Apple soars. Workers suffer.

The world’s most popular product relies on poverty wages, as low at $0.27 per iPhone.

Apple made headlines last week when it announced record-setting profits from its most recent business quarter (Oct-Dec 2014, Apple’s fiscal Q1).

$74.6 billion revenue

$18 billion in pure profit

$142 billion net cash reserves

74.5 million iPhones sold
Apple fiscal Q1 numbers, as reported by BBC

These figures blew past many analysts’ predictions and Apple’s previous records for the same quarter last year.

On the micro level, there are also some important numbers to pay attention to:

Number of workers in “final assembly” plants: 500,000

Hours worked per week: 72 – 105
Hours are higher during peak production seasons. The following calculations are based on 84 hour work weeks. (12 hour days, 7 days per week).

Monthly base wage: $244 (1530 yuan)

Overall monthly wage (including overtime): $582 (3650 yuan)
Hourly wage: $1.62 per hour (10.13 yuan/hour)

Labor cost per iPhone assembled: $0.27

Recommended living wage: $725 (4537 yuan)
Calculated by Asia Floor Wage for a 48 hour work week.
Recommended Hourly Wage: $3.77 (23.6 yuan)

Recommended labor cost per iPhone assembled: $0.63

Cost difference for assembly labor per iPhone: $0.36
Exchange rate used: $1 = 6.26 yuan

Explanation of Calculations:

iphone-assembly-lines sacom
Young workers assembling iPhones. Credit: SACOM

According to Apple, 1.5 million people work in their supply chain, a third of which work in “final assembly” mega-factories. This means that during the same three months Apple set these financial records, 1 million Apple workers made the parts for these phones and 500,000 put them together.

Workers at one assembly factory make base wages of 1530 yuan ($244) per month (This is the minimum wage in Suzhou, China). With lots overtime, workers can increase these earnings to roughly 3650 yuan ($582) per month, according to a 2014 investigation by Students and Scholars Against Corporate Misbehaviour (SACOM). This was at Pegatron, one of Apple’s main suppliers in China, which handles the final assembly of Apple’s iPhones. Other final assembly plants include Foxconn and Quanta.[1]

The living wage in China, as calculated by the Asia Floor Wage in 2013, is approximately 4537 yuan ($725 USD, PPP). This is based on working 48 hours per week at a rate of about $3.77 per hour.

However, workers in Apple’s supplier factories, do not work 48 hours per week, especially during peak production times.  SACOM’s investigation found that some workers at Pegatron worked for 10 weeks without a rest day and often for 12-15 hours a day, sometimes up to 17-18 hours a day. This means that during peak production time, workers at Pegatron were working between 84 and 105 hours per week. This is more than double a typical workweek around the world.

Taking a conservative estimate of (12 hours/day, 30 days per month) workers earn approximately 10.13 yuan/hour, or roughly $1.62 per hour. This is less than half the recommended living wage of about 3.77 per hour.

According to a 2008 study published by MIT’s Sloan school of Business, which looked at the value chain of iPods, the assembly time required for one device was 10 minutes, or six iPods per hour. Which means, if comparable, the cost of labor per iPhone assembled is roughly 27 cents.[2]

Apple’s profit margin, or the money in pure profit it makes on every iPhone sold, is 39.9%, according to BBC. The industry average for consumer electronics is below 10%, according to Standard & Poor’s. The iPhone 6 costs between $199 and $749 at Apple’s online store, which means that depending on which phone you buy and the amount of storage you elect, Apple could be pocketing somewhere between $79 and $299 in profit. Apple’s margins are high for any sector, let alone a sector that requires the work of millions of human beings to make a product.  The per piece labor of just $0.27 (for assembly) helps explain how Apple is able to achieve these remarkable margins.

Labor is one of the highest costs that any business will incur in any sector. One of the reasons, and usually the primary reason, a business may choose to manufacture in one particular country is the relative “cheapness” of labor costs there—meaning low wages. But at what point does the pursuit of lower wages move from a “savvy business scheme” to full-on exploitation?

In China, where Apple’s iPhones are made, wages are relatively low. So low in fact that workers must rely on overtime pay to get by. Electronics brands argue that workers like to work overtime so they can save for their future, but if workers base wages were raised to provide a living wage to begin with, would they elect to work such exhausting hours?

In these mega-electronics factories, there are typically 2 shifts, day and night. Workers either work 12 hours during the day, or 12 hours straight through the night. This often does not include time that workers may need to dress/undress, pass through security, or attend pre- or post-shift meetings. With either shift, little time is left over for recreation, personal development, or even rest.

bbc sleeping workers 2
Exhausted from long shift, many workers fall asleep on the job. Credit: BBC Panorama

In fact, in a recent BBC expose of Pegatron, one of the most apparent problems was the amount of workers falling asleep on the job, some while operating or working near dangerous equipment.

