FLA president says Apple/Foxconn agreement raises bar, but will it raise prices?

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The results of the Fair Labor Association’s investigation into Apple’s suppliers beginning with three Foxconn facilities officially published yesterday. While finding excessive working hours and many violations of Chinese labor law, Foxconn and Apple agreed to reduce workweek and overtime hours within Chinese law to 49 hours per week and 36 overtime hours per month based on the FLA’s recommendations. Foxconn will also hire tens of thousands of new employees and implement a compensation package to make sure workers’ salaries remain the same amid reduced working hours.

In the interview above with Reuters, head of the FLA Auret van Heerden talked about the investigation and noted the agreement could set a new standard for working conditions throughout China. One unanswered question is whether the agreement will lead to higher prices for consumers (which is not necessarily a bad thing)…

Given that Foxconn and Apple have now decided to raise the bar… dramatically improved conditions for workers… other factories are going to start losing workers, workers are going to choose to go and work at Foxconn… you work less and you get the same money, and you get time to spend it. Other factories will have to raise their offer in order to attract and retain workers… Apple and Foxconn will set the bar that everyone else will have to meet. – FLA president, Auret van Heerden

One result of the reduced hours and Chinese workers’ ability to demand higher wages is inevitably increased costs and potentially higher prices passed down to consumers. Not just for Apple, but all Foxconn customers, including Dell, HP, Motorola, Nokia, Amazon, Microsoft, and Sony. However, with Apple’s huge margins, it will likely benefit over other Foxconn customers who will be forced to pass down increased costs to consumers. While several reports were quick to note labor costs associated with assembly represent a small percentage of overall production costs, HP’s Meg Whitman told Reuters prior to the report’s publishing that increased labor costs at Foxconn could lead to an “industry-wide phenomenon”:

“If Foxconn’s labor cost goes up … that will be an industry-wide phenomenon and then we have to decide how much do we pass on to our customers versus how much cost do we absorb.”

It is unclear exactly how much of an impact Apple and Foxconn’s agreement with the FLA will ultimately have on product prices for consumers, but it is clear that at least some of Foxconn’s customers were concerned leading up to the audits. The FLA will continue its audits of Apple’s suppliers throughout the year at several contractors, such as Wintek, Pegatron, and Quanta Computer.

Related articles

• Fair Labor Association publishes findings of Apple/Foxconn Investigation (9to5mac.com)