July 7, 2010
On the surface, salary increases recently handed out by the Foxconn Technology Group to assembly line and base-level workers at its southern China manufacturing plant were unusually high.
But underneath, a much deeper tale is unfolding. Induced by a string of suicides at its Shenzhen plant, Foxconn, China's largest electronics contract manufacturer -- and supplier to the likes of Apple, Dell, HP, and Sony -- increased its basic wage by one-third to $177 per month, and says it will raise it again to $295 for employees that pass a three-month assessment period. But Foxconn's move, which helped ease pressure from activists around the world critical of its low pay and work-camp-like conditions, may actually be the driving force behind the company's plans for the future and also put the ball in its competitors' court. Foxconn's decision set off a wave of new salary demands and even strikes in the Pearl River Delta region. In one such instance, workers at a Honda factory in Guangdong's Foshan got a 35% pay hike after striking for two weeks. "Other people have had such high salary rises. If our factory doesn't have its own salary rise, next month I'll quit," said an employee surnamed Cao at a cosmetics company in Guangzhou. But this fails to fully address the reality of what is happening in the region, with some workers at the Foxconn plant claiming the salary hikes were simply window dressing. A worker surnamed Zhang started at Foxconn in April and earned $280 for the month. In June, however, restrictions on overtime meant he pulled in just $192, and he also said Foxconn had increased his workload. Similar stories are emerging at a number of factories in the region, where higher base salaries are accompanied by increased workloads, lower overtime pay, and less incentives. The reports reveal the reluctance of manufacturers in the region to raise salaries, because no matter how small the increases actually are, they pose a major challenge to companies in the region that do not want to see their margins eaten away by higher labor costs. A survey conducted by Sun Yat-sen University professor Lin Jiang in Dongguan, another city in Guangdong, said that anything higher than an average salary rise of 5% would be difficult for industries to endure. That is where Foxconn's sheer size plays to its advantage. Unlike many of its smaller competitors, it has the resources to move elsewhere, and it recently said it will relocate much of its assembly line work from Shenzhen to the northern province of Hebei, where lower wages are the norm. Analysts say Foxconn's move could hasten the transformation of the Pearl River Delta into a region that produces higher-value products and also hasten the development of inland China. But at the same time, it could threaten many of the factories that kick-started development in southern China and are now stuck trying to find a balance between workers' demands for higher pay and shrinking margins.
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