Apple may be poisoning Chinese workers and doesn't seem to care. Should we?

Apple may be poisoning Chinese workers and doesn't seem to care. Should we?

Summary: One of the reasons it's so cheap to employ foreign workers is that American standards for health and wellness can be flagrantly disregarded outside the United States.

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TOPICS: CXO, Apple, IT Employment
187

The Chinese are truly entering the first world. How do we know? Simple: they complained about something to Apple and Apple -- no surprise to us Americans -- didn't respond.

What a shocker. Apple didn't respond to a complaint, even a valid one.

Before I go on, I should give you a heads-up. Some articles are harder than others to bring in for a landing. This is one of those. It's got a lot of moving parts, so please read the whole thing before you form an opinion.

Gallery: iPhone/iPad worker factory housing

Also read: Is Apple's suicide factory outsourcing to even cheaper Chinese peasants?

Also read: Get angry: your tax dollars are being used to train foreign IT workers to take your jobs

Also read: Get angry: Congress can't even agree to mildly discourage outsourcing

We Americans complain when our iPhones drop calls, almost as if we think we have a right to have a full conversation just because we bought an iPhone 4. On the other hand, the Financial Times reports that 36 Chinese environmental groups complained to Apple because they're polluting the environment and risking worker health.

Wait...the Chinese have environmental groups?

That's actually pretty interesting, because it shows that China has loosened up at least to the extent that groups of citizens can express an opinion about something like worker health. Good for the Chinese!

According the FT article, these groups explored worker conditions and pollution at the Chinese operations of 29 multinational corporations, including our friends at Apple. According to the article, many of the companies, including HP, Samsung, Toshiba and others "responded to their inquiries and took some steps to adjust problematic practices at their suppliers or improve supervision systems."

Some others, including Nokia and Sony, were unresponsive and didn't take any action to correct the problems claimed by the environmental groups.

But Apple...apparently Apple behaved exactly like Apple behaves to us Americans. According to the article, Apple was "criticised for being evasive and not responding to the NGOs’ concerns." Further:

When the Chinese environmental groups brought this and another case to Apple’s attention, the NGOs say the company refused to confirm or deny whether the polluting companies were their suppliers and would not respond further.

“Apple behaved differently from the other big brands and seemed totally complacent and unresponsive,” said to Ma Jun, director of the Institute of Public and Environmental Affairs, a well-known Chinese NGO [non-governmental organization, generally a nonprofit] and the main author of the report.

Complacent and unresponsive. Now, that's the Apple we all know and love!

There are some serious issues raised in the article. Apparently, workers at the Lianjian Technology factory got poisoned by a chemical cleaning agent n-Hexane while making Apple touchscreen displays.

Let's separate Apple's unresponsiveness for a moment. That's Apple. Apple is known to practice unresponsiveness as an art form.

Instead, let's look at the following two issues. First, is a U.S. manufacturer responsible for the behavior of a sub-contractor in another nation? Second, should we care, given these jobs should never have been offshored in the first place?

Sub-contractor responsibility

Ultimately, this is a legal question. If Chinese law or American law requires the contracting entity (Apple) to have a level of responsibility, then they do. Is there a so-called moral or ethical responsibility? Sure. None of us want to think that people got poisoned or mistreated just so we could play with our iPads.

But does Apple even have direct oversight over these conditions? When I last looked into Apple's treatment of foreign workers, it became apparent that a big part of the problem was the enormous demand for production output was stressing the contractor companies and their workers to the limits.

One way to reduce the pain being caused these workers is to ship less products. But not only will Apple not accept a reduced revenue stream, we in the press would string Apple management up from the highest pole, simply because they couldn't deliver enough to meet demand.

So, in one sense, not only is Apple responsible, so are demanding consumers and an unrelenting press.

The offshoring question

Next, we get to what I consider the big question: offshoring. I wrote extensively about outsourcing and offshoring in How To Save Jobs and it's a huge problem for American workers. By the way, the book's a free download, so it's well worth reading.

The bottom line for companies like Apple is clear: offshored workers are far less expensive even as workers in foreign lands are pushed beyond their human limits so we can get our shiny toys. Here's a scary data point, derived from analysis in the book:

It costs the typical American employer eight times more each day to pay for an individual employee’s health insurance (and that’s before wages) than it costs to employ a “middle class” Chinese worker, wages and everything.

But most American businesses provide health care for a worker's family as well. Here's the money shot on that:

The health insurance cost shouldered by an American employer for a typical American employee with a family is 24 times the cost of the total wages for a Chinese employee.

Do the math. If it costs a company like Apple 8 to 24 times more just to pay for health care for an America worker -- not including salary -- than it does to pay a Chinese worker, it's much cheaper to employ Chinese workers.

