Apple recently released a report listing its major suppliers and detailing labor conditions among those suppliers in China. Conditions at Chinese factories, which have led to numerous suicides, had already been documented by others, from the New York Times to performance artist Mike Daisy. Apple, the second-largest company in the world by market cap, appears finally to be acknowledging problems:
- 62% of suppliers weren’t compliant with working-hours limits.
- 32% weren’t compliant with hazardous-substance management practices.
- 35% failed to meet Apple’s standards to prevent worker injuries. (Source: Wall Street Journal)
It’s good to see Apple making an effort to monitor and improve working conditions at its factories. But the company needs to do more. Those of us who own Apple products must insist that they do. As a result, we need to expect – no, we need to volunteer – to pay higher prices. Why?
Because we vote with our wallets.
Those of us who buy organic – milk, eggs, tomatoes – are willing to spend more because we feel we receive something of value in exchange for our money. With organic produce, we believe that what we’re buying is better for us – more nutritious and more flavorful. With organic dairy and meat, nutrition, health, and flavor are important to consumers, but I believe that a primary consideration is concern for how the animal is treated.
And there’s at least one more reason people buy organic: They’re concerned about the impact of chemicals on the environment and on farm workers. By choosing organic foods at the local produce market or grocery store, we’re sending a message. We know that hormones, antibiotics, chemical fertilizers, and pesticides help farmers reduce loss and increase production. And we know that not using those additives makes it more difficult for farmers to realize a profit on their hard work and investment. We get that. Because organic farming is important to us, we’re willing to help subsidize the farmer by paying higher prices at the market.
Essentially, that’s the same argument for paying higher prices to technology companies like Apple. We want these companies to require their suppliers to offer employees the same rights and working conditions and that employees here in US are entitled to – as Ira Glass put it, “to treat the workers the way that our country has already agreed that workers should be treated.”
“I just want basic labor protections for people,” said Mike Daisy in an interview with Ira Glass on This American Life. “It’s a basic thing that we fought for in this country. It took 100 years of labor struggles to get to a place where that happened for most workers. Then we exported those jobs overseas, and we didn’t send the protections with them. And it’s not right.”
Just as improved conditions for workers in this country have increased the cost of production for manufacturers, insisting on these changes overseas will also increase costs and likely raise prices. We probably can’t have one without the other, and we consumers need to accept that reality.
But of course, it’s never quite that simple. There are other perspectives to consider.
Apple reports record profits
I began writing this piece a couple of weeks ago, before Apple reported financial results for Q4 2012.
Bottom line: Apple makes a ridiculous amount of profit. It generated $13.1 billion on sales of $46.3 billion, mostly on iPhones and iPads. That’s nearly 30% in gross profits, which any company would love to achieve. By comparison, ExxonMobile set a record with its $14.8 billion profit in 2008, a mere 10.6% margin on sales of $140 billion, according to the Wall Street Journal.
As a result of its performance over the last few years, Apple now has $96.7 billion in cash in its coffers. It seems entirely reasonable that Apple could afford to use some of its profit and cash to subsidize improved working conditions for its suppliers by paying a higher cost of goods. And perhaps they should. Perhaps high-tech companies like Apple should consider the social and ecological impact of their actions as part of their financial results and report their triple bottom line to their shareholders.
But even if you believe in a triple bottom line – and not everyone does – who is going to demand that Apple force these changes on its supply chain? The shareholders who are raking in the profits from Apple’s stock price? That seems unlikely.
The “indirect and unintended results” of sweatshops
Finally, the argument has been made that the sweatshop conditions at factories like those run by Foxconn, a major supplier to US tech companies including Apple, may have done more good than harm. That’s the opinion of Paul Krugman, winner of the Nobel Prize for economics and New York Times columnist (as cited on This American Life):
“It is the indirect and unintended results of the actions of soulless multinationals and rapacious local entrepreneurs. It is not an edifying spectacle, but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful, but nonetheless significantly better.”
Nicholas Kristof, another New York Times columnist, who has written a book about the changes going on in China, concedes the point as well in an interview with Ira Glass:
“Well I mean, if you look at Shenzhen, for example, in Guangdong where Foxconn is, then there’s no doubt that it’s been a tremendous benefit, not only to southern China but indeed to much of Asia. It created massive employment opportunities, especially for young women, who frankly didn’t have a lot of alternatives.
“…we’ve returned many times to Dongguan and the surrounding towns and seen the transformation. Wages have risen from about $50 a month to $250 a month or more today. Factory conditions have improved as businesses have scrambled to attract and keep the best laborers. A private housing market has emerged. A hint of a middle class has appeared, as has China’s closest thing to a Western-style independent newspaper.
