrument of state repression. And if workers actually try to unionize independently, then they'll be sacked and hired thugs from the companies in question would beat them up and throw them out of the company-provided housing.
A great writer once said that it was interesting how manufacturers always complained about high wages, even though high wages led to an increase in national wealth. Yet they never moaned about high profits even though they came at the cost of low wages and were often damaging to the country.
Apple is no different to many other companies around the world and they refuse to acknowledge that their high profits come at the expense of low wages, forcing workers to live at or below the level of subsistence and as we see today, the concentration of wealth and therefore power in the hands of a minority. The consequence will be that in about 40 years, it will be the turn of our children to provide the low wage labour to these companies at the expense of Chinese jobs.
The write who highlighted that abusive profits were not good for the country; Adam Smith in the 1770s
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Sadly it's not only the Tech giants who take advantage of China's low manufacturing costs, it's the entire Western consumer goods market.
Apple "paying more" will not eradicate the issue at hand, rest assured if Apple (or ANY other tech manufacturer) were to increase salaries and improve working conditions, this would more than likely cause a long term domino effect where other Chinese based manufacturers would need to follow suite, irrespective of the industry they manufacture for.
In the long term China would cease being the cheap manufacturing hub of the planet, prices would escalate, but more disturbing is how these companies would resort to lowering costs. Would they push manufacturing to other countries like Burma, Vietnam or Cambodia? Either way the goods need to be made and rest assured some despot regime with a shady human rights record would open their doors to those contract manufacturers seeking cheap labour. Another factor not to be overlooked is the environmental issues within these nations than embrace low cost manufacturing.
We're going through one of the toughest recessions ever experienced and knowing that my branded product was made in Europe wouldn't overly bother me about forking out another £25-£50 for a games console, TV, laptop, tablet PC or phone if I knew it was contributing to the British or western economies which could do with the extra economic whack that could hypothetically be provided if manufacturing were removed from sweatshop culture countries.
Sadly this will never happen, we love shopping, we love a bargain but we whine when things cost too much, but at the same time criticize the tech industry for the appalling work conditions provided by contracted manufacturers' within their Chinese based facilities.
The bottom line is, we're all hypocrites and it's not just Apple and Dell who are responsible. We all are, perhaps we, the consumers should make a concious decision to boycott Chinese made goods?
I'm sure you'll get lots of replies saying that avoiding oppressively-made goods is just cutting off your nose to spite your face, but you're right - and it is possible. Unfortunately it's difficult to live in the UK and avoid it 100% of the time, but it is possible to get 99% of the way there.
To all those who get a new phone every year, replace their laptop every year, or buy cheap clothes: there is blood on your hands. You don't like me saying it, because it's true.
You *can* get fair trade, sweatshop-free clothes, for example - socks, pants, trousers, shirts, shoes - there's lots of choice and the prices aren't extortionate. You might think that not getting the latest smartphone won't make the tiniest difference to Apple or HTC, but what it means is that you're not contributing to slavery.
Unfortunately, it's not so easy when it comes to electronics - nearly everything is made in China (though my monitor was made in Europe - no doubt the components came from somewhere horrid). But this can be minimised this by buying less, not falling into the constant upgrade trap, and not thinking of electronics as disposable consumables.
Finally, Matt Assay: Fairtrade chocolate is available everywhere - are you going out of your way to buy the slave stuff?!
... For factory workers in the main coastal areas are running at about 20% per annum. $US330 a month is the average now. It will be $600 a month in four years.
Note that most factory workers also getfood and accommodation, and pay no tax. They have access to free medical care of some kind-no small thing in a country with a pay as you go medical system.
There are abuses, some of them bad. However, the labour market is a sellers one. If a factory sucks, the workers leave. Not sure if the Romans had that problem with their slaves...
Most of the comments on this thread, and indeed the article by Mr. Assay, are effectively bullshit. Imagination and ideology, with a levening of racism and some US state department koolaid, are not a great basis for reasoned argument.
These circumstances are extraordinary but really do highlight the irresponsibility of non manufacturing megacorps.
So how do they get to share Apple's success. Obviously 60% get the joy of working in excess of 60 hours per week!
Yep, Well I'm not a not a, not a fanboy fanboy.
There are companies all over SE Asia who have been producing kit for Western tech companies for 30 years or more.
