Lee Jeong Hyun

http://www.nytimes.com/2010/06/03/business/global/03foxconn.html?ref=asia

June 2, 2010
After Spate of Suicides, Technology Firm in China Raises Workers’ SalariesBy DAVID BARBOZA
SHANGHAI — Stung by labor shortages and a rash of suicides this year at its large factories in southern China, Foxconn Technology said Wednesday that it would immediately raise the salaries of many of its Chinese workers by 33 percent.

The pay increase is the latest indication that labor costs are rising in China’s coastal manufacturing centers and that workers are demanding higher pay to offset an increase in inflation and soaring food and property prices.

On Wednesday, Honda Motor said it had resolved a strike in southern China and resumed operations at a transmission plant there after agreeing to give 1,900 Chinese workers a 24 percent pay raise.

The Honda strike, which lasted more than two weeks, was a rare show of power by Chinese workers, who are not commonly allowed by the government to publicly strike and walk off the job for higher wages.

At Foxconn, the basic salary for an assembly line worker in Shenzhen is expected to rise from 900 renminbi ($132) a month to 1,200 renminbi ($176). The minimum monthly wage in Shenzhen is 900 renminbi, about 83 cents an hour.

The announcement comes just a week after Foxconn’s chairman, Terry Gou, visited its factories in the southern city of Shenzhen and promised to do everything possible to halt a spate of worker suicides and improve conditions at Foxconn, which is the world’s largest contract electronics manufacturer.

The police say 10 Foxconn workers have committed suicide this year in Shenzhen.

The company, which is based in Taiwan and employs more than 800,000 workers in China, has denied that the suicides were work-related or above the national average, saying instead that they were the result of social ills and personal problems of young, migrant workers. Foxconn said Wednesday that the decision to raise salaries was not a direct response to the suicides.

But Foxconn, which produces electronics and computer components for Dell, Hewlett-Packard and Apple, has come under growing scrutiny in recent years because of recurring reports of harsh labor conditions at its factories, including long working hours and claims by labor rights activists that the company treats workers like machines.

Apple, Dell and H.P. each said last week that they were concerned about the recent suicides and were investigating the situation at Foxconn.

Steven P. Jobs, Apple’s chief executive, said Tuesday during a technology conference in California that he was concerned about the deaths at Foxconn, but said that the factory was not a “sweatshop” and added that Apple was “over there trying to understand what is happening.”

Like most manufacturers in southern China, Foxconn is also struggling to hire thousands of workers at a time when the economy is booming and there is a shortage of unskilled migrant workers in many parts of coastal China.

Many migrant workers who typically move from inland provinces to coastal cities looking for factory work have complained that factory salaries have not kept pace with inflation. Many of them have decided to look for work closer to home.

Foxconn executives say the company’s factories in Shenzhen alone have hired more than 100,000 workers during the last year, and that labor rights groups have pressed the company to raise salaries.

“First, a pay raise will give our workers more leisure time,” said Arthur Huang, a Foxconn spokesman. “Second, such a huge pay raise will attract more qualified workers.”

Southern China’s manufacturing centers have been struggling with labor shortages since about 2003, and many coastal cities have raised the minimum wage in recent years.

Indeed, to help offset inflation and rising food, energy and housing costs — and to spur domestic consumption among the lower classes — Beijing urged local governments early this year to raise the minimum wage in the regions.

Many cities responded by raising the minimum wage by about 10 to 15 percent, to about 750 to 1,100 renminbi.

To cope with labor shortages and hold down costs, many factories in southern China expect employees to work a considerable amount of overtime. And often half of an employee’s wages come from overtime pay.

As a result, Foxconn’s 33 percent increase in wages could translate into even higher labor costs. Mr. Huang at Foxconn said the company had not yet calculated its impact on profitability.

But Debby Chan, project officer at Students and Scholars Against Corporate Misbehavior, a labor rights group based in Hong Kong, said the wage increases were insufficient.

“We’re advocating the living wage, and we think the standard should be between 1,700 to 2,100 renminbi a month,” Ms. Chan said Wednesday. “And we also have other demands, like Foxconn should look into the problems of their management methodology.”