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

Go ahead and buy your consumer electronics. Doing so is putting food in people's mouths. It's also putting blood on all our hands.
Written by David Gewirtz, Senior Contributing Editor

This is a challenging story to tell, because no matter how you approach it, it's horrible. Even if you thought you knew the whole story, you don't. This week, we found out it gets even worse.

First, though, some background.

"Run to your Death"

Apple's iPad, iPhone, and other Apple products are made in China by a $61 billion company named Foxconn. According to Reuters, Foxconn is the world's largest maker of electronic components. Beyond Apple products, Foxconn also makes products for other technology companies, including HP and Dell.

Last May, we learned about the string of suicides on Apple's production line. As of May 27, 16 people had attempted to take their lives by jumping off factory roofs (12 succeeded). At least another 20 were stopped before they could jump. Reuters reports that Chinese workers have "twisted Foxconn's Chinese name so that it now sounds like: 'Run to your Death'."

51 cents an hour

The company strings nets between buildings as a way to catch jumpers. According to Foxconn's CEO, Terry Gou, "It is a clumsy solution, but it may save lives." .

On the 10th of each month, Foxconn workers have their only good day. That's because they get the Chinese equivalent of $130. That's $130 for about 240 hours of work. The math is disturbing. These workers make about 51 cents an hour.

It should be noted that Apple's Foxconn workers used to work longer hours, as much as 70 hours a week. Apple mandated that the maximum overtime be 20 hours a week, so Foxconn workers now only work 60 hours a week. Of course, they're still making only 51 cents an hour.

By contrast, according to Forbes, Mr. Gou has a net worth of $5.5 billion. Steve Jobs has a net worth of $6.1 billion

51 cents an hour is apparently too much

I wrote a lot about China's workers in How To Save Jobs. I wrote about how, to many Chinese workers, middle class means you make the princely sum of $2 an day (a subset of that chapter is on CNN at China on $2 a day). By these measures, workers at Foxconn make a lot more than the typical Chinese peasant.

In How To Save Jobs, I talked about how the "middle classing" of Chinese workers will be driving the cost of goods up for those American companies who outsource jobs to China. I wrote that as workers earn more in China, companies will have to find workers in new places, people willing to work for less money.

This is, apparently, one possibility of what's happened at Foxconn. And this is where our story gets even more troubling.

The bulk of Foxconn's employees work in Longhua, a suburb of the massive Chinese industrial city of Shenzhen. It seems that 51 cents an hour is too much to pay for workers in Shenzhen. Remember, these are workers who are under such pressure that the factory complex is the site of a suicide cluster.

According to another Reuters report, Foxconn is spending something on the order of $10 billion to build a new plant in Chengdu. Why? According to Reuters, "Foxconn is expanding...to where wages are lower and workers more plentiful."

Foxconn may be spending billions of dollars to build a plant where it can pay workers even less than 51 cents an hour.

The rest of the story

On the other hand, the story may be more nuanced than it appears on the surface. In the May Reuters report, Gou is quoted as saying that he's considering moving factories closer to where the workers' families live.

Both Gou and Jobs find themselves caught between something of a rock and a hard place. According to the Reuters interview, Gou seemed genuinely disturbed about the worker deaths, but is also faced the challenge of keeping up with an almost insane level of demand, which often involved stretching workers to the breaking point.

We in the press are also not without some level of involvement in this. Whenever Apple (and, to a lesser extend, other vendors) can't keep up with demand, we often criticize management for poor planning and delivery. Avoiding our criticism may well mean pushing some foreign workers beyond their limits.

It should also be noted that for an emerging country, the Foxconn plant is actually quite progressive. The workers make considerably more than almost anyone else doing the same work in China.

Deplorable working conditions aren't confined to just Foxconn, or even to China for that matter. There's a fascinating movie called Shipbreakers that shows the absolutely squalid conditions workers in India must put up with at a site that breaks apart old ships for scrap. Workers are seen walking over decaying metal scraps and through toxic water -- barefoot.

But even that's not as clear cut as it might be. These poorly paid workers would otherwise starve, and hundreds of thousands of them make the trek to the shipbreaker port from all across the country because it's a job that pays -- even as it kills.

The sad fact is the average salary worldwide is $7,000 per year. Given how much we make in America and the number of very rich worldwide, that means that there are a tremendous number of people on the planet who make a lot less than $7,000.

In China, the average employment income per person, per year, is $4,325. Given the extreme income disparity between billionaires like Terry Gou and dirt poor farmers in the hinterlands, billions of Chinese make well less than that each year.

Here's perspective: in my research for How To Save Jobs, I calculated that more people are starving in China and India than America has people.

What should we do? What should we think?

This is a deeply disturbing topic to contemplate. Do we Americans really need our electronic toys so much, we're willing to look away when our fellow human beings are dying from the pressure they're placed under to, essentially, live the lives of slaves?

Yes, I know these people are getting paid and slaves don't get paid, but where do we draw the line? At what point does the stress, the long hours, the ban on speaking to other workers, the requirement that workers stand without being able to move or stretch for hours on end, the beatings, at what point does all of this become too much for us to accept?

It's not an easy answer. Millions of Americans rely on their jobs in the electronics and computer industries and those jobs are ultimately dependent on our continual purchases of affordable electronics. If we stopped buying our iPads and iPhones (and laptops and desktops and motherboards), Americans would lose jobs.

We also can't build these devices in the U.S. and have them sell.

According to Wolfram Alpha, the median American wage is $42,270 per year. That means each worker generally costs American employers about $15.57/hour. For the sake of this exercise, let's leave out the high cost of benefits. Even so, the typical American worker makes 30 times more than the typical Foxconn worker.

The low-end iPad sells for $499. If it were built by Americans, it would have to cost $14,970. No one would buy an iPad for $14,970. No one would buy a mid-level laptop for $23,970. No one would buy a smartphone for $5,970.

The only way we're able to get our affordable consumer electronics is, quite literally, on the blood of other humans working in misery.

And yet.

If we were to simply decide to stop buying consumer electronics, not only would American jobs be lost, the jobs of those miserable Chinese workers would be eliminated as well.

The sad, sad, horribly sad fact is these jobs are actually good for many of the workers at Foxconn. Because they're making so much more than their typical Chinese brethren, they're desperate to keep the gigs, even if the work is, almost literally, torture. Working at Foxconn, they're able to send money home to starving families, they're able to put some of their children into school, and they're able to move up, ever so slightly, on the incomprehensibly brutal economic ladder that exists in China.

So are these deplorable conditions Terry Gou's fault? Are they Steve Jobs' fault? Are they our fault?

Chinese workers -- and many other people throughout the world -- live in terrible conditions. We Americans are far more fortunate, all of us, than almost anyone here can imagine.

I'd like to see Mr. Gou relax some of the terrible working restrictions on his workers. I'd like to encourage the executives at Apple here in American who oversea the Foxconn contract to help motivate Foxconn to make improved conditions a priority.

The fact is, we're going to keep buying our consumer electronics. The good news is, doing so is putting food in people's mouths. The bad news is, it's also putting blood on all our hands. That's our world.

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