Alan Sugar's autobiography is a must read if you are interested in this. You see how there he was knocking out low tech electronic goods from an east end warehouse, and then suddenly he's dealing with companies in Asia who will build anything you need. They have the production lines ready so all you need to do is provide the tooling and design. You don't have all the hassle of setting up factory with a production line, you just pay the factory to make 50,000 Em@ilers using your tooling and design (and supplying them with any custom chips you might need).
The cost saving isn't just in labour or lower costs of regulation, but the fact that many of these factories can turn their hands to anything. You just buy the tooling and off you go. It's flexibility and cost saving that certainly in Amstrads heyday didn't seem to exist in the West.
Chances are your flash premium brand DVD player was knocked out in one of these factories. It's all very well going "oh I'd pay more for my iPhone" but what about the DVD player, TV or every other piece of electrical equipment in your house that happens to be made in SE Asia?
Seriously. Apple makes a lot of profit on each and any piece sold that was made in China. They take that and add it to the incredible pile of cash they are hoarding. What do you want, a Fairtrade iPhone? You are not getting one. Because phones not locally grown by families of smiling foreigners in some pittoresque little village, just seeking to get a decent price so they can have enough rice.
Excursion: Maybe you are old enough to remember what it cost to own a Powerbook back when they were made in a pittoresque little corner in Ireland. Those puppies cost 2-3 times of what you are shelling out for one today without even adjusting for inflation. Do you want to pay €2500k for the low end model? No? See?
Our whole digital society of the 2000s is based on the exploitation of cheap chinese labour. Just like your €5 T-Shirt is based on the exploitation of Bangladeshis wading in toxic sludge up to their genitals. And think about the cocoa, just think about the cocoa. Just because we no longer have colonies it does not mean that our affluence is not based on the blood and sweat of the 3rd world.
So unless you want to kiss your precious lifestyle goodbye: Forget it. As long as you vote for cheap labour with your money, it will exist. No happy-do-goody-thank-God-I-don't-have-to-think-about-it-LOGO will change that for one bit.
I would happily pay much more for electronics - who *needs* a toaster for £5 anyway? - if it meant I wasn't contributing to slavery.
Yes, I would happily pay £2000 for a laptop - my current one is over 5 years old and works perfectly, because I have looked after it. I know plenty of people who get a new laptop every year because they treat it like crap and, hey, they're only cheap, thank goodness for slave labour! Let's just bin it and get a new one!
So bring the fair trade, sweatshop-free world on - I'm happy to pay my share to live in a just society.
I recall Helsinki was full to cellphone-toting teenagers already in late 1990's when they still were mostly made in "high-cost" countries like Finland and Sweden and cost something like 4x present prices. Higher prices for consumer electronics would just mean people would pay more attention to their purchases, and not throw the device away every few months. It is not like we would go back to writing letters on paper and reading books in candlelight.
Let me see: Dell buys China-manufactured stuff, Samsung does too. Lenovo builds their kit there and Toshiba does too. Asus builds in China, so does Acer.
In fact, practically every single technology company on the planet employs Chinese labour at some part of the process.
So you write an article bemoaning the fact that technology manufacturers don't browbeat the Chinese factory owners into better conditions for their workers (unlike all of the 'nice' private enterprises out there - hah!) but do you headline it 'Why I'd pay more to tech manufacurers, etc. etc.'?
No. You have to cite Apple. Lazy, lazy, lazy.
All these "it costs $X" calculations; what do they actually cover?
- Do they just mean the cost of components?
- Do they mean components + labour to build?
- Do they cover parts, assembly and packaging?
- Do they cover manufacturing, packing and worldwide shipping Phones4U?
And then, what about the cost of research, prototyping, testing, QA, documentation, legal, blah blah blah.
Saying "they make $300 on each unit" or "their margin is 80%" is meaningless without knowing their upfront costs and ongoing costs (like marketing).
I heartily agree with you on the problem, Matt. But as for the solution: trying to raise consumer awareness and expecting the industry leader to voluntarily change things are merely pipe dreams.
What you might call "ethical capitalism" is an illusory, feel-good practice ("Buy some Fair Trade, feel better about yourself, leave the system itself intact so we can keep doing whatever we want, thanks" is what it should say on that chocolate). Regulatory capitalism, OTOH, is something we successfully apply every day at the national level. It's why you're not drinking arsenic when you have a glass of tap water (actually, some Americans are, due to relaxed federal standards during the Bush administration).
