Suicides, wages rise and moving westwards

The recent weeks, the Chinese news has been dominated by one very sad issue: the suicides at the Foxconn factories in Shenzhen in Southern Guangdong province. Foxconn is a 800,000 people company from Taiwan, producing electronics for HP, Dell and Apple. Foxconns 400,000 people factory in Shenzhen has been hit by a series of suicides during the last months. Some argue that the suicides are the consequence of the harsh regime in the factory where working 100 hours of overtime is default, where others try to put things in perspective by saying that the number of suicides in the city-sized factory is lower than the average in China.

The company’s first reaction to the suicides was not too subtle, with their CEO Terry Gou explaining that he worked 15 hours per day, and expected his workers to do the same. Later, the company reacted more 21st century-like, by opening its doors, and also practical by installing 1.5 million square meter of safety nets around the buildings  in the campus. Now, wages are also increased in the factory by 33%.

And Foxconn is not the only one, also Honda is raising its wages with 24% after a strike last week.

Yesterday, Foxconn announced another raise:

In announcing the wage increase late Sunday, the company, a unit of Taiwan’s Hon Hai Precision Industry Company, said that within three months the basic salaries of many of its 800,000 workers in China could reach nearly $300 a month, about double what many were earning a few weeks ago.

The increase is the strongest sign yet that labor costs are soaring in China’s biggest manufacturing centers and that consumers in other countries may eventually be forced to pay more for a wide range of goods that are made here.

This combined with the increase of the value of the Yuan, leads to a raise of the costs of products worldwide, analyzes the New York Times. It might make it necessary for companies to move their business. Either to Vietnam, Bangladesh, or to western China:

Pietra Rivoli, a professor of international business at Georgetown University and the author of “The Travels of a T-Shirt in the Global Economy,” says the effects of rising labor costs will vary by industry, perhaps with lower-valued goods like garments being forced to move to western China or even to Vietnam and Bangladesh.

UPDATE 06/09:

The NYT reported that another strike hit the Honda factories in China, and this proves the increased bargaining power of the Chinese workers. The article mentions the improving inland job prospects as the reason for the labor shortage in the coastal areas.

However, the writers underestimate the size of the Foxconn campuses in our opinion:

The campus has high-rise dormitories, a hospital, a fire department, an Internet cafe and even restaurants and bank branches.

Come on, there are 300,000 people living there! Of course they have restaurants…