“…it’s a very awkward thing to defend sweatshops, if you will. I mean, I think it’s useful to be reminded about how grim the conditions are. But again, I just think that if you try to think how you can fight poverty most effectively, and what has fought it within China, then I think sweatshops are a key part of that answer.”
So, what are we to conclude?
I was inspired to tell this story by Mike Daisy based on a version of his one-man show, “The Agony and Ecstasy of Steve Jobs,” which appeared on This American Life. I was moved by his story of the Chinese workers at Foxconn and by my own complicity through willful ignorance. I started this piece to make the argument that Apple needs to do more to improve working conditions at its suppliers – and that we consumers need to both insist on those changes and prepare to pay for them.
But as is the case with so many complex topics, it’s not black and white. After reading and thinking about this issue, I’m left to ponder this question: Is Apple doing all of us a service, or are they taking advantage of people for their own benefit?
Special thanks to my son, Blake, for the inspiration to write this article.
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Postscript, March 19, 2012. This story has continued to evolve since I initially published my blog. Two significant events have transpired. 1) In February, Apple asked the Fair Labor Association to inspect its factories in China. Apple’s actions come in the wake of substantial press coverage and public outcry over the working conditions of factory employees and appear to be a response to public pressure. 2) This American Life retracted its Mike Daisy episode, saying it had discovered that much of Daisy’s story had been fabricated.
The “Retraction” podcast on TAL is a remarkable story, definitely worth listening to if you are at all interested in this story. I was pleased to hear Charles Duhigg, a reporter with the New York Times who has investigated and written about Apple’s overseas factories, make the following point on This American Life, which I believe supports the premise of my blog post: “There were times in this nation [the US] when we did have harsh working conditions as part of our economic development. We decided as a nation that that was unacceptable. We passed laws that prevented those harsh working conditions from ever being inflicted on American workers again. And what has happened today is that rather than exporting that standard of life, which is in our capacity to do, we have exported harsh working conditions to another nation… Should you feel bad about that? I don’t know, that’s for you to judge. But i think the way to pose that question is: Do you feel comfortable knowing that iPhones and iPads — and other products — could be manufactured in less harsh conditions, but that these harsh conditions exist because of an economy that you are supporting with your dollars… You’re not only the direct beneficiary, you are actually one of the reasons why it exists. If you made different choices, if you demanded different conditions, if you demanded that other people enjoy the same work protections that you yourself enjoy, then those conditions would be different overseas.”
Maybe Apple has made a few lives in China a tad better. Maybe not. It seems undeniable that Apple products have made many lives better worldwide. On balance, the company seems to have a functioning moral compass. Does the Chinese government have one? I think not.
This article was on point! And I’ll take it in a different direction: when we hear tax arguments for the rich because they “create jobs” the point is often left out that these create jobs in other countries, not for Americans. I’m happy to see wages (and subsequently quality of life) being raised in other countries, no doubt, and am happy to continue to support these efforts, but by keeping these jobs here we create opportunities for Americans. The statistics for these shops are alarming, by the way. Great post – thanks for sharing!
Great point, Becky, and I’m glad you brought it up. If my blog weren’t already too long, there was one additional point I wanted to make: improving conditions overseas actually helps American workers. As manufacturers in China improve conditions for their workers, their manufacturing costs will naturally go up, as they have in this county — and that helps level the playing field and create opportunities for Americans. We’re already seeing that change in the auto industry, as factory jobs are starting to come back to the US. 🙂
Great article John! I agree that we should be willing to pay more, but I also feel that companies (in this case Apple) should not make as much in profit. Consumers and companies should be willing to share the responsibility, in the hopes it would improve the working conditions in China and elsewhere. I also think companies should do the right thing even though each country has their own labor standards. But unfortunately, this seems to be the exception rather than the rule these days.
Thank you, Danielle. It would be great if companies were driven at least to some degree by a sense of social responsibility, and some are, but the profit motive will always be the greater force in a market economy, it seems to me. I think the best we can hope for is greater transparency. In this case, we want Apple to be more transparent — and less secretive — about their supply chain, which would allow impartial monitors to verify conditions at the factories. Openness would begin to drive more improvements than Apple’s secret audits, in part because of Apple’s conflict of interest.
Interesting article and, as you point out, a very complex matter. As wages rise in China, the manufacturing work flows elsewhere even now to the point where it is starting to return to the USA (when factoring freight/shipping costs and tariffs). So, maybe Apple will upgrade their practices in China but hundreds (thousands?) of other companies will continue to build there or take their work to even cheaper countries.
Ultimately, perhaps it does simply come down to having a moral compass.
Indeed, Kevin, one positive for the US is that higher cost of production overseas is driving some manufacturing back to American soil. That seems to be the happening in the automotive industry. Lower costs — and especially greater efficiency and production — in the US are attracting foreign investment too, from companies like VW.