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Apple Economy

Foxconn reform may lead to more changes in China

Adriene Hill Feb 20, 2012

Adriene Hill: Now to China, and to Foxconn Technology, the giant electronics maker. It puts together more than a third of the world’s electronic gadgets — including our smartphones and our computers. Foxconn assembles products for companies like Apple and Dell, and it’s come under pressure for mistreating its workers. Now Foxconn says it’s going to change its ways. The company will raise salaries, trim overtime.

For more we go to David Barboza. He’s been covering the story for the New York Times. Good morning.

David Barboza: Good morning.

Hill: So why is Foxconn raising pay for its workers now?

Barboza: I think there’s a lot of pressure on Foxconn. First of all, there’s probably pressure from Apple, which probably wants to see the workers better compensated. And also, lots of factories in China force workers to do overtime to make enough money to live on — sometimes it’s an illegal amount of overtime. And so, by paying their workers more, they can reduce overtime and make sure they comply with the laws.

Hill: Now how significant is this pay raise for people who work there?

Barboza: Pretty significant. I mean, it doesn’t mean it’s a great salary, but it’s getting to be a decent salary for migrant workers. And if they really do pay 25 percent more, and it’s what we think it is — about $400 a month at some factories — it would be close to a pretty decent wage.

Hill: Now is FoxConn making other changes at its factories? I know there’s been a lot of concern about safety conditions in the past.

Barboza: I think they are making a lot of changes, because they have to — they are under pressure. Apple and the other companies that deal with Foxconn — which is basically every electronics giant — is probably going to start demanding that more because of all the publicity around it.

Hill: Now does this mean that we can all feel better about our iPhones and iPads.

Barboza: Probably a little better. Factories in China are notorious for deceiving auditors; saying one thing and doing another; having lots of people off the books. But it is moving the direction that factories are under pressure to improve standards and pay.

Hill: What does this move say more broadly about the future of China’s economy and where things are heading there?

Barboza: I think it’s still not a very mature economy, but it is maturing. And so, to produce in China is getting more expensive; workers are going to be compensated better. And so the gap between China and the rest of the world is going to shrink. And if you look at the bigger picture, this is probably heading toward a major shift in China’s model, where it’s not just going to be cheap labor with a lot of illegal activity in export factories.

I think that’s what you’re seeing in this Foxconn and Apple story. And it means for most of the world’s major brands, they’re going to be produced in a country that’s increasingly expensive — or at least not as cheap as it used to be. And that will change a lot of things.

Hill: New York Times reporter David Barboza. Thanks.

Barboza: You’re welcome.

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