But this particular phenomenon is located at the global level, not the national level. So the only way this is going to change, is when a global institution forces the whole industry to live up to certain standards. Apple, Dell and every other company must be forced to play by the same rules and be subjected to the same inspections, regardless of which country they put their factories in. That means creating global institutions that are capable and empowered to do this. We have a World Bank and an IMF, and we used to have a Bretton Woods system, so the principle itself is really not that novel. It does require some considerable political effort, obviously.
The necessary sea change, therefore, is not in terms of how people feel about their products, but how they feel about institutions acting for the common good. And America, poisoned as it is with frothing anti-government and anti-regulation rhetoric, they're pretty much permanently fucked, doomed to drown in a rising sea of really cheap Walmart crap. But we in the rest of the world can still make a go of it.
If Apple were to take charge of their own Asian production and pay workers "fair" wages and only make "fair" demands (based on western notions of fairness) then before long the workers will demand more for less and the notion will ripple through the Chinese economy bringing them to their knees!
People say they'll do all sorts of things that don't stand up to empirical evidence. They say they want to see underdogs and new teams in championships, but traditional powers bring in the ratings. Union teachers drive Korean imports. If nobody watches reality tv shows, where do the ratings come from? And on and on.
Just because people claim something, don't believe it. A lot of people have shown that they're driven entirely by price with no regard to quality ... sometimes because some people have no concept of quality.
Holland outsourcing to the UK helped Britain get wealthy, and Britain outsourcing helped the US get wealthy, etc. Japan outsources, Korea is starting to, and ... well, this all goes in cycles. Remember how China outsourced to Europe during the age of navigation? No, of course not, you're not that old, but you can read about it.
For hte sake of balance, here's an interesting counter-argument to the "Apple should produce their products in the USA to help create jobs" line of thought. Its not just the extra cost of paying higher wages for US workers:
It's true that China has certain manufacturing advantages of scale and environment that you won't find in many other places.
I for one don't think Apple should repatriate those jobs. They should be forced to raise the standards for their Chinese employees: a higher minimum wage and shorter working hours.
Already Foxconn is looking abroad and building manufacturing plants in Brazil citing increased labour costs as the reason for building outside China. The conditions for workers in chinese manufacturing may seem unconscienable by western standards, but if it weren't for western demand for cheap shit, and chinas ability and willingness to provide cheap labour then there would be hundreds of millions of chinese still subsistance farming in an agrarian economy instead of, as they are now and have been for the last 50 years, moving into the middle classes and creating their own demand for cheap shit. As China continues to fill up with money and its per capita income continues to increase over the next half century more and more chinese will elevated from poverty to middle class and inexorably China's economy will follow western economies and manufacturing will move to parts of the globe with cheaper labour and China's economy will become more sevice oriented.
This is the joy of global capitalism. It is the most effective way to raise living standards around the globe, and its our demand that shit be cheap that determines where the focus of those living standard increases are directed. The rub is that the transitional steps between poverty and middle class often appear very unpleasent to those who never had to go through it.
Several problems with that model.
1) Limits to Growth. This transition to higher living standards through outsourced labor is running into ecological and sustainability limits. China is already one of the most polluted countries on the planet, and the fight over energy and minerals is already incredibly intense. The Chinese have caused nothing but misery in Africa with their ruthless competition for its mineral wealth (in a way, we have effectively exported misery to Africa by exporting jobs to China.)
You simply can't keep the cycle of "moving to the next cheap labor country" going ad infinitum if that means they're all going to destroy their environment and start fighting over the same resources.
2) It's not enough to export jobs, you need a stable infrastructure and the right political environment in order for it to also permanently raise living standards. Most people don't realize that this, but we have been outsourcing to countries like the Philippines and Thailand for much longer than to China. But due to certain conditions there, it hasn't raised their standards of living and remains pure exploitation.
Sometimes a great deal of outsourcing does not bring about these idealistic changes that you describe; rather it remains mere exploitation with no permanent benefits to the target.
Actually I mostly agree with you.
1) Absolutely there are limits to growth. You eventually run out of people in poverty who you can pay to do crap jobs. Then the cheap shit stops being cheap. It becomes expensive, and nobody wants expensive shit. I'm not sure it’s what you meant, but when you say:
"This transition to higher living standards through outsourced labor is running into … limits."
you are suggesting it’s the outsourced labor that’s the problem. I suggest it’s the higher living standards period that is running into sustainability limits. It’s our already high living standards not their improving living standard that’s the main cause of that. It’s not fixed by telling the world’s poor "You cannot work your way toward having what we have." It’s fixed by us accepting decreases to our living standards
Despite limits to growth the outsourcing of crap jobs to places with cheap labor is the most effective (only) way that vast numbers of people around the world can be raised out of poverty.
