Tuesday, February 21, 2012

Raising Wages With Charity

The NYT discusses "Foxconn, with 1.2 million Chinese employees, [which] is one of China’s largest employers. It assembles an estimated 40 percent of the smartphones, computers and other electronic gadgets sold around the world."  Foxconn announced that, "it would raise salaries as much as 25 percent, to about $400 a month, ...after an outcry over working conditions at its factories."  The article suggests that this will only work if consumers have sufficient charity.
Plants depend on workers’ being at assembly lines six or seven days a week, often for as long as 14 hours a day. ...For that system to genuinely change, Foxconn, its competitors and their clients — which include Apple, Hewlett-Packard, Dell and the world’s other large electronics firms — must convince consumers in America and elsewhere that improving factories to benefit workers is worth the higher prices of goods.
“This is the way capitalism is supposed to work,” said David Autor, an economist at the Massachusetts Institute of Technology. “As nations develop, wages rise and life theoretically gets better for everyone.  But in China, for that change to be permanent, consumers have to be willing to bear the consequences. When people read about bad Chinese factories in the paper, they might have a moment of outrage. But then they go to Amazon and are as ruthless as ever about paying the lowest prices.
If consumers' sentiments in favor of Chinese workers does not last, will improvements in Chinese working conditions be temporary too?
Did America develop higher wages than China because our consumers have been "willing to bear the consequences" and decided it is worth paying higher prices for US goods?

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