It is commonly understood that working conditions in China are quite inferior to those in the US so I find it interesting that the New York Times once again has come out with an article which seems to be designed to embarrass Chinese contract manufacturer Foxconn with a story which says students are forced to work there for free in an effort to pump out iPhone 5 devices. The article tells us Foxconn says the students are able to leave while some students say they are required to work there by their teachers.
We need to take a step back and look at the situation objectively. Life in China is difficult – there is no social safety net, no Medicaid, no food stamps, etc. What this means is if you aren’t working, you starve. Hunger as they say is a powerful motivator which naturally explains why people work in factories which have poor conditions for little money.
But let’s put aside our moral outrage for a second and marvel at a country where they are able to tap into a student labor force on-demand to fulfill orders. Contrast this to teachers in Chicago who are the highest paid in the nation and are fighting because they don’t want to be graded based upon their performance.
In which country would you build a factory? In which country would you want to make your goods?
Now for those of you who are disgusted by the capitalist viewpoint in this piece – let me ask you, “Do you own any Apple products or any other consumer products made in China?” If the answer is yes, I leave it to your own conscience to work out the disparity in your positions.
Before we move on, let’s explore my past post on the topic titled, Does the New York Times Have it in for Apple? where I mentioned that it isn’t news that Chinese factories don’t treat workers as well as those in the US. Another item discussed in the post was that Apple employs complex financial accounting to minimize its payment of US taxes. Again, not such a big surprise – the more expenses a company has the less competitive it is. The goal of business is to maximize profitability in a legal manner.
What we should take away from all of these stories is that China has a better environment in which to manufacture products from a profitability standpoint. Moreover, except for specialized products like airplanes, you cannot compete with Chinese manufacturing, their supply chain and ecosystem of parts suppliers.
When you look to the unemployment rates of the US and Europe, the challenge we have is global competition from China in manufacturing and from India in services.
I see two solutions to this problem.
We can make it illegal for companies in countries to export to a global market unless they pass standards related to worker treatment and pollution. Although this is the most elegant answer to the problem I don’t see it ever happening because if one country decides not to participate in such a global treaty, they would have an advantage in the market since they will have access to lower cost products and services.
The other idea is to explore how to make the US market more competitive. Lowering taxes across the board from top to bottom earners, eliminating collective bargaining and reducing unnecessary red tape related to the EPA, OSHA and other government agencies would be a step in the right direction.
The US has never faced a competitor like China – they will do anything in their quest to become the best in business.
If we don’t acknowledge the problem I fear there is no way to solve it.
Moreover, the problem has a time limit associated with it as workers who aren’t in the workforce for months and years become systemically unemployed meaning they are unemployable. The more workers we have in this category, the worse the entire country does.