Apple Turnover – Got a life Mac?

Everyone loves Apple. The late Steve Jobs is surely in line for canonisation in the not too distant future. Apple Macs and iPads and iPhones have replaced religious icons as the focus of adoration. People will queue up in their thousands, for hours, just to acquire the latest Apple hardware.

Apple is a success by anyone’s standard. It is making money hand-over-fist, $108bn last year with at least $80bn sitting around in cash reserves.

Started in California in 1976, it has been the quintessential American dream success for two of its three founders. Portrayed as a very un-capitalist company Apple is in reality only unconventional (or was).

Once the epitome of all-American production it has trotted along behind its conventional capitalist operators and outsourced its production abroad. Abroad being cheaper, with employees ready to work harder and longer without interference from such health and safety regulations which protect western labour, so ensuring profits are all the greater.

In late 2011 the Chinese authorities raised environmental concerns over their plant in Suzhou. This followed exposure of child labour and poor working conditions at Apple factories in China where workers could be operating 60 hour weeks, being paid a mere £100 a month and from that having deductions for dormitory rent and food – reminiscent of the old truck system which operated in this country before workers were properly organised.

Some may remember reports of suicides among the Apple employees in China which led to a won’t kill myself clause in worker contracts.

On a recent visit to China to meet his iPhone workforce , Apple Chief Executive, Tim Cook was lauded by the Chinese government and workers alike. This didn’t go unnoticed by Cook who praised the Chinese people for their ability to work hard, oh, and then spend the money they earned buying Apple’s very highly priced products. Nice capitalist symmetry.

But is all well in Apple’s Chinese manufactures? It appears not. The Fair Labor Association has reported many ‘serious and pressing non-compliances’ with the company’s workplace code and Chinese labour laws. Foxconn, Apple’s main electronic component supplier has been heavily criticised for its labour conditions. Foxconn employs China’s largest workforce on one campus, its Longhua, Shenzhen factory (iPod City) where between 200,000 and 400,000 people are employed. Currently Foxconn workers could clock up the company’s 80 hour a week limit but Foxconn promise this will be reduced to 36, with commensurate overtime compensation. Reductions in overtime are not always welcomed by employees who can expect their take-home pay to drop accordingly and there is pressure to offer better remuneration for basic pay and overtime to alleviate this.

The average working week is long: the average above 56 hours and the week can be just that, 7 days although there are occurrences of workers going 11 days without a day off.

Could this be a source of Apples vast profits? Work them hard and pay them little? Apple would argue they are paying Chinese factory labour above local rates and the large number of applicants for jobs testify to this. So how should Western multinationals set their standards – by low pay scales in immature economies which let’s face it is why they are there in the first place or by standards of employment in their homeland?

Apple’s conscience has been tweaked by its critics and it is intending to improve pay and health and safety standards. It certainly has doesn’t appear to have had any impact on their profits but Apple must have concerns that a negative campaign highlighting the need for substantial reform of its production in China might affect future sales of its products.

Foxconn’s profits run at some 1.5% while Apple’s come in somewhat greater at 30%. This breaks down to labour costs on an iPhone or iPad of between 2% and 5% It would seem, therefore, that Apple is well able to pay their workforce more and reduce the price of their gadgets and still make hefty profits.

Hopefully the pressure on Apple and Foxconn will see substantial moves to improve life for their employees and Foxconn has announced it intends to raise wages by up to 25%.

Meanwhile Apple’s continues to hoard its vast fortunes. It is thinking about paying out dividends to its shareholders which might surprise some that it doesn’t already. Of course what it could and should do is greatly increase the pay and conditions of its employees, irrespective of where they are, and slash prices on their products, after all Apple appears to have more money than it knows what to do with.

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