A recent letter written by nine non-profit and workers organizations called on brands to address the poverty wages in the manufacturing sector by paying “living wages, according to a credible benchmark, throughout their operations and supply chains… and structur[ing] their business relationships with suppliers, both in terms of price and volume, in such a way that living wages can feasibly be paid.” For electronics in China, this would mean paying the living wage for 48 hours of work–not poverty wages that rely on excessive overtime to get even close to this figure.

$1.62 per hour, or less, is just too little to compensate someone who works six+ days a week, for 12+ hours a day, in exhausting and often dangerous conditions. As documented by Green America and allies, toxins are prevalent in Apple supplier factories (many of which are suppliers for Apple’s competitors as well), and workers are developing cancer and other devastating diseases as a result.  Apple announced in 2014 that it would ban two harmful chemicals in its final assembly plants to protect workers, however, there are hundreds of hazardous chemicals used in electronics manufacturing, particularly at parts and semiconductor manufacturers.

36 cents
36 cents, the amount it would cost Apple per iPhone to pay final assembly workers a living wage

The trade-off workers in these factories must make for these meager wages is one that arguably no worker in the United States would willingly accept.

So when does the pursuit of lower wages move from a “savvy business scheme” to full-on exploitation? In the case of Apple, who made $18 billion in profit last quarter and who could spend just 36 cents more per iPhone to ensure living wages, it’s painfully clear it has crossed this line. And what better company to fix this error than the most profitable company in the history of the world?

[1] In 2012, the New York Times did a thorough job analyzing workers hourly wages at Foxconn, another final assembly factory.

[2] This estimation is imperfect. It does not include the cost of labor further down the supply chain, at parts manufacturing plants. (Though the MIT study estimates these workers earn even less than assembly workers, due to greater competition among parts manufacturers). It also bases the assembly time required on iPods, not iPhones. Finally, it relies on exchanging yuan to US dollars, a rate that is not constant. ($1=6.26 yuan was the exchange rate at the time of writing.)

Patience and Action for iPhone 6 Workers

Some iFans may have called out of work last week in an effort to snag a new iPhone 6 and 6 Plus, which went on sale last Friday. Sales of these devices topped 10 million last weekend–higher than the first weekend sales of the iPhone 5 last year.

The line at NYC's 5th Avenue Apple Store on September 19, 2014.
The line at the 5th Avenue Apple Store in NYC on September 19, 2014. (Credit: Kathy Harget)

There is no question that demand for the new iPhones is strong, but some analysts have pointed out that these high sales figures are not an indicator of demand, but supply. With the iPhone 6 and 6 Plus selling out at locations around the world, its clear Apple is limited by how much it can supply, and how quickly.

Apple shareholders may be excited about the frenzy generated by the release of the iPhone 6, but workers experience this frenzy differently.  A spike in demand for these phones puts greater pressure on Apple’s supplier factories and the estimated 1.5 million workers who work in them, either making parts or assembling the phones.

The Wall Street Journal reported that Foxconn, one of Apple’s final assembly partners, has been operating roughly 100 production lines around the clock in Zhengzhou. “We have been churning out 140,000 iPhone 6 Plus and 400,000 iPhone 6 every day, the highest daily output ever, but the volume is still not enough to meet the preorders,” said a person familiar with the matter.

“The challenge is to manufacture two complicated new iPhones on a large scale at the same time because Foxconn is the sole assembler of the 5.5-inch iPhone 6 Plus [and assembles a majority of the 4.7 inch iPhone 6.]”

While Apple boasts profit margins as high as 69%, as was the case with the iPhone 5s, Foxconn’s profit margin is closer to 1.5%, according to Bloomberg.  Apple expects high volume, high quality, and high Corporate Social Responsibility (CSR) standards of its suppliers, however, not in equal measure.  When these expectations come into direct conflict, the CSR policies most likely lose out.  This is especially common during times of peak demand, when workers are found to be working excessive overtime, well beyond legal limits. This can also take the form of mandatory overtime, as we found at Catcher, another Apple supplier.

Consumers who didn’t snag a phone last weekend can expect to wait several weeks or months for a new iPhone. We encourage Apple to allow its suppliers the time they need to meet this demand, without compromising working conditions. With worldwide demand well over 10 million units, its clear that consumers of these devices won’t be disappearing anytime soon.

As iPhone 6 workers labor around the clock, you can support them by pushing Apple to take action to improve conditions for workers. You can also share “9 Reasons Not to Rush your Next Smartphone Upgrade” with your friends.

Apple: the Walmart of the High-Tech Industry

Co-authored by Joey Friedman

badapple_logo_VERTICLE

Of late, most of Apple’s labor scandals have stemmed from supplier factories in China. Today’s Wall Street Journal, however, points to a labor problem much closer to home. On Monday July 21, 20,000 hourly workers in California filed suit against Apple for workplace violations.

