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Does Apple Really Care About Factory Workers?

Apple CEO Tim Cook (via Cult of Mac)

In response to the growing brouhaha over working conditions at Apple (NASDAQ:AAPL) suppliers’ factories in Asia — not to be confused with the growing brouhaha over Apple’s iPad trademark problems in China — Apple CEO Tim Cook said this:

Apple takes working conditions very very seriously, and we have for a very long time. We care about every worker [...] We believe that every worker has the right to a fair and safe work environment, free of discrimination where they can earn competitive wages and where they can voice their complaints freely. And Apple suppliers must live up to this to do business with Apple.

It certainly sounds nice, and Apple has asked the Fair Labor Association to conduct an audit of some of its major suppliers in China.

But then, Apple has taken similar steps before.

Apple and Labor in the News

Back in June of 2006, an article in the Daily Mail reported to the world that workers at an iPod manufacturing plant in China were being paid extremely low wages to work 15-hour days manufacturing the devices. Apple said that it “would not tolerate” any violations of its code of conduct for suppliers and began an investigation into the reports. Ultimately, that investigation concluded that the factory in question — which was run by Foxconn — “complies with our Supplier Code of Conduct in most areas and is taking steps to correct the violations we found.” Among the violations Apple found was that some workers were working more than 60 hours per week — the maximum stipulated in Apple’s supplier code of conduct — and not being given at least one day off per week. Meanwhile, the China Business News, which had run the original article translated by the Daily Mail, was sued by Foxconn for libel. Foxconn ultimately dropped the suit.

In 2009, Apple came under fire in the international press again when a Foxconn worker committed suicide. The man, whose name was Sun Danyong, had jumped out a window after being detained, interrogated, and allegedly beaten by Foxconn security personnel after an iPhone prototype went missing. Sun had denied taking the phone. Apple stated that it was “saddened by the tragic loss of this young employee” and that it would await the results of an investigation. Ultimately, Foxconn paid compensation of more than $50,000 to Sun’s parents, although it denied that Sun had been beaten. Apple expressed concerns but continued to work with Foxconn.

That same year, Apple supplier Wintek, which has plants in Taiwan and mainland China, was accused by its own employees of violations including sudden layoffs, forced unpaid overtime, illegally firing workers after a labor strike, and unacceptable working conditions. Apple expressed concerns but continued to work with Wintek.

Suicide nets at Foxconn, via publicintelligence.net

In 2010, a rash of suicides brought international attention back to Apple supplier Foxconn. An investigative report in China’s Southern Weekend pointed to poor working conditions and forced unpaid overtime as contributing factors in the suicides. In response, Foxconn announced a series of pay raises, hired psychological counselors, and installed anti-suicide nets around its buildings to catch jumpers. Wintek workers were reportedly poisoned by a toxic cleaning agent that had been used in 2008-2009 (the story didn’t break until 2010). Apple expressed concerns but continued to work with Foxconn and Wintek.

In 2011, China’s IPE published a report accusing Apple of lax oversight leading to poor environmental and working conditions. At Foxconn, an explosion killed three workers and injured 15 others. Another explosion killed one and injured dozens more. Reports of labor violations also continued to dog the supplier. Apple expressed concerns but continues to work with Foxconn and Wintek.

Of course, there are many other tech companies with serious issues in their supply chain. Foxconn, in fact, makes products for many of the world’s biggest tech companies. We’re focusing on Apple for the purposes of this article because of the six years of publicly available data, and because Apple’s problems have been widely reported in mainstream media, so we can make some conclusions about consumers who are for the most part aware of Apple’s supplier problems.

A full accounting of all the stories about Apple supplier labor violations in the news would be difficult. Anecdotally, it certainly appears not much has changed over the years. But what do the data say?

Apple’s Yearly Progress Reports

Every year since 2007, Apple has released a report detailing the results of internal audits of its supplier factories. This is the largest available database of information about worker rights violations at Apple suppliers. However, before we attempt to analyze it, it’s important to understand there are some serious problems with this data.

apple-foxconn-protest

A protest of labor conditions at Foxconn, via Bloomberg

First and foremost, as the reports come from Apple themselves, there are potential conflict-of-interest problems. While I’m not aware of any substantiated accusations that Apple’s reports are falsified or otherwise doctored to benefit the company, it is important to be aware that the reports do not come from an unbiased third party.

Additionally, the way Apple has audited its facilities, and the way it has reported those audits has changed over the years. And as Apple expands its business, the number of facilities audited has also risen significantly, from just 11 in 2009 to over 200 this year. Apple has cut some serious violators out of the supply chain, but these companies are often replaced by new suppliers just as willing to cut corners.

For the full story, then, we suggest you check out Apple’s reports in full. Here are the PDF links:

2007 | 2008 | 2009 | 2010 | 2011 | 2012

Note that Apple names reports for the year they are released. Each report details the results of audits from the previous year; hence, the 2012 report details violations that occurred or were discovered in 2011, etc.

We looked through these reports and tracked a few key metrics across time, which you can see plotted in the graph below. The vertical axis indicates the percent of factories with violations out of the total number of factories audited that year. The horizontal axis indicates the year the audits were performed, so the data from Apple’s 2009 report appears as 2008 in the graph. The violations we tracked were working hours (factories working employees more than 60 hours/week or not providing at least one day off per week), wages (factories underpaying employees, not paying overtime, etc.), and core violations (major offenses like child labor).

apple-chart-2

Click the image to see the interactive version of this chart.

First off, a few notes:

  1. The numbers for 2006 are really just my estimates. They come from Apple’s first supplier responsibility report, which is short, only audited 11 facilities, and doesn’t contain the same data as most of the other reports (there is no data on core violations).
  2. The big jump in core violations in 2010 is probably just an anomaly.
  3. Six years of data is probably not enough to be able to draw clear conclusions about everything.

That said, the data seem to show a marked initial improvement within the first few years Apple was reporting, but since then, things have apparently stagnated. Moreover, they’ve stagnated at disturbingly high levels: more than half of Apple’s suppliers are still violating its regulations on working hours. At least 30 percent aren’t paying their workers fairly. Core violations per capita appear to be rising as Apple’s business expands (if we assume the 2010 numbers are a statistical anomaly).

To be fair, Apple audits track dozens of variables; in other areas we didn’t include in the chart, the company has seen more significant improvement. Moreover, it’s to Apple’s credit that they even release this information publicly at all (although until very recently their list of suppliers was a closely guarded secret).

On the other hand, the data we tracked certainly don’t look good, and they appear to call into question Apple’s commitment to fair labor practices in China and elsewhere in Asia.

Cutting Costs, Cutting Corners

One reason Apple suppliers often have horrendous records when it comes to workers’ rights is that workers’ rights are expensive. If you’re not allowed to keep people working more than 60 hours per week, you need to hire more workers. If you’re not allowed to force employees to work unpaid overtime, then you need to find that extra money somewhere. Safety equipment and training cost money. Decent food and housing for workers costs money. You get the picture.

You might think that with Apple making massive profits, its suppliers are raking in the dough as well. But actually, the vast majority of the profits on Apple devices go to — wait for it — Apple. That’s why, as we recently reported, when you buy a $500 iPad, only $8 gets to the Chinese people who built it, but $150 goes into Apple’s bank accounts.

Or, observe the charts below, courtesy of “Capturing Value in Global Networks: Apple’s iPad and iPhone”. See those tiny slivers on the top left? That’s the percentage of iPad and iPhone prices that goes to Chinese suppliers (as of 2010).

distribution-value-of-iPhone-20110

Distribution of value for the iPhone 2010 - Click to Enlarge

distribution-value-for-the-ipad

Distribution of value for the iPad 2010 - Click to Enlarge

Although Apple has a huge and complex supply chain, that should not let it off the hook, either. In fact, in yesterday’s presentation, CEO Tim Cook said of Apple’s involvement with its supply chain: “We are very closely connected to the production process, and we understand working conditions at a very granular level.”

Apple should not hold all the blame for poorly-paid workers at Apple suppliers. Foxconn’s parent company Hon Hai is a giant that takes in nearly as much revenue as Apple does. Even so, it’s clear Foxconn is not making nearly as much from the sale of Apple devices as Apple is. And with billions of dollars in profit every quarter, Apple could find a way to get more of that money to the workers in its supply chain if it decided — or was forced by consumers — to do so.

Conclusions

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Workers at Foxconn, via Cult of Mac

Let’s return, then, to what Tim Cook said about how Apple cares about every worker, and how the company has launched a Fair Labor Association investigation into working conditions at Foxconn. On the one hand, it sounds like the right thing to do. On the other hand, Apple has been aware of issues with Foxconn’s treatment of workers since at least 2006. Problems at other factories have also been evident in Apple’s own reports since the first one it released early 2007, and yet six years later, the people who make iPads, iPhones, and MacBooks are, statistically speaking, probably working at a factory that violates Apple’s own rules about working hours and days off. There’s a one-in-three chance they’re working at a factory that doesn’t pay proper overtime or underpays employees for hours worked, too. This has been the case for years, yet Apple continues to work with many of the same suppliers year after year, including Foxconn. So much for Cook’s emphatic, “Apple suppliers must live up to [Apple's Supplier Responsibility principles] to do business with Apple.”

Apple has consistently demonstrated its dedication to reporting and investigating labor problems at its suppliers. But has it convincingly demonstrated a dedication to actually fixing those problems? That answer is less clear.

On the one hand, six years is a fairly short period of time. On the other hand, Apple is one of the world’s richest companies, and those six years have seen a massive expansion of its global business, the introduction of major new products, and record profits. It’s very hard to believe that if it really wanted to, Apple couldn’t have achieved more significant improvements in its labor rights record.

That said, part of the problem is us, the consumers. When we read something like the New York Times‘s latest reports on Foxconn working conditions, we demand change. The media gets riled up, and Apple launches an investigation. Then we get distracted. We don’t bother to follow up on the results of the investigation. And when the next Apple product launches, there were are in line for it. Even here in China, where these labor abuse stories quite literally hit closer to home, the latest product launch saw riots in the waiting lines and people egging the Apple Store in Beijing. They weren’t angry because Apple suppliers are mistreating thousands and thousands of Chinese workers. They were angry because they wanted to buy an iPhone.

photo_sanfrancisco

Can't resist...too shiny...

The demand for an “ethical iPhone 5″ in response to the New York Times reports is certainly encouraging. But how long will it be before interest in this wanes? By the time Tim Cook is on stage actually talking about the iPhone 5, will anyone care enough to ask him about what they’ve done at Foxconn and at other supplying factories to improve conditions?

Apple doesn’t really care about its workers in China. That sounds harsh, but then again, Apple is a corporation, and despite what the US Supreme Court may say, corporations are not people. A corporation’s aim is to make money. A person should aspire to more than that. And since it is people who make up a corporation’s market and supply its profits, Apple doesn’t have to care about its workers if we choose to care about them. If consumers really demand a safe working environment at Apple suppliers, Apple will supply it.

Or, to put it another way: Apple’s own reports show little improvement over the past six years on some aspects of workers’ rights. All of these reports are publicly available on Apple’s site and the major findings were reported in a variety of media outlets. Has that information affected your purchasing habits over the past six years? Are you less likely to buy an Apple product now than you were in 2006?

By every available figure, use of Apple products has grown over the past six years, so it seems the revelations about Apple’s supply chain have had essentially no affect whatsoever on our appetite for Apple. And if what we as consumers demand doesn’t change — if we can’t be bothered to care about these workers — why should we expect Apple to be any better?

Hypocrite alert: This post was written on a MacBook Air. I’m just as bad as anyone.

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