Thu, Feb 23, 2012 - Page 9 News List

Foxconn drives fundamental labor shift in Chinese economy

By David Barboza and Charles Duhigg  /  NY Times News Service, BEIJING and NEW YORK

The announcement on Saturday that Foxconn Technology — one of the world’s largest electronics manufacturers — will sharply raise salaries and reduce overtime at its Chinese factories signals that pressure from workers, international markets and concerns among Western consumers about working conditions is driving a fundamental shift that could accelerate an already rapidly changing Chinese economy.

However, the true meaning of Foxconn’s reforms, analysts say, will depend in part on how effectively the company can remake an economic system that has relied for much of the last decade on luring cheap migrants to work long hours in mammoth factories building smartphones, computers and other electronics.

Plants depend on workers’ being at assembly lines six or seven days a week, often for as long as 14 hours a day. Such facilities have made it possible for gadgets to be turned out almost as quickly as they are dreamed up.

For that system to genuinely change, Foxconn, its competitors and their clients — which include Apple, Hewlett-Packard, Dell and the world’s other large electronics firms — must convince consumers in the US and elsewhere that improving factories to benefit workers is worth the higher prices of goods.

“This is the way capitalism is supposed to work,” said David Autor, an economist at the Massachusetts Institute of Technology. “As nations develop, wages rise and life theoretically gets better for everyone.”

“But in China, for that change to be permanent, consumers have to be willing to bear the consequences. When people read about bad Chinese factories in the paper, they might have a moment of outrage. But then they go to Amazon and are as ruthless as ever about paying the lowest prices,” Autor said.

Foxconn, with 1.2 million Chinese employees, is one of China’s largest employers. The company assembles an estimated 40 percent of the smartphones, computers and other electronic gadgets sold around the world. Foxconn’s decisions set standards other manufacturers must compete with.

The announcement by Foxconn, which said that it would raise salaries by as much as 25 percent, to about US$400 a month, came after an outcry over working conditions at its factories. In recent weeks, labor rights groups have staged coordinated protests in various countries after reports that some of Apple’s Chinese suppliers operate harsh, abusive and dangerous facilities. To stem criticism, Apple hired a non-profit labor group to inspect the plants it uses.

Workers welcomed the announced raises and overtime limits, though some were skeptical they would cause much real change.

“When I was in Foxconn, there were rumors about pay raises every now and then, but I’ve never seen that day happen until I left,” said Gan Lunqun, 23, a former Foxconn worker. “This time it sounds more credible.”

By bowing to such demands, Foxconn has conceded that employees and consumers have gained a sway once possessed only by Chinese bureaucrats and executives at the global electronics firms that hire Foxconn to build their products.

Foxconn’s announcement also reflects how quickly China’s economy is shifting. Many of the country’s employers are facing labor shortages, which also puts upward pressure on wages, as do inflation and government demands to raise minimum wages.

Over 100 million migrant workers returned to their village homes this month to celebrate China’s Spring Festival, otherwise known as the Lunar New Year. Traditionally, factories have had no problem luring those workers back. However, many Chinese cities are still confronting serious labor shortages, even though the holiday ended weeks ago. A recent Chinese government report said this year’s labor shortage was more pronounced than those in previous years.

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