2) Yes you need more than just pouring money into a place to permanantly increase standards of living. China’s stable communist government that genuinely seems focused on the greatest good for the greatest number of its citizens (to the exclusion of concern for the individual which is reflected in their disregard for human rights) has allowed china to ride the gravy train to middle class in a way that no other nation could have.
But even if you create the required economic and governance environment in places like the Philippines and Thailand through UN diplomacy and IMF carrots and sticks you still then need to pay them to do something and that thing is going to be stuff that you can’t pay people in developed economies to do cheaply. i.e. cheap labor making cheap shit.
It’s still the process of global capitalism finding the cheapest place to get something done that in the end will grow the economies and the living standard of the worlds developing economies.
Last time I checked, Foxconn's employees were the sole responsibility of Foxconn, not Apple.
I understand why Apple currently have a great big virtual target painted on them by the media: they're doing what every other business <i>dreams</i> of doing: winning the old-fashioned way, by making stuff people actually want and selling it to them at a healthy profit. (Jobs never claimed to be Mr. Nice Businessman. Business was, and is, war.)
As for the employees in Foxconn's factories: if it's such a massive shithole—as the media insists—why are there so many Chinese clamouring to work there, and insisting that it's a far <i>better</i> place to work than other factories?
China is going through the same process <i>every other major Western nation went through</i>. There were sweatshops in the <i>UK</i> only a couple of generations ago. In the US, it took decades of strife and effort to get unionisation off the ground. France, Germany and Italy all went through the same thing. That's why we <i>use</i> terms like "Developed" and "Developing" to describe specific nations. China is, despite its economy, still in the <i>"Developing"</i> phase, as are India, some parts of the Middle East, and parts of Africa.
We can wring our hands all we like, but the fact remains that, as long as consumers demand more for less, there will always be a market for cheap labour. Right now, that market is China. In a generation, it'll be some other country—or none at all as factory automation technologies are getting better and better.
Foxconn are already looking into automating most of their processes, so those cheap Chinese labourers may soon find themselves being replaced in their turn by <i>free</i> electronic machines.
Apple is certainly not alone. Probably every bit of tech on my desk or person is involved...and I am feeling bad about those chocolate bars I bought today. It seems, however, that its practices are opposed to the image and ethos that Apple has always espoused. What's happening isn't a surprise and is to be expected from Walmart or Dell. But Apple? Are they that greedy they can't make a better effort at improving conditions and environmental health? If you think about it, with Apple's huge cash position, raising worker wages would be a great way for them to hurt their competition, whose lower margins wouldn't give them the room to follow suit.
Chinese workers getting underpaid.
The panda being kept alive just because we think they are cute.
Polish workers getting treated like cattle and having to work 16 hours a day in Holland.
Russian girls being lured by false promises and then forced to work in prostitution.
Us blaming the Chinese for the polution while we first shipped all have industry to them so they could make us *stuff*
The US putting the rating agencies on the EU to downgrade some countries, so at least we look worse then they do, so they can get cheap loans.\
Us subsidising the EU food industry creating overproduction which we then dump below cost price on the African market, so their farmers can't make any money and will stop farming althogether making them dependant on us
But the thing is, life is supposed to be unfair. It is natural selection. Everybody tries to get the advantage. So their race/country will win. It is called natural selection, and it has served us well in the past.
Anything you buy, someone has been abused, wronged, underpaid and overworked to make that product (even if its just the cleaning ladies of the building). That's what capitalism does. To maximize profit you have to minimize the costs.
So stop whining about Apple abusing their workers to increase profit margin. And if you are willing to pay more, you will probably just increase their profit margin, because they will just find another way to abuse their workers. So in fact then you are not helping but contributing to what you perceive as a problem.
No, it's not natural selection, it's exploitation, they're different things.
If some thugs broke in to your house and tied up your family and stole all your stuff, would that be okay? It's just natural selection, after all - your family were weaker, survival of the fittest, innit?
