Posted by: Matthew Molinari | February 19, 2012

Foxconn to Raise Wages

Over the past few months Foxconn has come under fire for the treatment of workers at their plant in China. The reason this story has made so many headlines is because Foxconn is one of the main suppliers for Apple. Despite the fact that Foxconn supplies most of the electronics industry with materials the focus has been on Apple because of Apple’s self promotion as being socially responsible.

The fallout has come in stages since the original article appeared in the New York Times. Recently, Apple joined the FLA and asked that Foxconn’s factory be audited for worker conditions.  There is now a report coming from Foxconn that the factory will be raising worker wages by 16 to 25%. That’s a pretty severe increase which is being accompanied by a promise to reduce overtime.

Obviously, when it comes to human rights, there is little to argue about whether or not this is a good move for the workers involved. People need to be paid a fair wage and given reasonably working hours. However, this situation does represent an interesting question when it comes to Apple’s supply chain. How will this increase in labor change pricing? With less overtime, how will demand be met (especially with the Ipad3 launching soon)?

With record profits, it is possible that Apple simply absorbs the cost of the increased wages. One thing they can’t absord is less worker output. It is unlikely they will allow shortages of their products and it will be interesting to see how Apple adjusts to this dramatic change in their supply chain.

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