This is our challenge. Apple should not be offshoring manufacturing to Foxconn and Lianjian. Apple, a great American company, should be manufacturing its incredibly popular products here in America, using Americans to do all the work.

But how can they? Your iPad would cost a lot more. Your iPhone would cost a lot more. And companies like Samsung, Sony, and Nokia -- none of which are based here in America -- would clean Apple's clock when it came to price.

On one hand, we want American companies like Apple to be competitive and therefore they must compete on price. Therefore, they must offshore. On the other hand, we want inexpensive devices and we all derive value from having access to these technological wonders and we wouldn't necessarily have that access if they were built here.

The fact is, I don't believe offshoring is a true strategic necessity. I believe it's possible to engineer better processes, bring assembly back to America. I'd rather we use American robots (and some nicely paid Americans to maintain and program them) than put money into China's economy and their workers.

Here's how the math works. Foxconn has something like a million employees. Let's say 100,000 of them work on Apple products. That's 100,000 jobs not here in America. So, as an exercise, let's say Apple can only pay one American worker for what they pay 100 Chinese workers. If one American has to do the work of 100 Chinese workers, so be it. Let's build technology to create that force multiplier and give our own people the jobs.

That'd still be 1,000 jobs here in America.

At the beginning of this article, I told you that Chinese environmental groups are claiming that Apple is poisoning Chinese workers and doesn't seem to care. I then asked, "Should we?"

In my opinion, we should. One of the reasons it's so cheap to employ foreign workers is that American standards for health and wellness can be flagrantly disregarded outside the United States. Both workers and the environment can be abused to keep costs low. This tolerance of abuse is creating an unfair competitive advantage for foreign companies, is keeping the cost of workers artificially low, and is helping put Americans out of jobs.

Perhaps if we demanded that workers offshore working for American companies be treated as well as American employees would be, foreign competitors would no longer have such a cost advantage. Without a towering cost advantage, perhaps our great American companies would employ all our great Americans.

Apple is one of America's crown jewels. It's time they stood up for the country that gave them the opportunity to be such a success and moved those offshored jobs back to America. If any company can figure out how to make it work, Apple can.

Update: This article was originally titled "Apple is poisoning Chinese workers and doesn't seem to care. Should we?". Ever since I saw the article rendered live on the site, the title's been bugging me. The “Apple is” part is the part that I’m less comfortable with. That’s an allegation by these environmental groups, but we don’t know for sure it’s true. I think "may be" is a far more fair way to represent this issue, so I've changed the title accordingly. --David

Topics: CXO, Apple, IT Employment

About

David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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187 comments
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  • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

    "Apple is one of America?s crown jewels. It?s time they stood up for the country that gave them the opportunity to be such a success and moved those offshored jobs back to America. If any company can figure out how to make it work, Apple can." Then they can charge more for their product to make up the difference. Apple's stuff is already overpriced. They are in it for the money, just like everyone else. "Crown Jewel"? Laughable.
    bobfastner
    • You really don't understand ...

      @bobfastner ... how much of the cost of labor impacts the cost of products. In the USA, if you work for a large employer, your salary represents only about 60% of their cost of employing you. The rest is withholding taxes, health insurance, other benefits, and meeting government regulations. If skilled American workers were assembling and shipping iPods, the cost of each device would triple and the number of American who could afford to buy them would plummet!
      M Wagner
      • Is your job dependent on pitching offshoring?

        @mwagner@...

        I call BS on this. I work QC, and our work load exploded when manufacturing started going overseas. It exploded again when the rest followed, and just recently exploded as idiot managers tried to offshore QC, because QC costs were too high! Now, we not only have to check every stupid thing half a hundred times, because we can't trust any component or piece of code to work from one program to the next, we have to troubleshoot tests going on in India because management didn't want to order enough prototypes or test equipment to fully equip two labs. We have to double check everything coming out of India, and then we have to wait for the equipment and rerun half of it stateside. We actually had to INCREASE stateside headcount to manage India. INDISCRIMINATE offshoring is nothing but cost add. Offshoring being cheaper is a LIE! It's just MBAs moving the dollars from one department to the next, and it's all suddenly a problem because they've offshored everything but the management, which is, in my opinion, the only thing they should have sent overseas in the first place.
        tkejlboom
      • Actually, you both don't understand

        @tkejlboom

        At my employer, my salary (before taxes) is less than 1/3 (that's 33%) of my cost to my employer. That's an overhead rate (with general and administrative costs) of about 3.0. If Bob's really has an overhead rate of only 1.7 then his company must be offering very poor benefits including vacations, holiday, and health as well as not paying the management (such as HR, payroll and corporate row types that create no measurable cash revenue) very well.

