What would you pay for a gadget made under better conditions?

[fjtorres]

Originally Posted by Apache

Apple isn't the only one using Foxconn. They should all be taking heat.
Apache

Well, now:

1- Apple is the one raking in a cool billion a week in *net* profit...
2- ...at a time the Commander-in-chief is betting his reelection on populism and demonizing the wealthy...
3- ...and a time when the media is free of the old distortion zone and feels free to take shots (earned or otherwise) at previously-untouchable Apple.

Translation: Without St Jobs at the helm, Apple is just another greedy evil corporation, according to the mainstream media.

About time they got a turn as the whipping boy!

[DebbyS]

Originally Posted by Penforhire

No, but I do pay more for some items of quality made in my country (America).

That's the first thing I thought of, too. And I'd want the American company to create the devices in a clean, green, environmentally friendly manner, too. No poisoning the land/rivers/aquifers/air, etc, as moving to China and other countries seems to allow Multinational Corporations to do.

[fjtorres]

As to the question of how much more an ethically-built product would cost, well it turns out THE ECONOMIST took a look at the iPAD cost structure recently:
http://www.economist.com/node/21543174

It turns out the Chinese labor that Foxconn provides isn't much of a cost driver. The cost breakdown looks like this:
31% - cost of materials
30% - Apple profit
15% - distribution and retail
7% - South Korean (Note: Display and memory, mostly)
6% - Other
5% - Non-chinese labor
2% - Taiwan
2% - US
2% - Chinese labor

So, I'm thinking improving labor conditions wouldn't add much to the cost of the US$500 iPAD, since only $10 go into that category.

That is half the story.
The other half is the *actual* labor rates that make that 2% assembly labor cost possible.
http://www.ventureoutsource.com/cont...tion-costs-ems
Chinese electronics assembly labor rates run around US$1.50 an hour by now ($1.36 in 2008) which undercuts even the phillipines (at $1.66 an hour) to say nothing of Japan ($27.80) South Korea ($15) and Taiwan ($8.68). Never mind the US or Europe.
(German labor costs for 2008 ran US$46.50 an hour of which 35% were hidden "social costs"--taxes!)
http://www.spiegel.de/international/...549003,00.html
The US (2009) ran about $33 an hour, excluding taxes which add an extra 40% burden.
http://www.bls.gov/fls/chartbook/section3.htm#chart3.1
(Hey! Bing has its uses!)

Get the idea? Needless to say, chinese labor doesn't carry the "social charges" and taxes that burden western manufacturing.

Excluding those self-imposed competitiveness handicaps, it all comes down to essentially a twenty-fold (2000%) labor cost increase for "manufactured in my country" gear vs chinese assembly. Simple math says that raising labor costs from $10 per iPAD by 20, to $200 would raise the total product price by 38%, to $690.
That iPAD still looking good?

Now, a more realistic scenario would be South Korea labor rate (US$15) which yields a $600 iPAD, or even a Taiwanese labor rate, which yields about a 10% increase to $550.

However, since Apple clears 30% gross (25% net) on that iPad (US$150), keeping the price at $500 and "eating" the higher labor might be an option--except this *is* Apple we're talking about.
That's not how they roll; not now, not ever. (The original Macintosh listed at US$2500, discounted to $1000 for students, and cost $300 to manufacture, in 1984 dollars. At a US factory. High margins are baked into the Apple DNA so don't expect that to change, NYT bad-mouthing or not.)

Bottom line: you don't have to boost prices 50% to sell an iPAD built without sweatshop labor, a modest 10% could do the trick.

Of course, this only applies to the iPAD and Apple since their margins are gigantic by design. Other vendors that live off more reasonable margins are passing on the labor savings to the consumer.

One would expect that the labor going into a Nook or a Kindle 4 won't be much less than the labor needed to assemble an iPAD and a $50 labor cost increase on those products would in fact lead to a 50% price increase. And $200 would simply be out of question; it would kill the product.

