Apple Pact to Ripple Across China
Apple Pact to Ripple Across China
Manufacturers Face Pressure to Cut Workers' Hours, Raise Pay; New Generation Has Lifestyle Goals
Manufacturers grappling with rising labor costs and increasing worker demands in China could face further pressure if a critical probe of a major Apple Inc. supplier sets a new standard for China's factory workers.
Apple and one of its top suppliers, Hon Hai Precision Industry Co., agreed to a set of recommendations by the Fair Labor Association following an audit of Hon Hai's Chinese factories to reduce work hours and change other employment policies.
Hon Hai said on Friday that it welcomed the report and would work with Apple "to carry out the remediation program…along with the FLA audit findings." It added, "We will continue to support Apple's initiatives to ensure that its business partners are in compliance with all relevant China laws and regulations and the FLA's Workplace Code of Conduct."
The recommendations included reducing work hours to a maximum of 40 hours a week and limiting overtime to a maximum of 36 hours a month-the legal maximum in China-by July 2013. Implementing the measures would require Hon Hai to hire and train more workers and increase compensation to make up for reduced hours, according to the FLA report. The companies also will explore benefits such as unemployment insurance with private providers and government agencies. FLA is a nonprofit involving companies, universities and social groups to address labor conditions and training.
The move could further encourage changes throughout the rest of the manufacturing sector, starting with other high-tech companies. A Dell Inc. spokesman said the computer maker is "pleased that [Hon Hai] is taking steps improve working conditions" but declined to say how changes would affect costs. Dell will "assist" as Hon Hai "makes this transition and [will reach] out to other companies who have made similar moves to get lessons learned to share with" them, he said.
A spokeswoman for Taiwan's Quanta Computer Inc., another manufacturer with Chinese factories, said on Friday that it, too, is expecting an audit from FLA and "we will cooperate fully." She declined to disclose information about working hours. Quanta produces notebooks and netbooks for Apple, Dell and Hewlett-Packard Co. Spokesmen for H-P and Nokia Corp., which also use contract manufacturers to make their devices, didn't immediately comment.
Ron Li, spokesman for Wintek Corp., a supplier for touch screens for Apple, said the company is in compliance with Apple's maximum work hours, which "is below China's maximum." Charles Lin, chief financial officer of Apple supplier Pegatron Corp., declined to comment.
The FLA report "clearly lays out what the issues are and how to fix them," said Alberto Moel, analyst at brokerage firm Sanford C. Bernstein (Hong Kong) Ltd. Hon Hai can "use this in many ways-to get better labor, better employees, for higher retention. It will drive the standards up for everyone in that way."
Manufacturers in China increasingly say they are reconsidering labor practices, including limiting overtime, raising wages and more actively considering worker lifestyles.
Chinese officials also are shifting their view of labor practices. They have faced pressure to share more of the nation's heady growth with workers as it looks to make its economy more consumption driven, and following a wave of labor unrest in 2010 at a number of Japanese-owned factories that supplied the auto industry, including Honda Motor Co. Nationally, average 2010 private sector manufacturing wages totaled 20,090 yuan (or $3,190 at current rates), up 16.4% from the year before.
Meanwhile local governments are raising minimum wages, including 13% increases in Tianjin and Shanghai, and a 19% increase in Shandong, all announced in the past two months. Officials in past years would have been reluctant to draw attention to rising wages out of fear it could drive away investors. The pressure is "coming from all sides. It isn't only from the overseas organizations," says Jeffrey Wilson, a Shanghai-based lawyer in the labor practice at Jun He Law Offices.
For example, works hours aren't strictly enforced at the local level, and up to 100 hours a week is often tolerated by authorities. Chinese workers put in the time willingly, in order to earn more money.
"They were willing to tolerate that level of overtime as long as there were no complaints by workers and they were being paid. What the government is now concerned with is a new generation of employees that wants a more balanced lifestyle," Mr. Wilson said.
Some of the pressure comes from workers themselves. Widespread job vacancies and turnover in China's factory towns reflect lesser willingness by workers to accept low wages and long hours, even though such jobs were much sought after a decade ago.
It is unclear what workers will do if companies abide by the letter-of-the-law on overtime limits. The Contract Labor Law enacted in 2008 that was designed to protect worker rights. But many young workers take factory jobs specifically because want to make as much money as quickly as they can, including laboring overtime or taking more dangerous positions.
Factory owners must balance that with young workers' changing aspirations, experts say. Ma Ai, director of the Institute of Legal Psychology at the China University of Political Science and Law, said that unlike "their parents worked in factories in order to survive, the new generation's needs lie in personal development."
While their parents were willing to work long hours for the money, young workers "are no longer willing to bear this hardship," he said. "They see themselves as sophisticated urbanites."