        If you believe that Quality Control issues add to costs for off shore production, then I suggest that your employer is not managing your procurements properly. If delivered goods are defected, then they should go back to India for remediation. Better yet, there should be some level of production testing on the fabrication and assembly lines in the off shore facilities. QC is never reliant solely upon finished products or even major subassemblies. It actually starts with assuring that the components and parts used in assembly steps meet their requirements for performance and reliability at the component vendor. Then there is usually spot testing and QC at each step of the complete fabrication and assembly process.

        You MBA bean counters are either completely stupid (not improbable) or they're still saving money with the process you describe. Frankly, I find the credibility of your statements to be questionable.
        jacarter3
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @mwagner@...
        Not true....if Apple were manufacturing iPads here in the U.S. they would not be using "skilled" american workers...they would be using the equivalent of their Chinese counterparts....in other words....those among the poorest in America...which just happens to represent a very large portion of the millions of unemployed workers in America.

        Pushing buttons and turning screws doesn't require "skilled" anything. It requires a bunch of high school students working part time, a bunch of people who formerly pushed buttons on various other assembly lines, etc.
        VRSpock
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @mwagner@... and without customers able to afford this stuff, how do you expect ANY company to profit in the end? Slashing wages isn't the answer... credit isn't the answer. cutting corners isn't the answer (Apple's products aren't perfect and I own three of them and thanks to the article about their changing screw types I won't be owning any more in the future since I, how dare I, like choice and freedom...)

        http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages
        HypnoToad72
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @tkejlboom

        A fair response.

        Offshoring DOES have a time and place, but when used indiscriminately, as we have seen, it has done far more harm than good.
        HypnoToad72
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        No, you simply do not understand. Read the articles from the stand point of the capitalist unfettered. Why make billions upon billions when you might only make billions? Do you honestly think the cost of iPhone is lower because it is being produced by near slave labor. Think again. The cost of these products are neither reasonable nor fair. They are 'pillage.' It is sad so many have been brainwashed to believe this tripe that somehow the American worker and fair business practices are the evil of the world. Get real please. Why do Hyundai, Toyota, and innumerable other build in the USA? Things can be different if we just stand up and demand it. Stop buying from the economic slave masters of our new world order. We are very much like the drunken sailor addicted to our toys as he is to his booze.
        We do not care where we get our fix or who suffers for our gratification. It must end with every worker be it in China, Mexico, Malaysia, or the USA being provided an opportunity to work with dignity, pride, and to be provided with a living wage in their respective countries. If we can even begin to achieve those goals fewer jobs will go off shore.
        falcon2000
    • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

      @bobfastner

      I ran the numbers on the Foxconn suicide thing at one point. Turns out that, even with the recent spate of suicides at the plants, the Hon Hai factory suicide rate was not only lower than China, but lower than the U.S. as well. So take that with a grain of salt. To give you an idea of the scale of the company they are HIRING 450,000 people this year.

      But yes, the working hours are long and the environmental standards lower. The Foxconn CEO makes little statements like "Hunger sharpens the mind." and "Hard work is joy.". Grim stuff.

      There are some positive signs though. Foxconn pay has been rising dramatically recently in response to some of the suicides. It's the first indication I've seen that the Chinese worker is finally starting to get enough ahead of subsistence to start sticking up for themselves instead of trying to hang-on for dear life.

      Really, the only way to play the on-shore vs off-shore game is to only allow off-shoring to places that have roughly the same basic standards of health-care, environment, worker treatment, that we do. I don't mind competing with the Indians and Chinese as long as we are all playing the same game.
      SlithyTove
    • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

      @bobfastner - WELL SAID!! Thank you much!
      HypnoToad72
    • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

      @bobfastner

      Maybe they could if they didn't have to pay such a huge "tax" to your health insurance industry.

      YOUR income tax should pay for YOUR healthcare, it's how it's done in other countries.

      Apple has policies relating to contractors, they brought to light issues on their own.

      The n-hexane referred to WAS a contractor who also made Nokia screens.
      alsobannedfromzdnet
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @alsobannedfromzdnet

        Indeed. There are many companies that would have preferred that the health care law passed last year contained a "medicare for all" / "single payer" provision so that they could rid themselves of the enormous cost of subsidizing employee health care which makes them less competitive internationally, but the health care industry evidently has more lobbyists...
        RRJP
    • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

      @bobfastner

      If this country used tariffs or VATs to protect our jobs, like most countries in the world (including China), and if our tax structure wasn't so different than many countries, we would not have one of the worst wage disparity problems in the world. According to UN data, the high levels of income inequality that our system currently creates has the side effects of high poverty rates, poor and unequal educational outcomes, poor health outcomes, including infant mortality and life expectancy, and high rates of crime and incarceration. Using world-wide statistics, these problems are exacerbated in even the wealthiest demographic groups in countries like ours that have a huge income disparity problem.

