BEIJING — A spate of suicides at the world’s largest factory has drawn international criticism of the Chinese manufacturing model, raising new questions about whether low-cost production is worth the potential consequences.

This story first appeared in the June 15, 2010 issue of WWD. Subscribe Today.

Ten worker suicides this year at Foxconn’s huge electronics factory in Shenzhen have cast a harsh spotlight on factory conditions and the pressures on the young workers who fill the production lines. Though experts have cautioned it is impossible to connect the deaths with factory conditions, the suicides have prompted the Taiwanese-owned company to promise a series of salary increases that might prevent workers from needing to rack up so many hours of overtime.

Foxconn last week pledged for a third time to raise salaries — this time bringing monthly base wages up to 2,000 yuan ($293) starting on Oct. 1. The pay hikes will apply to workers who have been with the company three months and passed a performance review. Foxconn, which employs an estimated 400,000 people at its Shenzhen operation, makes and assembles electronics for the world’s top tech companies, including Apple, Sony and Motorola.

But labor-rights groups say much more work is needed and low wages are only one part of the problem with China’s manufacturing industry. They argue that vast structural changes are required and that the world can no longer expect this country’s workers to work themselves to death to make consumer goods. All this has raised new questions about whether China has reached a critical juncture, moving away from being the world’s low-cost production center. Such a move is in line with the government’s ambitious but far-off goal of becoming an economy based on innovation by 2020.

Liu Kaiming, founder and executive director of the Institute of Contemporary Observation, a Shenzhen-based advocacy group for migrant workers, said the Foxconn situation might force across-the-board wage increases in the manufacturing industry. Foxconn’s reaction, Liu said, was a natural attempt to prevent a mass exodus of employees in the wake of the suicides. What happens next depends on how other companies and sectors react, but it does appear Chinese workers are gaining clout — as further evidenced by the recent strikes at two Honda plants that subsequently forced the auto giant to raise wages and provide other concessions.

Liu said factory salaries have not gained much ground in the past decade and progress suffered a big setback with the global financial crisis in 2008. Wages are rising now, but salaries simply have not kept pace with inflation.

Dai Jianzhong, a labor relations expert at the Beijing Academy of Social Sciences, said wages are only one component of the reforms that are needed. Other necessary measures would address living conditions and social welfare benefits. Most migrant workers are ineligible for local health care and education, and living on-site at factory dorms means limited personal lives.

“Increasing salaries is an effective method to improve the workers’ material lives, but it is not enough,” said Dai. “What is more important is that the workers need to have a say in the management of their labor relations. This is the larger challenge for Foxconn.”

 The Hong Kong-based labor advocacy group Students & Scholars against Corporate Misbehavior, which investigates factory conditions inside China, has called on Foxconn and its customers to allow a democratically elected union within the factory and better channels of communication for employees. Overall, the group said, Foxconn must put workers ahead of its bottom line.

“In this race-to-the-bottom game, workers inevitably suffer as a result,” the group said. “To reform the vicious cycle, Apple and other electronic brands should increase the unit price it pays in order to provide a truly decent and above-minimum wage for workers.”

 Other recent labor unrest in China, including the Honda strikes, further underscores the narrative that Chinese workers are gaining new confidence in making demands. What that holds for other sectors, including textiles and apparel manufacturing, remains to be seen. Several factories contacted had mixed opinions on the matter.

“We haven’t had pressure yet to raise wages, but we think it might happen,” said Linda Guo, a sales manager for a textile production company in the manufacturing base of Dongguan.

load comments
blog comments powered by Disqus