So the survey isn't out of line with that 50% bogey.
Apple *can* easily pay higher assembly labor costs because their customers are already paying more than enough to cover it; other products, though, can't sustain their current price points without sweatshop labor so we *are* looking at two different ethical propositions.

Consumers of non-Apple products *are* benefitting from sweatshop labor and we should ponder the human cost of our toys.

But Apple consumers simply need to ponder why they support a company that exploits such practices when the numbers say they *don't* have to.

Either way, the onus is on the consumer.
Cause Apple is what they always have been.
"Trust scorpions to be scorpions."

[CarolineNH]

I do make an effort to shop local, especially in regards to my food (also my spinning wheel & fiber, support local festivals, buy "Made in USA" when I can). I did see a report about Chinese factories, I believe it was on one of ABC's "Made in America" segments, that stated the Chinese work longer hours but produce less. The American factories they looked at were able to produce better-made products in fewer hours, so supposedly the costs balanced out somewhat. Regardless, if it meant bringing more jobs back to the US instead of outsourcing everything, I would definitely be willing to pay more. I'm not sure that would end up being 50% more expensive, however. Some costs would certainly be lower - transportation, for one.

[Greg Anos]

Originally Posted by HansTWN

I have visited perhaps a 1000 factories in China over more than 20 years. Not Foxconn or other electronics companies, but factories producing other items.

I must say that those reports are way overblown. Workers have to work hard, but they are paid very well by local standards and minimum working hours are being implemented (the customers of the factories check that very thoroughly, as well as safety standards and general working conditions).

Workers in China have their pick of places to work at these days, so treating them well and paying well is a necessity. The workers have come a long long way very quickly. If one factory works people too hard or don't pay enough they just go next door, where they will be welcomed with open arms.

The only factories that still do mistreat workers are small, locally owned and locally run, selling extremely cheap products (we are talking those 75 $ Android tablets and $5 shoes here). If you want to make good products you need good workers who stay at your company. And that means good pay and a good working environment.

Of course, these are factories, you can't goof off at an assembly line. But the workers choose to go to Foxconn, they could easily go to work at many other places. That alone proves that they don't feel mistreated.

I bow to you wider "on-the-ground" knowledge. I merely note that Foxconn is undergoing a massive effort to automate its assembly lines. That is going to be the real "job killer", and it's steadily increasing even in the low wage countries. The days of using an "endless source of cheap labor" for assembly are limited...

This has its own human disasters coming...

[fjtorres]

Originally Posted by Ralph Sir Edward

The days of using an "endless source of cheap labor" for assembly are limited...

In coastal China, perhaps.
There's plenty of places left to exploit.
(In fact, Foxconn is already building factories in Brazil and looking at africa.)
http://chinainvests.org/2011/02/18/w...g-geese-style/

If you look at the labor rate charts, the Phillipines is right there in china range. What they lack is the raw numbers of workers.
Which is where Africa comes in.

And, in a few decades the ticking demographic time bomb in the islamic lands will go off.

[SteveEisenberg]

Originally Posted by fjtorres

Simple math says that raising labor costs from $10 per iPAD by 20, to $200 would raise the total product price by 38%, to $690.

Simple math may not be realistic here. When the device is manufactured in a lower wage country, work is done by hand that in a high wage country would be done by robots. Also, high wages lead to designs that have fewer but more expensive parts, thus taking less time to assemble.

Chinese factories are filled with workers, whereas today's American factories have a small number of workers tending large numbers of machines. Nothing wrong with that. It is, in the long term, impossible to have higher wages unless the workers are more productive.

Export-driven manufacturing is the most plausible means of lifting third world countries out of desperate poverty. It worked for South Korea and Taiwan, and now it is working for mainland China.

There is a middle ground here. If you take a buy American stance, rural Chinese lose an opportunity to better their lives. But without some Western pressure to mitigate sweatshop conditions, the positives described by HansTWN in #15 above are less likely to occur.

I suppose that if someone really believes in buying American or other first world goods, they would stick to paper books and not even be in this forum. Correct?

