backtop


Print 50 comment(s) - last by tygrus.. on Jun 10 at 9:38 AM


Could the iPad see a "China wage" price increase? Some analysts think so. They say that many products including consumer electronics and clothing may become more expensive as Chinese workers are paid more.

Many workers in China today don't make enough to properly support their families. That is slowly changing, though, thanks to internation scrutiny on companies that manufacture in China.  (Source: East Day)
Improvements in working conditions may give firms just the excuse they need to bump prices

According to The New York Times, increases in the labor costs of manufacturing in China may lead to price increases in the U.S. and abroad.

The issue of Chinese workers' wages has been brought into the media spotlight following a string of deaths of workers at Foxconn's facility that manufactures the iPad and iPhone.  Most of the deaths were suicides, but at least one worker has reportedly died of exhaustion after being forced to work long hours.

Foxconn, which manufactures numerous computer motherboards and much of the world's top electronics -- including Nokia cell phones, iPads, iPods, iPhones, and motherboards for gaming consoles (the Wii, Xbox 360, and PS3) -- responded by offering employees up to a 30 percent raise, plus an additional performance-based raise.

Those raise increase the average plant worker's salary to 2,000 renminbi (China's currency) — about $300 USD.  Those increases, combined with appreciation of the renminbi currency may have a ripple effect resulting in rising manufacturing costs for a variety of retail products, including clothing and electronics.

Dong Tao, an economist at Credit Suisse, "For a long time, China has been the anchor of global disinflation.  But this may be the beginning of the end of an era."

In the short term, these cost increases remain relatively small compared to corporate profit margins.  For example, the new Foxconn wages are estimated to raise the cost of labor on the base model iPad by roughly 0.7 percent of the unit's cost, or approximately $3.50.  Apple makes approximately $200 in profit per iPad sold, though.  And while much of that profit goes to Apple's design and engineering costs, the company still is stockpiling cash each quarter.

The ripple effect is already being witnessed.  Honda announced it will also raise its average pay at one of its southern China plants to $300 USD.  And Beijing announced that the minimum wage would be bumped 20 percent to 960 renminbi, or about $140 USD.

As costs rise, some predict manufacturers will bump their prices.  A $50 price increase on the iPad, justified by improved Chinese worker conditions, would both make the company look good in the eyes of some and increase its profit margins.  Such increases, while distasteful to some, may soon become reality.

Ultimately, whatever the ramifications, the salary increases in China are long needed.  A long-standing shortage of jobs versus job-hunters has caused wages to sink dangerously low over the last decade.  Workers in the country have found it hard to support their families and pay for proper medical care.  Now that wages are rising employees may finally be able to afford the essentials.

Some manufacturers will likely flee to cheaper countries -- Bangladesh or Vietnam -- but others will likely remain in China.  After all, wherever they go, companies will eventually face these same issues.  As Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania, comments, "There is no way out."



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: This was coming
By HotFoot on 6/8/2010 12:45:00 PM , Rating: 2
The machines displacing workers idea has been around a long, long time. When machines are cheaper than workers, it amounts to an overall increase in productivity. This is a case of the pie growing larger. What's traditionally happened is that the economy grows, and people find other (usually better) work to do.

In my job, I might run a few hundred thousand or a few million calculations in a day. All this costs pennies for computer equipment and electricity. Does this mean I've displaced the thousand-odd workforce that would have been required to do this math by hand?


RE: This was coming
By SublimeSimplicity on 6/8/2010 1:37:37 PM , Rating: 2
The point is, their demand of a higher standard of living doesn't make it so.

If every employee of the foxconn plant joined forces to demand a higher wage only one of a few things will happen:
1) Someone else, potentially somewhere else, will replace them at the same wage rate.
2) The cost of the product will increase:
a) To the point that paying to design automation makes sense
b) To the point that the product is no longer viable to produce
c) Fewer people buy the product (lowering others standard of living)

It is actually laughable that the OP suggest that the workers would "gain influence over the government". Exactly what would they change? It's a communist... err... socialist worker's government as it is. The conditions they have are the result of the same laborers generations before them "gaining influence over the government"


RE: This was coming
By XSpeedracerX on 6/8/2010 2:19:14 PM , Rating: 2
quote:
It is actually laughable that the OP suggest that the workers would "gain influence over the government". Exactly what would they change? It's a communist... err... socialist worker's government as it is. The conditions they have are the result of the same laborers generations before them "gaining influence over the government"


No, whats ACTUALLY laughable is your knowledge about china. The idea of striking to increase wages and getting a lawyer if you get into legal trouble - in china - use to be the material for jokes and not really options available to your average Chinese citizen. No so anymore. As for what they would change, thats easy; the wages. This is not rocket science.


"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki