Corporate profits have a human cost

PUBLISHED : Tuesday, 15 November, 2011, 12:00am
UPDATED : Tuesday, 15 November, 2011, 12:00am


On May 21, a day after an explosion at a plant operated by Apple supplier Foxconn in Chengdu, Sichuan province, Debby Chan Sze-wan went to a hospital in Chengdu hoping to speak to families of injured factory workers. But the project officer from Students and Scholars Against Corporate Misbehaviour (Sacom) arrived at the hospital to see teams of policemen patrolling the area, not allowing anyone to enter the wards.

Foxconn, a Taiwanese manufacturing giant, employs more than one million workers on the mainland that make laptops, tablets and smartphones. Chan's presence was soon noticed by a man claiming to be a government official. 'He asked me if I was a reporter. I said no and he asked me why I was there, and tried to drive me away. I refused to answer and sat on the floor. Later, I was locked up for an hour before being released,' Chan says.

She thinks the relationship between the Chengdu government and Foxconn is unusually close, and she suspects the government is trying to protect Foxconn from any negative media coverage. 'The suicides in factories in Shenzhen damaged the name of Foxconn, so they moved to Chengdu, much to the delight of the local government. All the government cares about is increasing GDP, so foreign investors such as Foxconn are welcomed. From finding land to building the production plant to recruiting factory workers, the government has been very helpful, but when it comes to the well-being of the workers, who is there to stand up for them?'

Outsourcing production to developing countries has been a magic formula to help corporations cut costs over the past two decades. This is part of globalisation. With lower production costs, product prices are lower and much-needed jobs are created to support the economies of developing countries. It sounds like a win-win situation, doesn't it?

The reality is that competition among developing countries to host the factories of foreign investors has been a race to the bottom. 'Places with the lowest wages, poorest environmental protection, poorest job safety standards and the lowest labour rights are the favourites of manufacturers. Big corporations take advantage of low production costs to make fat profits while factory workers put their health and sometimes even lives at risk working for disgraceful wages,' says Chan.

By interviewing factory workers, Chan discovered that factories have done very little to protect workers' health. 'In 2009, many workers producing iPhones suffered from n-Hexane poisoning. The chemical is used to clean the phones' screens. Some workers were even paralysed. They wrote to Apple to complain but never got any reply about compensation,' she says.

According to a survey by market research firm iSuppli, published in The New York Times in July 2010, production costs are equal to just one per cent of the income received by corporations. For an iPhone with a retail price of US$600, the materials such as processor and chips cost US$187.51. Another US$49.95 goes on miscellaneous expenses, and an assembly fee of only US$6.54 is paid to factories. Taking out overhead costs, it is hard to imagine how little the factory workers earn for each item that they produce.

Factory owners get one per cent of the profit, but Apple pockets a fat profit of US$360 for every phone sold.

'How these companies set their profit margins is ridiculous,' says Chan. 'Their greed is unbearable. Factory bosses have to operate on low budgets since corporations offer so little, so in turn they have to sacrifice the benefits of workers in order to stay profitable. This is exploitation from top down.'

The case of Foxconn is only the tip of the iceberg for labour exploitation. Every year Sacom investigates a dozen factories and finds conditions to be intolerable. Millions of workers in developing countries face poor working environments, low safety standards and extremely long working hours.

Big companies based in developed countries have systems to protect workers, but when they move their production lines to developing countries, things are very different. 'They basically drop the burden of caring for workers on the manufacturers in developing countries. All they care about is getting goods at the lowest possible price. The production process is none of their business,' says Chan.

She believes the public is the best group to monitor the behaviour of corporations. She calls for consumers to pay more attention to how their beloved products are produced. 'Every firm wants to maintain a good reputation. If consumers show more concern for the well-being of workers, the company will definitely pay attention to it,' Chan says.

Technology companies such as Apple may have made life better for some of us, but let's not forget that our comfort may come at the expense of less fortunate people.


Today Hong Kong is a financial centre that thrives under globalisation and is one of the wealthiest cities in the world. But 30 years ago, Hong Kong was very much like a developing country - most of the population worked in factories, exporting goods to the developed world.

As Hong Kong evolved into a service economy, factories were shut down and many workers lost their jobs. These were usually low-skilled workers that struggle to compete in the job market. Most ended up working as security guards and cleaners.

Joan Lee Tsui-king of The Link Watch, a community concern group, says the working-class grass roots have suffered a lot owing to globalisation with fewer job opportunities and rising living expenses. 'In the 1970s and the 1980s the grass roots lived in public housing and worked at nearby factories in places like Tsuen Wan and Sha Tin, away from the urban area,' Lee says. 'They lived and worked in the same community. They could work in factories or open little shops selling cooked food and other necessities to support the family. There was no need to spend on travelling to work. They were able to support themselves.'

The shift to service-oriented industries meant fewer jobs locally. People then needed to travel to the city for cleaning and security jobs.

Travelling expenses further squeeze their tight budgets, and less time is available to take care of children.

'No way can these families afford baby-sitters - they struggle between going to work and taking care of their kids,' says Lee. 'The self-sufficient economy of the community doesn't exist anymore as people no longer live and work in the same place. And with less spending in the community, little family businesses have to close down.'

Globalisation has brought more international brand names in to the city, but that does not necessarily mean more choice for consumers, according to Lee.

'Small family businesses are forced out, as they are not able to compete with big brands for shops. This is bad news for consumers, who no longer have a choice. More and more grass-roots people who used to run small businesses are not able to make a living,' she says.

In recent years, chain stores have expanded from the urban areas to public housing estates in remote areas such as Tin Shui Wai. Lee sees this as a nightmare, as these big corporations force small businesses away.

'The opening of luxury shopping malls seem to upgrade the neighbourhood, but the reality is that the grass roots can never afford to shop there. The small family businesses that they used to shop at are replaced with fancy brand names, leaving them less and less choice,' she says.