Since the Industrial revolution, "dirty" industries like steel production and manufacturing have chased cheap labor to guarantee the bottom line. In the 60's and 70's the US led the world in steel and automobile production. This comparative advantage gradually moved from Pittsburgh to Japan, then Korea and eventually countries like Vietnam and China. Recession and unemployment inevitably followed. Highly paid manufacturing and industrial jobs are now just a distant memory.
This cycle is endlessly repeated in almost every hard goods industry today, from automobile manufacture to chip production. This basic rule (sales price - input costs = profit) is unlikely to change anytime soon regardless of individual or collective good intentions.
So what is the solution ? There isn't one really. Attempts to regulate such behavior increase production costs and send more jobs overseas. When (if) all nations reach a comparable level of economic development, manufacturers (read capital owners) will then re-locate plants based on "regulatory" considerations: tax breaks, labor laws or more lax ecological protections. No capitalist society has really changed this fundamental human situation in the last 300 years, although a few have made it more palatable. If anything, the Chinese have just reverted full-circle to many of the worst excesses of the industrial revolution, which is pretty ironic for a Communist nation.
So if we fully apply Adam Smith and Karl Marx's reasoning to this conundrum, the logical conclusion is full-scale robotization of most or nearly all manufacturing processes. One reason the Foxconns still add value is that they can get new products out in an industrial heartbeat. When that can be done with a keyboard and some wetware, the machines will eventually rise.
So your next question must be: what happens then ? ..... what will people do with all their free time when they don't (can't) work anymore but all have Iphones?. Your theories are welcome.
according to both Smith and Marx. Both believed in the Labor Theory of Value. So if and when human labor input factor is zero in a product, its market price will also be zero, just like the air we breathe, according to both Smith and Marx. (of course I don't agree with the Labor Theory of Value, which underlies every misconception calling any employment as "exploitation")
Of course, in reality, people will find better things to do, even after they are freed from the present drugery. Before circa-1900, 70% of the population in the US engaged in farming; today, only 2% still do, as farm machinery replaced human labor. Before that took place, people did not have time watching movies or professional sports. People instead worked 12hrs a day, six days a week, here in the US!
I don't see why it should be lamentable if some time in the future people have to work less to stay alive, just like they have to farm less nowadays to stay reasonably well fed.
As for why manufacturing jobs have been shipped over seas, it's called Ricardian "Comparative Advantage." The US is exporting military "might," the dollar, and farm products overseas. So long as Chinese and Indians want the dollar and so long as their largely manual labor farm sector can not compete against the mechanized farming in the US, they have to work hard in the factories in order to earn the dollars. Conversely, so long as Americans can make an easier living being bureaucrats (whether on Wall Street or in uniforms), merely waiving union membership cards or welfare cards, they don't find the need to work hard or work at all.
The problem is that China is not too keen on controlling its industry to day.
Minimum wages, work conditions and things like that does not concern The Party right now,
Add to that the fact that trade unions do not fit to well into an totalitarian state.
So the problem like the solution lies inside China.
The naive part is to believe that companies in the west, or where ever, would do more than "lip service" about things like these. And while your personal "lip service" is that you are prepared to pay more for an Apple, my solution is simply newer to bye one.
Ha, didn't this very publication publish figures that the unit cost of an iPhone is $188, but retailing for $699?
I wouldn't exactly say people are 'demanding' apple products at low cost. Appe products by and large are exorbitantly expensive and until the tablet boom, any similar product at similar spec would likely be several %age points cheaper.
Apple it would seem have forced a trend with tablets where every vendor is now trying to sell normal products and "premium" prices. and most of them are making massive profits.
How about Apple shave some of that ridiculously large profit margin and pay them more or move their production to another place where it's easier to check on conditions? Feel free to pay them more, oik.
This is not the same as manufacturing issue, you know. You can't easily move chocolate plantations somewhere else, they need a certain climate and tradition. Meaning that either the kid or his parents will be getting that job in any case, regardless of whether wages are high or low, simply because those plantations need workers and the locals are the only potential source of labour.
So the case for trying to improve working conditions in that sector, if necessary by paying more for our own chocolate, becomes much stronger.
Tim Worstall has written something on the Apple/Foxconn issue over at Forbes. He says that there shouldn't be any boycott of Apple goods because of the suicides at Foxconn or the working conditions.
Which shows this Appl€ cult at its absolute worst.
Most manufacturing companies are happy to be getting a 30% profit margin. What is Appl€'s profit margin - 300%???? ... And the author's solution is to not only justify Appl€'s extortionate margins, but to demand that they rape the comsumer in the ass even harder?
The Stockholm Syndrome of the Appl€-Fanboy never caeses to amaze. Thankfully, the Reality Distortion Field does not extend to all of us.
"Fair trade" == Slavery, as it makes both the worker and the employer subject to the commands of someone else.
How is "fair trade" at union wage level working out for the millions of unemployed in Detroit?
The high profit allows Apple and FoxConn to introduce more products and hire more workers, lifting many of them out of worse circumstances. It's not like any of the workers are forced work there, like those unemployed youth mistakenly signing up with the military before the wars now finding themselves forced into deployment.
If you think those workers are paid too little, go there and hire them and promise to pay them more . . . if your offer is good enough and solid enough, many of them probably will sign up with you.
The idea of inserting another layer of bureaucrats to enforce "fair trade" is repugnant and morally reprehensible, considering how all those bureaucrats have fattened themselves at the expense of workers over the decades. In the absence of those busybodies, workers are free to choose from competing employers offering better and better wages and work environment. Worker wages in India and China have been going up at double-digit per centage every year in recent years, just like Detroit in the 1920's. Bureaucratic "standards" and collective bargaining put an end to that improvement in Detroit in subsequent decades. Until the last couple decades, China and India were frozen time capsules capturing the 1940's, thanks to their own busy body "standards" setters in a previous generation.
You obviously don't understand what the Fairtrade mark means - it means a *minimum* price is paid, so the producers can earn a living wage. It doesn't set a maximum. If the producers can get a higher price-" - if the global price for that commodity rises, for example - then they can sell for that.
I've met a coffee farmer from South America and my girlfriend has met factory workers from India, and they told us that the Fairtrade accreditation system has made a big difference to their lives. They can afford to send their children to school, for example.
How you can see that as a bad thing, I don't know.
It's a bad thing because you and your girlfriend should have have been paid to go to South America or India on the backs of those poor workers to begin with. If you talked to the the South American and Indian employed trying to get jobs, you'd get a very different story.
I'm sure if you go to Detroit and talk to union workers, you'd hear praises of union wage rules too; yet what you'd be entirely missing the millions of unemployed in the city due to the same wage rules.
Wage is determined by the supply and demand, just like any other products and service. Price control would only interfere with market price discovery. The reason why South America and India are so poor is precisely because decades ago their governments thought price control and red tapes were good things.
The "maximum" is automatically lowered after paying for the trips of you and your girlfriend, and all the bureaucrats and interpreters that have to be hired to kid-glove you and your girlfriend. All that comes off the backs of the workers and the robbed employment opportunity of those waiting outside the factory gates.
Look to Detroit to see what your artificial "minimum" price does to an economy: mass unemployment and social break-down. That's precisely what South America, India and China were laboring under before the "greedy" capitalists like Apple brought them a better alternative to their former "fatherly" slave-owners. You and your girlfriend are part and parcel of the problem, just like those of your ilk who exported socialist bureaucratic red-tape revolution to those countries more than half a century ago.
Well my girlfriend paid for her trip to India as part of a group, and I went to see the South American guy at an event in Leeds hosted by the Co-op, so stick that up your viewpoint. Don't try to second-guess me, I'm one step ahead of you on all this because I live with my ethical decisions every day instead of dressing up selfishness as an political-economic position.
If you want to be greedy and selfish just admit it. Somehow you think that paying people subsistence wages is empowering for them? I bet if you were living below the breadline with no way out you'd feel great about it, right? Perhaps if they were paid even less, they'd be even better off!
Bureaucratic red tape is what prevents black people being chained up and made to work for nothing, it's what stops kids being forced up chimneys to clean them, it's why children can't work in mills any more. Sure, it puts the prices up but I think worth it overall. Would you be happy if your children had to work instead of going to school? Why do you want to deny that privilege to people based on their distance from you?
Maybe Apple and the other tech companies should screw the wages even more to the point that Chinese workers finally stand up, say no more and demand not just decent human rights but an actual democracy from their OWN government (who should be governing for their citizens) rather than expecting foreign companies (who serve no-one but their own shareholders) to do so.
Western companies and governments attempting to increase wages in China is a nice humanitarian concept, but in doing so they are also further excusing, validating and indirectly supporting a non democratic government that has proven to quite happily toss aside individual human rights when there are so many citizens to simply replace any worker at any time.
