Thursday, March 29, 2012

Fair Labor Association Report leads to Apple and Foxconn promises to change working conditions in China

Apple, Foxconn vow wide revamp of worker conditions

Reuters – Thursday March 29th at noon Los Angeles time

The following story and my blog are preliminary. I have not yet read the FLA report and I am sure I will have some criticisms of the report given the approach taken by the FLA. However, without reservations, it has to be a good thing for Chinese working people that Apple and Foxconn are acknowledging issues and promising to take action. So read the news story below, and realize that the attention of American news and you the reader motivated much of what is reported below. Congratulations. 

Peter Schnall

Highlights below are mine. One goal mentioned in the article below of maintaing wages for individual workers seems unlikely, especially if hours go from 80 hours to 49 hr/week. Also, remember that workers wanted overtime. 

By Poornima Gupta and Edwin Chan

SAN FRANCISCO (Reuters) - In a landmark development for the way Western companies do business in China, Apple Inc said Thursday it had agreed to work with partner Foxconn to substantially improve wages and working conditions at the factories that produce its wildly popular products.

Foxconn - which makes Apple devices from the iPhone to the iPad - will hire tens of thousands of new workers, clamp down on illegal overtime, improve safety protocols and upgrade worker housing and other amenities.
The moves came in response to one of the largest investigations ever conducted of a U.S. company's operations abroad. Apple had agreed to the probe by the independent Fair Labor Association in response to a crescendo of criticism that its products were built on the backs of mistreated Chinese workers.

The Association, in disclosing its findings from a survey of three Foxconn plants and over 35,000 workers, said it had unearthed multiple violations of labor law, including extreme hours and unpaid overtime.

Apple, the world's most valuable corporation, and Foxconn, China's biggest private-sector employer and Apple' main contract manufacturer, are so dominant in the global technology industry that their newly forged accord will likely have a substantial ripple effect across the sector.

Working conditions at many Chinese manufacturers that supply Western companies are considerably inferior to those at Foxconn.

"Apple and Foxconn are obviously the two biggest players in this sector and since they're teaming up to drive this change, I really do think they set the bar for the rest of the sector," FLA President Auret van Heerden told Reuters in an interview.

More immediately, the Apple-Foxconn agreement will raise costs for other manufacturers who contract with the Taiwanese company, including Dell Inc, Hewlett-Packard, Inc, Motorola Mobility Holdings, Nokia Oyj and Sony Corp.

The agreement will likely result in higher prices for consumers, though the impact will be limited because labor costs are only a small fraction of the total cost for most high-tech devices.

Foxconn said it would reduce working hours to 49 hours per week, including overtime, while keeping total compensation for workers at its current level. The FLA audit had found that during peak production times, workers in the three factories put in more than 60 hours per week on average.

To compensate for the reduced hours, Foxconn will hire tens of thousands of additional workers. It also said it would build more housing and canteens to accommodate that influx.

Apple CEO Tim Cook, who company critics hoped would usher in a more open, transparent era at Apple after he took over from the late Steve Jobs last fall, has shown a willingness to tackle the global criticism head-on.

The much-anticipated report marks the first phase of a probe into Apple's contract manufacturers across the world's most populous nation. With 1.2 million workers, Foxconn - an affiliate of Taiwan's Hon Hai Precision Industry - is by far Apple's largest and most influential partner.

(Reporting By Edwin Chan; Editing by Gary Hill)

Wednesday, March 14, 2012

Why Is the GOP Suddenly Turning Against College? (or why the U.S. no longer needs a highly trained and skilled blue collar workforce)

Most of the article below comes from James Kwak in this week’s issue of the Atlantic. Tx James.

By (James Kwak) | The Atlantic – Mon, Mar 12, 2012 10:51 AM EDT, Reuters

…..  Paul Krugman argues that Republicans prefer tax cuts to education for political reasons: Their goal to preserve upper-class prosperity comes at the expense of heightened middle-class insecurity. While this is probably true, I think there is more to it. Today, Republicans are turning their backs on higher education because of two historical trends. One is globalization. The other is the anti-tax revolution.

Imagine for a moment that the American political system is controlled by rich people. (That shouldn't be too hard.) In the mid-twentieth century, the United States had by far the largest economy in the world. American companies located most of their operations domestically; foreign direct investment was relatively difficult; and global securities markets were relatively undeveloped, making it hard to invest in foreign countries.

For these reasons, if American elites wanted to make more money, they needed American companies to become more profitable. Since American companies relied on American workers, they needed those workers to become more productive. In that situation, it made sense for the upper class to invest in education for the masses (via taxes and government spending on public education) so they could have a more productive workforce. If, instead, they took all their money and built huge houses in the Hamptons with it, the companies they owned (directly or indirectly) would grow slowly and become uncompetitive.

