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["I promise, I will never die."] --retracted by Foxconn  (Source: Paramount Pictures)
Turns to employee relocation, pay raises after yet another death

Taiwan's Hon Hai Precision Industry's Chinese Foxconn unit has been having some problems at its Shenzhen plant lately.  A string of suicides has compelled Apple, Dell, and HP to launch a string into the supplier.  Foxconn previously responded by playing Buddhist music, offering employee counseling, and most requiring employees sign a letter promising not to kill themselves.

Apparently that's not working out so well.  On late Thursday, an employee slit his wrists, and according to the 
AFP has since become the eleventh to die this year.

After receiving news of the latest attempt Sony, Nintendo, and Nokia joined a pending probe into the company's business that currently included Apple, HP, and Dell.  In response to criticism about the letter, Foxconn CEO Terry Gou retracted it, saying it was inappropriate.

Guo is also trying yet another tactic in hopes of convincing its employees not to jump off high buildings -- giving them a pay raise.  Foxconn does give occasional raises, and claims that it has been planning to do so for some time, but never got around to it.  Currently entry level workers are paid 900 yuan (about $131.80) per month and also have the chance to earn overtime or bonuses.

According to Vincent Chen, an analyst at Yuanta Securities in Taipei, says that Foxconn typically bumps wages by 20 percent to meet holiday demand for consumer electronics.  However, he says that a pay raise of 50 percent is not outside the realm of possibility.

The pay raises will reportedly raise Hon Hai's operating costs by T$2.7B ($84M USD) and cut the company's profits by 10 to 12 percent, according to analysts at Citi.  Other analysts disagreed, though.  Chen comments, "I don't think this will impact Hon Hai's profitability...Hon Hai has raised salaries by up to 50 percent in the past, and it's still doing well."

It is believed that at least some of the suicides were financially motivated.  According to various employee accounts families of suicide victims with the company are typically paid between 8.5 and 10 years of pay.  Faced with scant salaries, some depressed employees reportedly think they are doing their families a favor by killing themselves.

Foxconn is also planning a mass relocation of about one fifth of its 400,000 employee Shenzhen workforce in Southern China to a plant in Western China.  Workers often migrate to get jobs at Foxconn's plants.  By moving the workers closer to home, Foxconn believes it can decrease their discontent.

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RE: Wait a minute...
By Spivonious on 5/28/2010 9:43:19 AM , Rating: 3
$132 a month sounds low, but remember that the cost of
living in China is much much lower than here. The average restaurant charges $1 per person for a full meal.

RE: Wait a minute...
By gamerk2 on 5/28/10, Rating: -1
RE: Wait a minute...
By Seemonkeyscanfly on 5/28/2010 10:26:04 AM , Rating: 2
Raising the minimum wage will directly effect the cost of good sold (raising them). However, no it does not always effect lifestyle. Many more things are need to determine effects on lifestyle. Example, you could give a 20% increase to minimum wage and have a great increase in lifestyle because - employment is at 99.5%, average savings is up X%, consumer spending index shows an all time high, and people are feel great about their future. Of course you could have that 20% increase to minimum wage - an everything else the opposite of what I listed - then you will see a huge drop in lifestyle.
Though I agree, minimum wage should not be raised very often... I'm sorry but a kid's first job should not be paid $18. per hour. They need to learn how to be a good worker (earn the wage).
P.S. Regan gave us some of the greatest economic improvements the US has ever experienced. He pulled us out of one the worst economic times the US ever experienced. If you do not think so then you are not old enough to remember those times. The problem with what he created was he assumed other politicians that followed him would do what is best for the nation and not what is best for their own personal goals. So, politicians took a great and working plan and twisted it for their self needed goals and we are left with our current economic state.

RE: Wait a minute...
By ValorMorghulis on 5/28/2010 1:30:13 PM , Rating: 2
I have to dispute your take on Reagan's economic success. Sure the U.S. was very prosperous during his terms especially compared to his predecessors. However, I think you might overestimate the effect a president has on the economy. Reagan certainly didn't screw anything up, but perhaps more of the credit should be given to Paul Volcker the Fed Chairman. Which isn't to say we shouldn't give Reagan some credit, sometimes the best you can do as president is not screw it up.

(For a more in depth explanation of why the Fed Chairman is more important than the president do some research into Keynesian economics and the differences between fiscal and monetary policy.)

RE: Wait a minute...
By Seemonkeyscanfly on 5/28/2010 3:30:33 PM , Rating: 1
Errr... Do you forget Volcker was reappointed in 1983 by President Ronald Reagan. Paul Volcker only 4 months under Carter. Regan worked very, very closely with Volcker to snap us out of stagflation. At the time the people thought Volcker was nuts for his methods and they thought less of Regan because he allowed Volcker to continue on with his method.... This alone is big thing for any President... Standing behind his man and say, "I do not care about what others say or think, I'm letting my man do his job." He took a big chance, if he was wrong he would have never been re-elected.

Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983

RE: Wait a minute...
By C'DaleRider on 5/28/2010 7:39:27 PM , Rating: 3
In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.

Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced.

RE: Wait a minute...
By XZerg on 5/28/2010 10:46:59 AM , Rating: 2
The only problem with this equation is that people already have the inflated $$$ and you can't turn back time. And with the amount of money the countries/world have thrown in to stop/slowdown/prevent recession (well not all countries had one), the only expected outcome of this is people have more $$$ eventually compared to today. Hence the trend cannot be paused or turned back...

RE: Wait a minute...
By ValorMorghulis on 5/28/2010 1:11:28 PM , Rating: 3
The problem with economics is that its never that simple. In the short run, if wal-mart reduced its pay everything would be cheaper and the cost of living would decrease for everyone who doesn't work at wal-mart (i.e. you, me and most people). Basically we would seem richer because everything was cheaper. But in the medium term, most companies would start laying people off because the wal-mart employees would buy fewer products from them. The newly laid off employees would stop spending, mean more companies would have to have layoffs etc. Remember that the largest influence on the American economy is consumer spending (~70% of GDP).

This deflationary spiral occurs because there is a delay as markets adjust. In the very long term everything would return to equilibrium just with a different valuation of the dollar.

RE: Wait a minute...
By The0ne on 5/28/2010 11:11:48 AM , Rating: 3
Actually, that $1 meal is street meal. Shenzen is a big city and in most, if not all, big cities prices are similar to what we pay over here in US. In some cases where brand name is "important", the prices are actually MUCH higher. Cost of living, however, remains cheaper but with their own real estate boom, even those cheap homes/apartments are really rundown places. Again, in bigger cities not a small town.

RE: Wait a minute...
By Estee on 5/28/2010 1:35:14 PM , Rating: 2
Too bad, this isn't in Shenzhen proper. It is in a little town called Long Hoa, about 30 minutes away...

RE: Wait a minute...
By iFX on 5/29/2010 2:52:38 PM , Rating: 2
Never heard of a Metro area I take it? I live in a town of 14 thousand which is arguably 30 minutes from the "city center" of my metro area but I am very much in town. I would have to drive over an hour to see an open space - this isn't in NY or Chicago either, this is a medium sized US metro area with 3 million people.

RE: Wait a minute...
By Yawgm0th on 5/28/2010 11:19:57 AM , Rating: 3
$132 a month sounds low, but remember that the cost of living in China is much much lower than here. The average restaurant charges $1 per person for a full meal.
So people earn in one month one less than one fifth of what I earn in one week, but it's okay because their restaurants charge one fifth of what Subway wants for a foot-long? I mean, they can eat a full 90 times a month on that and still have $42 left for housing, clothes, and everything! Wow, China sounds great.

Don't try to rationalize low wages with cost-of-living nonsense. These workers live lives of unimaginable poverty. I would literally rather be homeless in any American city than work for Foxconn in China.

RE: Wait a minute...
By Solandri on 5/28/2010 1:47:34 PM , Rating: 2
Don't try to rationalize low wages with cost-of-living nonsense. These workers live lives of unimaginable poverty. I would literally rather be homeless in any American city than work for Foxconn in China.

He's not trying to rationalize it. It's the way economics works. The workers there live lives of relative luxury compared to most Chinese. Average wage for a farm worker there (where most of the factory workers worked before moving to the city) is something like $100/yr.

As the economy, manufacturing, finance, and services become more efficient, wages go up and cost of goods (cost of living) goes up in turn. You can't just take a wage in the U.S. and plop it in the middle of China and expect it to work, just like you can't take restaurant prices in the U.S. and plop it in the middle of China and expect it to work. The entire economy has to grow to where the wages and prices you see in developed nations becomes the norm.

If things didn't work like this, there would be no economic incentive to improve areas of low wages/prices. Because wages are lower in undeveloped nations, there is an economic incentive for factories to move their operations there. Which spreads wealth there, helping raise wages/prices there. If companies were required to pay the same wage regardless of location, they would stay right here in the U.S. And undeveloped nations would have a much harder time become developed, thus propagating the low standard of living there which you're trying to stamp out by arguing for U.S.-level wages.

RE: Wait a minute...
By Chadder007 on 5/30/2010 11:11:25 AM , Rating: 2
I wouldn't even call it relative luxury if they are all wanting to kill themselves.

"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation

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