Manufacturers Face Pressure to Cut Workers' Hours, Raise Pay; New Generation Has Lifestyle Goals
Manufacturers grappling with rising labor costs and increasing worker demands in China could face further pressure if a critical probe of a major Apple Inc. supplier sets a new standard for China's factory workers.
Apple and one of its top suppliers, Hon Hai Precision Industry Co., agreed to a set of recommendations by the Fair Labor Association following an audit of Hon Hai's Chinese factories to reduce work hours and change other employment policies.
Hon Hai said on Friday that it welcomed the report and would work with Apple "to carry out the remediation program…along with the FLA audit findings." It added, "We will continue to support Apple's initiatives to ensure that its business partners are in compliance with all relevant China laws and regulations and the FLA's Workplace Code of Conduct."
The recommendations included reducing work hours to a maximum of 40 hours a week and limiting overtime to a maximum of 36 hours a month-the legal maximum in China-by July 2013. Implementing the measures would require Hon Hai to hire and train more workers and increase compensation to make up for reduced hours, according to the FLA report. The companies also will explore benefits such as unemployment insurance with private providers and government agencies. FLA is a nonprofit involving companies, universities and social groups to address labor conditions and training.
The move could further encourage changes throughout the rest of the manufacturing sector, starting with other high-tech companies. A Dell Inc. spokesman said the computer maker is "pleased that [Hon Hai] is taking steps improve working conditions" but declined to say how changes would affect costs. Dell will "assist" as Hon Hai "makes this transition and [will reach] out to other companies who have made similar moves to get lessons learned to share with" them, he said.
A spokeswoman for Taiwan's Quanta Computer Inc., another manufacturer with Chinese factories, said on Friday that it, too, is expecting an audit from FLA and "we will cooperate fully." She declined to disclose information about working hours. Quanta produces notebooks and netbooks for Apple, Dell and Hewlett-Packard Co. Spokesmen for H-P and Nokia Corp., which also use contract manufacturers to make their devices, didn't immediately comment.
Ron Li, spokesman for Wintek Corp., a supplier for touch screens for Apple, said the company is in compliance with Apple's maximum work hours, which "is below China's maximum." Charles Lin, chief financial officer of Apple supplier Pegatron Corp., declined to comment.
The FLA report "clearly lays out what the issues are and how to fix them," said Alberto Moel, analyst at brokerage firm Sanford C. Bernstein (Hong Kong) Ltd. Hon Hai can "use this in many ways-to get better labor, better employees, for higher retention. It will drive the standards up for everyone in that way."
Manufacturers in China increasingly say they are reconsidering labor practices, including limiting overtime, raising wages and more actively considering worker lifestyles.
Chinese officials also are shifting their view of labor practices. They have faced pressure to share more of the nation's heady growth with workers as it looks to make its economy more consumption driven, and following a wave of labor unrest in 2010 at a number of Japanese-owned factories that supplied the auto industry, including Honda Motor Co. Nationally, average 2010 private sector manufacturing wages totaled 20,090 yuan (or $3,190 at current rates), up 16.4% from the year before.
Meanwhile local governments are raising minimum wages, including 13% increases in Tianjin and Shanghai, and a 19% increase in Shandong, all announced in the past two months. Officials in past years would have been reluctant to draw attention to rising wages out of fear it could drive away investors. The pressure is "coming from all sides. It isn't only from the overseas organizations," says Jeffrey Wilson, a Shanghai-based lawyer in the labor practice at Jun He Law Offices.
For example, works hours aren't strictly enforced at the local level, and up to 100 hours a week is often tolerated by authorities. Chinese workers put in the time willingly, in order to earn more money.
"They were willing to tolerate that level of overtime as long as there were no complaints by workers and they were being paid. What the government is now concerned with is a new generation of employees that wants a more balanced lifestyle," Mr. Wilson said.
Some of the pressure comes from workers themselves. Widespread job vacancies and turnover in China's factory towns reflect lesser willingness by workers to accept low wages and long hours, even though such jobs were much sought after a decade ago.
It is unclear what workers will do if companies abide by the letter-of-the-law on overtime limits. The Contract Labor Law enacted in 2008 that was designed to protect worker rights. But many young workers take factory jobs specifically because want to make as much money as quickly as they can, including laboring overtime or taking more dangerous positions.
Factory owners must balance that with young workers' changing aspirations, experts say. Ma Ai, director of the Institute of Legal Psychology at the China University of Political Science and Law, said that unlike "their parents worked in factories in order to survive, the new generation's needs lie in personal development."
While their parents were willing to work long hours for the money, young workers "are no longer willing to bear this hardship," he said. "They see themselves as sophisticated urbanites."