Today, however, we live in a much more globalized world. Large American companies locate much of their operations overseas and can draw on talented labor all around the world, essentially free-riding off of other countries' educational systems--many of which are at least the equal of our own. We like to think manufacturing has shifted to China because of cheap labor, but it's also because only in China can you hire 8,700 engineers in 15 days . This means that American companies are far less dependent on the American workforce than they were half a century ago.

To which I would add you can also hire a blue collar workforce for 50 cents an hour in China willing to work 12 hours a day 7 days a week reducing the need for a well-trained U.S. workforce reinforcing the migration of manufacturing overseas. 

Wednesday, March 7, 2012

Apple has joined the Fair Labor Association: What does it mean?

By Ellen Rosskam  and  Peter L. Schnall

We thought that the interested reader might want to know a bit more about the Fair Labor Association (FLA) which has been retained by Apple Corporation to evaluate whether Apple’s suppliers are adhering to Apple’s standards for the proper treatment of their workforce. This standard is outlined in the Apple Supplier Responsibility Progress Report (Apple_SR_2012_Progress_Report)  We quote from the report … “We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made”. Unfortunately, as many readers are certainly aware questions have been raised about several companies that supply Apple as to whether or not they are in violation of these policies. Among the issues raised are excessive overtime (more than 60 hours of work per week), crowded dormitories, military like working conditions, lack of breaks, mental harassment, etc. (the list goes on and the reader should refer to earlier blogs posted here). Foxconn itself acknowledges turnover rates in excess of 75% per year (Walmart which is considered a terrible U.S. company to work for has a turnover rate of 50 to 60%). High turnover rates are considered a good indicator of the stressfulness of a company to work for.

Apple has responded to the barrage of news and criticisms about Foxconn ( a major Chinese supplier of Ipads and Iphones) by releasing for the first time a list of its official suppliers. More importantly, on January 13, 2012, Apple joined The Fair Labor Association (FLA) as a Participating Company (PC) - the first technology company to join the FLA. The FLA works to end sweatshop working conditions around the world. As a PC, Apple commits to bringing their entire supply chain into the FLA program. This means FLA will visit, inspect and evaluate companies like Foxconn as to their adhearance to Apple and FLA standards.

FLA’s Goals

The FLA promotes core international labor standards. Details of the FLA’s Code of Conduct based on core international labor standards are provided below.[1] 
The Fair Labor Association is a non profit organization that combines the efforts of socially responsible companies, civil society organizations and colleges and universities to protect workers’ rights and improve working conditions worldwide by promoting adherence to international labor standards. The FLA conducts independent monitoring and verification to ensure that the FLA’s Workplace Standards are upheld where FLA company products are produced. Through public reporting, the FLA provides consumers with credible information to make responsible buying decisions. FLA Participating Companies agree to uphold the FLA Workplace Code of Conduct throughout their supply chains and commit to the FLA’s Principles of Fair Labor and Responsible Sourcing...Like all new affiliates, Apple will align its compliance program with FLA obligations within the next two years.[2]

Well yes, but as they say the devil is in the details. It seems fair to ask if FLA is truly an independent organization able to carry out the mandate outlined above. The problem is that the monies for the extensive audits, salaries of staff, etc. required by FLA to conduct their evaluations all come from the companies that are members of the FLA. This means Apple is paying for its own audit. Obviously, this is a less than optimal situation.

The FLA Workplace Code of Conduct

The FLA Workplace Code of Conduct defines labor standards that aim to achieve decent and humane working conditions. The Code’s standards are based on International Labor Organization standards and internationally accepted good labor practices. These include practices generally considered for corporations that want to be recognized as “socially responsible.” PCs are expected to comply with the relevant laws and regulations of the country in which workers are employed and to implement the FLA Workplace Code in their applicable facilities. The FLA accredits independent third-party monitors and engages them to conduct un-announced audits annually of a group of randomly selected factories that supply products to FLA-affiliated brands and universities.

What is wrong with FLA’s Code of Conduct

These standards are good as far as they go but they are 25 years out of date.  A great of research has been undertaken examining not just the role of the physical environment in causing ill health but also the psychosocial work environment (e.g., job strain, ERI, social isolation, injustice, lack of mobility, etc.). Psycho-social work hazards are not even mentioned in any international labor standards related to occupational health and safety nor are they part of the FLA’s evaluation of the workplace.[3]  This is not surprising. Science evolves faster than the international standard setting process, which is long and arduous - even updating international labor standards can takes years. Needless to say, the FLA’s Code of Conduct also does not address psycho-social work hazards. This is why the director of the FLA – Auret Van Heerden could visit Foxconn, look at the well lit and clean factory floors and declare that “facilities are first-class” and “Foxconn is really not a sweatshop”. Yes it is first class and not a sweat shop compared to other Chinese companies but this does not make it a healthy place to work.

Given the FLA’s flexibility it would be good if its Code were revised to address psycho-social stressors. Implementing the FLA’s Code is no easy undertaking in countries where labor laws are weak and not enforced, such as in China, or where there are no protective labor laws at all.