Apple and Foxconn plan raises bar for Chinese factories

Chinese factory workers are likely to see an increase in wages

High-profile pledges made by Apple and its supplier Foxconn to improve working conditions for the millions of Chinese workers that churn out iPhones, iPads and other gadgets will put pressure on the country's manufacturers to raise wages.

However, some factory owners feel that the pendulum is swinging too far in favour of China's workers.

They say they are already being squeezed by labour shortages, government measures to increase pay and the changing attitudes of China's one-child generation.

"In the last few years it has been much more difficult to recruit and retain workers," says Eddie Wong, deputy chief executive of Silverlit, a toymaker that employs 5,000 workers in the Pearl River Delta, across the border from Hong Kong.

"Workers have more choices than the factory owners," he says. "They can easily jump ship now with Twitter or other social networks... because they know immediately the differences in wages or benefits."

Last week, a report by the Fair Labour Association (FLA) into working conditions at three manufacturing facilities run by Foxconn found that workers regularly clocked up more than 60 hours a week, exceeding China's legal limits.

In response to the findings, both Apple and Foxconn promised to eliminate excessive overtime while maintaining pay.

It's a strategy that will result in higher hourly pay and, if implemented as promised, will probably be adopted by other manufacturers as they compete for workers.

"Every manufacturer must look at their own corporate social responsibility now," says Willy Lin, managing director of Hong Kong-based Milo's Knitwear, which has three factories in China.

Overtime

Mr Lin, who is also deputy chairman of the Federation of Hong Kong Industries that represents many Chinese factory owners, says that overtime is often sought by workers, who are eager to send money home.

He says the current Chinese law is too strict.

Since 2008, Chinese law has stipulated a 40-hour working week, with a maximum of 36 hours of overtime per month - making the law more restrictive than the US or UK where, generally speaking, there are no limits on overtime as long as the employee is in agreement.

At Foxconn, almost half of the 35,000 workers surveyed by the FLA said they thought their working hours were reasonable and 34% would like to work more hours to make more money. Only 18% thought hours were too long.

Apple products are massively popular in China

Geoff Crothall, spokesman for China Labour Bulletin, a Hong Kong-based organisation that promotes workers' rights in China, says the desire to work overtime varies widely depending on the individual.

"The problem at Foxconn and other factories is that they are given no choice on the hours they work," he said.

The key to effecting lasting changes in working conditions, according to Mr Crothall, is to give workers a bigger voice when their terms of employment are drafted, and in ensuring health and safety standards are met.

"The problem with audits and inspections, no matter how often they are conducted, is that it's just a snapshot from your own perspective."

A common complaint from manufacturers is that the big-name brands that outsource their manufacturing to China often have different and contradictory requirements when it comes to factory conditions.

Mr Lin said a Japanese customer would want fire extinguishers placed on the floor, while their American counterpart insisted they were fixed to the wall. Another client wanted workers to be given free condoms as well as fair wages.

"There's no harmonisation," said Mr Lin. "Everybody wants to be seen to be responsible but it's really quite complicated."

Bigger forces

It's likely that larger economic forces will have the greatest impact on pay and working conditions in Chinese factories, rather than the measures taken by individual companies.

There is increased pressure for higher wages in China

The wages of China's rural migrants who work on the assembly lines have increased at an average of 15% a year since 2005, and the government has pledged to double minimum wages, which are set by individual cities and regions.

The sustained increase in pay packets is part of a government drive to boost the spending power of its citizens as China tries to rebalance its economy away from its dependence on exports and investment towards consumption.

But even with the increased wages, there are widespread shortages of labour in China's coastal regions.

Demographic changes resulting from the one-child policy and the development of China's landlocked cities mean that better educated young people don't need to travel south and east to find well-paid work, says Mr Wong at Silverlit.

"Unlike their parents, who only wanted to work hard to send money home, these young workers also care about quality of life," he says.

As a result, manufacturers like Mr Wong find they have to pay more than the minimum wage and provide perks such as basketball courts, libraries and karaoke lounges to recruit and retain employees.

At Foxconn, which despite being a lightning rod for criticism is regarded as one of China's better employers, the starting salary at its Shenzhen plant - which employs the bulk of its workers - is 1,800 yuan, compared with a minimum wage of 1,500 yuan in the city. The monthly wage increases to 2,200 yuan after a probation period, and more if overtime is included.

Mr Wong's workers have seen wage increases of between 18% to 20% over the past two years, and many factory owners think wages are rising too fast. He says the authorities in Dongguan, Guangdong province - where his factory is located - have postponed a 19% increase in the minimum wage.

"Because so many companies went bankrupt in the last couple of years, the government wants to give factories some breathing space," he said.