The case, originally filed back in 2011 by four Apple employees, now voices the position of 20,000 employees claiming Apple’s violation of wage and hour laws. Reports have been made that these employees were denied lunch breaks, rest breaks, and final paychecks while working for Apple. Other claims broadly illustrate mistreatment within the workplace. Multiple reports reflect that if certain labor policies were discussed among employees they became at risk for being “fired, sued or disciplined.”

The claims made by the thousands of California-based staff members exhibits behaviors of a hostile and threatening work environment. It is possible that such a harsh relationship between staff members and management is what has kept these employees fearfully quiet for any length of time. It’s clear that while Apple offers admiral benefits packages for its corporate employees, its hourly retail workers (and the workers on the other end of its supply chain, assembling its prized iGadgets) are not treated as well.

Apple is the second most profitable company in the world and recently announced second quarter profits of $7.75 billion dollars, up 12% since the same time last year. The company touts itself as a leader of social and environmental responsibility, however, in reality, Apple’s labor record seems to align more closely with that of Walmart.

This can’t go on. Send Apple a message>>
In the “letter” box you can add your concerns for workers in the U.S. as well as overseas.

Read more:
Apple Facing Another Class-Action Suit by Employees, Wall Street Journal

 

Samsung: Don’t Abandon, Make Reforms!

Co-authored by Joey Friedman

Samsung-Home-SliderAfter undercover investigations and resulting allegations of underage workers in one of Samsung’s supplier factories, Samsung has quickly made public response to this issue. Repeatedly pledging a “zero tolerance policy”, Samsung has currently suspended their involvement with Shinyang Electronic Co. Ltd, in Dongguan, China. Until recently, Shinyang produced phone covers and parts for Samsung. It’s a South Korean-invested facility which hires about 40% temporary workers, all reportedly under the age of 35.

Although Samsung has conducted its own audits of this factory (three since 2013, the most recent on June 25, 2014), the company uncovered no cases of child labor. China Labor Watch (CLW), however, found at least five children working on one production line in this facility, and estimate there could be as many as twenty children working on that line and more throughout the facility.

Samsung’s failure to notice such gross violations during multiple visits to Shinyang certainly questions the rigor and effectiveness of these audits. In response to the allegations made by CLW, Samsung launched another investigation last week and reported finding evidence of illegal hiring processes. If Samsung’s investigation concludes that illegal hiring practices were indeed used, Samsung is threatening to permanently terminate its involvement with Shinyang.

In an effort to completely eradicate child labor within electronic factories, it is reassuring to see such an adamant response from Samsung’s team. However, the repercussions that could result from termination would leave workers worse off. Most imminently, the reported 1,200 Chinese workers in this facility could immediately lose their jobs, as Samsung is a major purchaser from this facility.

Cutting ties also relieves a lot of responsibility from Samsung. Other major electronics factories have formal child labor remediation policies. Apple, for example, requires that suppliers found to be employing underage workers must return children to school, finance their education and continue to provide income.

Shinyang’s violations reach beyond underage workers. All workers—adults, minors, and children—are underpaid, overworked, malnourished and forced into hazardous situations. A strong child labor remediation process, along with an increased hourly wage, and overtime that respects national limits would go a long way to make Shinyang a better place to work.

As Samsung considers next steps with Shinyang, we strongly urge the company to invest more in Shinyang and reform the factory so that it is a decent place to work. Terminating business with this factory is just a temporary solution to a systemic problem. The high demand and low prices that Samsung imposes on its supplier factories indirectly pushes them to seek out the cheapest labor possible, and in this unfortunate instance, children.

Take Action>>

Read More>>

  1. Another Samsung Supplier Exploiting Child Labor (CLW’s Report)
  2. Samsung Blog Post – July 14
  3. Samsung Blog Post – July 10

 

Bad Samsung: Stop Using Child Labor

Samsung-Home-SliderNews broke last night that global electronics giant Samsung has once again been found to be using child labor in the production of its mobile phones.

China Labor Watch’s (CLW) report, Another Samsung Supplier Exploiting Child Labor, documented child labor and other abuses at Shinyang Electronic Co. Ltd. Shinyang is a South Korean-owned company, mainly producing the covers and other parts for Samsung cell phones. The report revealed that five children (under 16) were found to be working in this facility, as well as numerous minors (under 18). These young workers are subject to the same long hours as other workers, and compensated less. These children were also working the night shift, from 8:00 pm to 8:00 am, six to seven days a week.

This news adds to mounting concern regarding Samsung’s labor record. Last month the Washington Post shared that more than 200 former Samsung workers are suffering from grave illnesses, allegedly contracted while working in Samsung plants.

Samsung’s own sustainability reports make no-mention of these issues. It’s most recent report stated stated the company inspected working conditions at over 200 suppliers in 2013 and that “no instances of child labor were found.” The violations found in CLW’s report raise questions about the effectiveness of Samsung’s self-monitoring and the truth of its reports.

In response, Green America and China Labor watch have teamed up to launch a petition to Samsung’s CEO calling on the company to immediately cease abusive labor practices in its supplier factories.

Take action »
Read the report »
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