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The True Cost of Foxconn’s Wage Hikes

What is the Big Idea?

Foxconn’s employees in China may be getting a raise, but it’s only a matter of time before higher wages prompts the manufacturer to move its operations to a cheaper Asian country, according to a report by the Global Post

“It’s just cost efficiencies. Like any other company they’re trying to cut costs,” said John L’Epagnol, a managing partner of Goldhawk International, which marries Western buyers with Chinese factories.

“The increased labor demands will continue to push them into places like Vietnam or further into automation,” he said, adding that he’s been seeing “a lot more automation taking place,” even before Foxconn’s announcement.

The manufacturer downplayed the effect of automation. “Automation is playing an increasingly important role in our operations as our manufacturing processes and the products we produce become more sophisticated. This development is allowing many of our employees to move up the value chain,” a Foxconn spokesperson said in an email to Global Post. 

What is the Significance?

Could the factory workers of another Asian country suffer from some of the abuses that their Chinese counterparts were subjected to?

“They want the cheapest possible labor while escaping the most basic labor laws. That’s why you will see them connive with dictators and autocratic governments in places like Vietnam and Cambodia, so they can ensure their interests are always protected,” said Ying-dah Wong, a Taiwanese labor activist.

The minimum wage in Vietnam is about $85 per month, which is much lower than Shenzhen’s $207. Foxconn currently has operations in Hungary, Mexico, India, Malaysia, Brazil and Vietnam. It’s the largest exporter in the Czech Republic.

“Communist and other autocratic countries just want jobs. It’s as much a security and social order issue as it is an economic issue,” says Ying.

Read the full story at Global Post.

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