The only way the rest of the world is ever going to be able to compete fairly on a level playing field with China is when China becomes a country playing by the same rules, controlled and held accountable to a system determined by the democratic voting power of its individual citizens rather than by a self selected government who will self serve itself and do anything it wants under the guise of nationalism and 'for the country'.
Unfortunately for the chinese workers, we all like cheap products more than we care about them having the same basic democratic and human rights that we have by default.
If we really cared about them we wouldn't be simply talking about paying them more to alleviate our guilt, we would be helping to fund their own democratic revolution, unfortunately there would be a shortage of Iphones during that revolution and if it was a successful democratic revolution we'd end up paying more for our Iphones too.
As the blessed Steve made clear to Obama (http://www.heraldtribune.com/article/20120123/ARTICLE/301239999/2055/NEWS?Title=Apple-s-Jobs-to-Obama-jobs-aren-t-coming-back-to-U-S-), it's the massive number of skilled workers and the ability of companies like Foxconn to ramp up/down and rapidly make changes which simply cannot be matched in western Europe or the US economies. Of course there's nothing to stop Apple reducing their profit margin and insisting that the Chinese subcontractors pay their workers more.
Nobody forces employees to work in Apple suppliers' factories. They choose to do so because the alternatives available in their country pay less or have worse working conditions. For example, would you rather scratch 5p an hour working arid farmland, or earn 15p an hour in an Apple factory? Factories owned by Foxconn and Pegatron are a stepping stone to better-paid, more pleasant jobs that become available as a country’s economy develops – ask any South Korean. Or would you rather the workers stay out in the fields, and in poverty, forever?
To suggest that consumers should pay more for a product because it is made by a company investing in a developing country is ludicrous.
And to all those screaming "Fair Trade!", I suggest you undertake a little research to understand just how much economic damage the Fair Trade programme causes through market distortion.
Jack Tramiel was known for squeezing his suppliers (and later, competitors) out of business by driving prices as low as possible. So if Foxconn's manufacturing expenses rose and it couldn't remain profitable anymore, Jack wouldn't pay a cent more. He'd just find another supplier or tell this one to continue as is (until it goes bankrupt).
Buying Apple products while complaining about the conditions of it's workers is like a bloke who continually throws more wood onto a fire but complains that the fire won't go out.
If you want Apple to change, stop buying their iProducts.
If you're not willing to do that, then stop whining about the workers' conditions, or anything else the company does, because it will never, ever change.
This whole outsourcing for sub-human wages actually extends far and wide through western civilization. Most ad building these days is being done in India. Publishing houses sell the ads, but everything is shifted (images, text files, etc) to India, where very low paid workers assemble the ads. Once the ad is built, the entire pdf is electronically shipped back to the publishing house where it gets dropped into the page layout and published. Most of the ad builders have a private website where the ad buyer and publisher can view pages and accept/decline/recommend changes on the fly.
Same thing for the legal profession. Many law firms (particularly the large ones) employee researchers in India (and other countries) to go though case law records to find the material they need for their cases.
We all already know about call centers. Having had to support publishing for a time, I had to deal with Quark on a regular basis. Call center was in India, and it was pure torture trying to get authentication codes for upgrades over the phone - the codes were 48 characters in length.
Even McDonalds did some market tests where the drive-through order taker was actually in a foreign call center. The customer would place the order, which was then pushed to the local McDs to complete. The idea was dropped (at least for now) due to customer unhappiness with accent issues.
ABC News did a story not too long ago about the foreign product content in our homes. They would pick just one room and then remove everything made/assembled overseas. Guess what? The one episode I saw only one item was left in the room. So much of our day-to-day stuff is made overseas in sweatshops that the average consumer probably can't even begin to comprehend it. So before casting that first stone, check around your house.
Anyone suggesting mandatory enslavement should try the medicine themselves.
For what it's worth, the workers at FoxConn actually have the freedom to quit, so they are not slaves . . . unlike the young American boys and girls who have mistakenly signed up with the military because dumb minimum wage laws have banished private sector jobs for the same young people.
If you really want to object to Apple (which I have no problem with) then you should be taking issue with their walled garden philosophy. The conditions at the Foxconn factories are already far better than the Chinese average. Should this stupidity actually gain any traction it will actually hurt workers/conditions in China by slowing/reversing conditions.
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