Foxconn plans to Lift Pay Sharply at Factories in China

February 18, 2012 - Foxconn Technology, one of the biggest manufacturers of products for Apple, Dell, Hewlett-Packard and other electronics companies, said Saturday that it would sharply raise workers salaries a its Chinese factories.

Foxconn said that salaries for many workers would immediately jum by 16 to 25 percent, to about $400 a month, before overtime.

The company also said it would reduce overtime hours at its factories. (NYT)

Background and Implications

For years, China has been the go-to market for cheap labor. Beijing has relied on low wages to win the title as world's largest exporter and surpassed Mexico and Canada as the largest exporter to the U.S. in 2009. That led to higher living standards for some Chinese workers but also to an increasing income disparity accompanied by a growing number of strikes in various factories. The growing wealth within the society also contributes to an increasing number of young adults with college degrees who are either reluctant or unwilling to work in the country's manufacturing industry. That and China's one-child policy began a decline of the number of young workers entering the workforce. To address the supply-and-demand imbalance, and avoid further labor unrest, China's government raised the minimum wage in most of its regions sharply (15-20 percent per year). This also helps boost domestic consumption and reduces reliance on exports to expand the economy. In China's 12th Five-Year-Plan, the government targets a minimum wage increase of 13% annually, or 63% over five years, whereas industry expects an increase of 80% within five years.

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