This is not going to play well around the world in places where China’s employment practices are seen as fountains of unfairly cheap labour. Officials in Yantai in Shandong have removed 56 schoolchildren working as interns from a Foxconn factory in the city. China’s labour laws specifies 16 as the minimum working age. The interns were between 14 and 16.
How they got there is the question. Hon Hai Precision, Foxconn’s Taiwanese parent, says its Yantai factory asked the local development zone for help in covering a severe labour shortage last month. The interns were supplied by the development zone from local vocational schools. This Bystander suspects that blind eyes were turned on both sides as children turned up among the thousands of other legal-aged temporary workers supplied to do the tedious and waring work on production lines. And before you ask, no, it doesn’t make iPhones or any other Apple gizmos there; it produces Nintendo Wii gamepads.
Hon Hai says employing underage interns is a violation of its own policies as well as China’s labour laws. It says an internal investigation has turned up no further cases of underage interns working in its factories. It will let interns of legal working age leave if they so choose. Its interns don’t work for free but are paid a fraction of a regular wage.
We do know of a previous case where local officials in Henan were given targets by their township to recruit staff to Foxconn factories there, with their work performance judged according to whether they fulfilled their quotas. But once bitten twice shy. We suspect that the Yantai case will result in some exemplary punishments. We’ll be looking to see whose are the harshest, the company’s or the authorities’, and, if the later, from what level they are handed out.
Foxconn, the Taiwanese-owned electronics contractor whose Shenzhen plants were hit by a wave of suicides earlier this year, is to expand its presence in Chengdu with a new assembly plant there, the latest of a number of new inland factories. Foxconn is owned by Hon Hai Group and numbers some of the best known global technology brands among its customers such as Apple, HP, Sony and Nokia.
Since the suicides put the company into the international spotlight it has opened new assembly plants in Henan, Hebei, Shanxi and Hubei provinces as well as raising wages and improving living conditions for workers at its giant Shenzhen operations. The Chengdu plant is expected to produce advanced panels for LCD TVs and tablet PCs. Foxconn has already has started producing Apple’s iPads there and the new plant will let it expand production of these. Hon Hai has reportedly allocated $275 million for investment in six new Chinese plants, most of them inland.
Much of the commentary about China written by non-Chinese, scholarly, commercial, journalistic, is written by Americans, as weight of numbers suggests it would. That may be, though, why historical perspective is often missing. America is a country where history is regarded as the refuse of the present rather than prologue to the future. As we read coverage of the strikes and pay rises at the likes of the Foxconn and Honda factories and of Uncle Wen Jiabao’s tribute to the migrant workers filling all the other workshops and assembly plants of China’s industrial heartland, this strikes us as being particularly the case when it comes to China’s economic development.
There is an arc to industrial revolutions. Economies transverse it in their own ways and at their own speeds, but they don’t avoid it. That is as true for China as it was for England, Germany, the U.S., Japan, South Korea and many others before it. One characteristic of China’s industrial revolution is that it is being carried out under the umbrella of state-owned capitalism. Another is that, unlike, say, Japan, which became the low-cost export manufacturer to the world by taking labour out of manufacturing, China did so by putting low-cost labour in.
That was always going to be unsustainable as China’s industries started moving up the development ladder as they are now doing. One measure of that is the rising level of capital per employee. Another is the rising skill levels being required from workers. The inevitable consequence is a rise in productivity. The International Labor Organization’s most recent biennial international productivity study shows China’s productivity increasing by an annual average of 5.7% since 1980 (the figures run to 2006 but the trend is clear). Wages should be rising to reflect that, just as wages in England and America did at comparative stages of development. (Not that those pay rises didn’t come without their share of labor struggles.)
Even the scale of pay rises being seen at Foxconn, a special situation anyway, and Honda would not materially change retail prices for China’s exports. Labour accounts for about 5% of the price of consumer electronic goods like an iPhone. There a plenty of points along global supply chains where some if not all of any wage cost increases can be absorbed. If wage inflation is to push manufacturing out of the present industrial heartlands it is more likely to go to inland than to Vietnam or other lower-cost countries. True, some Western multinationals are looking at shortening their international supply chains, but that is more because of factors such as event risk (think volcanic dust disrupting transport) and carbon footprint concerns than labour costs.
There is one more reason to cheer rising wages in China. More money in the pockets of Chinese workers and thus more purchasing power. That is a prerequisite for domestic-demand driven growth.
We are not sure what to make of stories circulating about a series of suspected suicides at a Foxconn plant in Shenzhen. The Taiwanese company is an contract manufacturer of electronics equipment. Customers include U.S. multinationals such as Apple, Sony and Hewlett-Packard and products produced include the iPhone and Wii.
At least 10 of its workers, all under 25, have apparently committed suicide, the most recent a 19-year old employee from Hunan who is thought to have jumped from a dormitory building. There are said to have been at least 20 failed attempts. The company has hired Buddhist monks to rid the place of evil spirits and taken practical measures such as erecting 3-meter high fences around the dormitories, hiring psychiatrists and playing music to calm workers on the assembly lines.
The plant is huge; it employs 420,000 and there is talk of poor working conditions and long hours. (An English translation of an undercover investigation by Southern Weekend is here.) A BBC report says theories range from the presence of a suicide cluster (essentially a spate of copycat attempts) to that number of suicides being what would be expected in a population that large. Whatever the reason, factory suicides are not uncommon even if those at Foxconn are getting the most attention. Tt is a disturbing underbelly to factory life.