[DiapDealer]

If I made a point of investigating/judging the ethical(ity?|ness?) of the manufacturing/production process of every product I wanted to buy... I'd own nothing and (be very hungry to boot).

So unless I find out that a company is using thumb-screws, whips, cattle-prods, and/or mind-altering drugs on their "employees"... I frankly can't take the time to care.

[wyndslash]

Originally Posted by DiapDealer

If I made a point of investigating/judging the ethical(ity?|ness?) of the manufacturing/production process of every product I wanted to buy... I'd own nothing and (be very hungry to boot).

So unless I find out that a company is using thumb-screws, whips, cattle-prods, and/or mind-altering drugs on their "employees"... I frankly can't take the time to care.

we all benefit from the current situation, so i guess that's also partly why little is being done about it. it's only when the media causes an uproar over these things are we forced to really look at the situation and forces the hands of company execs

[DiapDealer]

it's only when the media causes an uproar over these things are we forced to really look at the situation and forces the hands of company execs

I watch hours worth of news per day, and I'd never heard the the name Foxconn until reading this thread. How am I even supposed to know specifics about where/how my stuff is made? Is Proctor & Gamble is still satanic?

[elemenoP]

Originally Posted by wyndslash

we all benefit from the current situation, so i guess that's also partly why little is being done about it. it's only when the media causes an uproar over these things are we forced to really look at the situation and forces the hands of company execs

I was thinking yesterday that this thread would get very little response, because these things are unpleasant to think about. But it seems it was just Friday-quiet. I thank you guys for your thoughtful answers, it's a difficult issue.

eP

[Pomtroll]

I would pay more. BUT it depends on the product how much more I am willing to pay. I say this as a business owner facing stiff competition from countries using cheap labor (dental laboratory).

[SteveEisenberg]

Originally Posted by wyndslash

we all benefit from the current situation

Rural Chinese whose children are sending home remittances certainly do.

It's to some extent a myth that Chinese manufacturing is all about low paid labor. Sure, Apple wants high margins, but even more they want to be the first with new features. When I purchased the Kindle 3 on the day of release, yes, I was benefiting, because Amazon could not have gotten a US company to make millions of newly designed devices, that year, at any price. Our more automated manufacturing takes longer to set up.

My favorite web site for these issues is atlanticmonthly.com. See:

China Makes - The World Takes

The above is long enough to be more comfortably read on an eReader. Here is a Kindle-friendly URL:

http://tinyurl.com/73wgh3e

[speakingtohe]

I will pay more for a quality product if I expect to own it more than 3 years. I am not concerned with where it is made unless I know that it is being made under sweatshop conditions. Sometimes the price will indicate that, but not always. People in third world countries deserve some means of earning a living and currently outsourcing provides that in many instances.

I would be inclined to lean towards a manufacturer who demanded a reasonable standard of living for employees of the companies that they used but don't see it as happening overall.

Helen

[fjtorres]

Originally Posted by SteveEisenberg

I suppose that if someone really believes in buying American or other first world goods, they would stick to paper books and not even be in this forum. Correct?

Probably.
Depends on how deep you look at the supply chain.
If you simply look at the final assembly some PCs might qualify. Or if you look at where the money ends up, which is what the ECONOMIST article was pointing out.

There is a fine line between commerce that helps ramp up a country's economy (as happened with Japan, S. Korea, and the other "asian tigers") and outright exploitation. Generally, countries decide for themselves where to draw the line but China is problematic there because the political system doesn't give the local citizens quite as much say-so as in, say, Japan. Or even in early 20th Century US, where factories were hardly a model of anything good. (The Triangle Shirt Fire being just one of the horrors of the era.)

Ethical considerations are never easy to settle but thinking about them is definitely better than trying to sweep them under the rug. I'm not arguing for any position myself but I do think that being aware of the realities of the modern world can't hurt.

There is no such thing as a free lunch.
And it isn't a bad thing to ponder the actual price from time to time.