      Pres. George Washington signed the Hamilton tariff act of July 4, 1789, and until the failed policies of such economists as Milton Friedman became the rage, tariffs served to keep our economy strong. A rising tide lifts all boats, and in an appropriately protected economy, we would all be able to buy the goods manufactured here.

      From our individual points of view, the decision to buy lower-priced goods seems like a no-brainer. But people who have enough money tend to buy quality, rather than just searching for the cheapest junk on the market.

      Relying on sweatshop labor not only impoverishes us as a country, but it impoverishes us as individuals, because we stop thinking about ethics and principles and allow the bottom line of costs and fear to drive our decisions.
      cougar.b
  • Crown Jewel??? Are you nuts??

    Apple (Corporate America) has little regard for Chinese workers. Obama last night talked about core human rights that America embraces and tells Pres Hu that he too should embrace these values. He should be telling Apple this not Hu. From experience I can tell you that the human values that the average chinese worker needs or wants is NOT political freedom, but rights to medical care, education and a job that will support an extended family. These are the rights they need now and others will follow as Hu quietly suggested. Raising many millions of people out of hunger is their priority, not political freedom. So Obama should be lecturing Apple who can do something about the problem today, but then they really do not care one iota. This Jewel as you state is really anti american in its stance to basic human rights. The ongoing saga of american hypocrisy perhaps.
    Bradish1
    • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

      @Bradish@... did you miss the whole point of the story was not really that apple may be poisoning chinese workers as much as it was, lets bring some of those jobs back to the US and automate them? we could have robots who cant be poisoned doing the work, and pay americans to take care of those robots, I think its a FANTASTIC idea, and Kudos to the author for saying it.. I would rather have 1000 people employed in the US taking care of robots that do the job of 10,000 chinese workers..
      nickdangerthirdi
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @nickdangerthirdi@... I did not miss the point of the article...I just did not comment on the impracticality of the suggestion...as enticing as it may be it will not happen.
        Bradish1
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @nickdangerthirdi@... Factory Automation is an excellent idea in theory. However, the devil is in the details, and normally FA efforts just don't make good business sense when all angles are considered.
        Most of the cost of labor (offshore especially) offers little upfront capital and can be somewhat transactional. Build a product, sell a product, pay employee for work. Factory Automation requires large upfront capital, and works on a moving average which depends on how many units can be produced in a comparable time frame.

        That's the big devil in the details. Most of the time factory automation can't be justified because either the company doesn't have the upfront capital or credit (not the case with Apple), product supplies aren't consistent (down time hurts the ROI of FA efforts a lot more than using hourly workers. This might affect Apple as the components they use are in high demand and delivery might not be reliable), and then there's the issue of product lifecycles. Consumer electronic products generally have a relatively short product lifecycle which would mean that an FA effort would have a much shorter time to produce a lot of products, lower the FA Cost/product average, and increase the ROI of the FA effort above that of using traditional labor.

        Now the Gov could offer FA subsidies in manufacturing sectors, and balance the budget with tariffs on offshored manufacturing labor. But that's anti free-market, and free-market ideals are as American as hamburgers and milk shakes. It creates quite the conundrum.
        Caffeinated85
    • Quite agree...

      @Bradish@... the one thing you and the article miss out is that Apple is making money hand over fist. Apple can well afford to employ more Chinese workers in better conditions to meet their targets without losing that much in revenue. They should do it now!
      They upped their green credentials regarding their products, they should lead again in looking after the people that make them! Chinese or American!!
      pjher
      • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

        @pjher This is an example of one of the problems with offshoring. Most of the time companies who off shore don't set up shop off shore. They use someone else's shop, which means they don't have the complete control over operations as they would if the work was done in house. Apple most likely doesn't own the factory and operations in China. So all they could really do is put pressure on their sub-contractors, and sometimes pressure just isn't enough, regardless of who's applying it.
        Caffeinated85
  • RE: Apple is poisoning Chinese workers and doesn't seem to care. Should we?

    @Ron Bergundy Ron, you are right! I also think most Apple customers could care less. Its why we are hated in the world. We have a "All about me" attitude. I think our Corporations like Apple have one concern. Making Money!<br>So they do it on the backs of a few suicides and poor health conditions at their factories. For most American's they don't care.
    jscott418-22447200638980614791982928182376