Foxconn raises wages!

Foxconn, the Taiwan-owned manufacturer with giant assembly facilities in mainland China which is one of Apple\’s main contractors, says it has raised wages by up to 25% in the second major salary hike in less than two years.

Stunning, isn\’t it?

It\’s almost like they have annual pay rises or something! You know, productivity going up, the reserve army of the unemployed disappearing, wages rise. Who would have thought it, eh?

Other than anyone who had bothered to read Marx of course….

And of course we know what happens next too:

Foxconn has also announced plans to invest in millions of robots and automate aspects of production.

38 comments on “Foxconn raises wages!

  1. I’m having trouble parsing this for some reason-

    Who would have thought it, eh? Other than anyone who had bothered to read Marx of course….

    Are you saying that this is compatible with/predicted by Marx, or that it isn’t?

    Tim adds: Predicted by. 18th Brumaire. As long as there are capitalist competing for access to the profits that can be made by employing labour then rising productivity, increasing those profits available, will feed through into rising wages for the workers.

    Two things stop this. Monopoly (what we now call monopsony) purchasing of labour meaning no competition and or the existence of the reserve army of the unemployed. For that latter, you need to get that reserve army employed and then wages start to rise with productivity.

    Which is pretty much what has been happening in China these 40 years, a) competing capitalists and b) that reserve army or peasants is pretty much exhausted. Thus wages are rising with productivity.

  2. Would appear to show the operation of the Major Douglas mechanism more than Marx. Nasty capitalists “invest in” cheap oriental Labour; wages rise ; Worstallites become so excited they run round and bump into things ;then, the moment oriental wage levels approach Western levels the nasty capitalists bring in the robots.What is going to happen when you’ve got robot production all over the world and there is no comparative advantage premium to cheap foreign Labour?

  3. And Ian wins the prize. Really, DBC, that’s like saying, ‘And what happens when people in the East are as rich as people in the West, eh? Eh?’

    You won’t find me complaining, that’s for sure.

  4. What is going to happen when you’ve got robot production all over the world and there is no comparative advantage premium to cheap foreign Labour?

    Then we’re in Utopia. Wages are at current Western European levels across the planet, commodity products are cheap, quality of life is high, most people work in the service industries. It probably won’t happen quite that way, however.

    Oriental wage levels have already reached Western ones in a number of countries in the East. It doesn’t seem to have wrecked anywhere (Japan’s crash was largely due to its insane land-value bubble.)

  5. That’s still a big rise – why have those workers become more valuable so quickly?

    Tim adds: Not all that large. Productivity’s rising at about 10% pa. Inflation is something, forgotten, 5, 10 %?

  6. “Wages are at current Western European levels across the planet” … not quite, the current wage differential means that we are richer than the average would be if everywhere was as developed as the rich countries are.

    Right now, we are enjoying cheaper stuff than it would cost us at economic parity. If a chinese worker charges more to assemble a fan heater then our real wages come down as chinese wages rise, experienced as inflation by us and pay rises in china.

    So some part of equalisation is an absolute fall in rich country wealth.

    On the other hand, the usual suspects have managed to stay ahead of the pack for the last few hundred years, and will probably find ways to continue to enjoy the benefits of being able to hire foreigners for cheap. If we’re smart (sometimes we are) then china’s prosperity presents abundant opportunities, but there is a real arithmetical threat to our wages as chinese wages rise.

    The real hit to our pockets from oil price rises is a nice current example. We still use much more oil per head than china, but not as much much more as we used to.

    Economic prospects do not look so good for less skilled workers of the rich countries, the rising tide floats many boats, but equalising unskilled rates across the world is bad for many (though good for more).

    There’s a hell of a lot of yet “marginal” workers who would love to join the modern workforce, such things as a real factory job in a factory with proper big expensive kit instead of hand weaving in a shed, or perhaps a tractor instead of oxen.

    The huge wealth differentials will be with us for a while yet. There’s little danger of the foreign cleaners going home and leaving the brits to do our own cleaning.

    Global wage parity is a long way off.

  7. Johhny Bonk (#8) said:
    “If a chinese worker charges more to assemble a fan heater then our real wages come down as chinese wages rise”

    Yes, but only if you ignore productivity gains.

    The Chinese worker can be paid more per hour, but could still be paid the same per heater.

    So it is possible to get global pay parity without an absolute fall in rich country wealth, provided it’s productivity driven.

    And as you say, there’s still a lot of productivity gains to be made – all those workers who would like “a factory with proper big expensive kit instead of hand weaving in a shed, or perhaps a tractor instead of oxen”.

  8. If a chinese worker charges more to assemble a fan heater then our real wages come down as chinese wages rise, experienced as inflation by us and pay rises in china.

    Not if it isn’t the Chinese worker assembling out fans but, as per DBC’s question to which we were responding, robots. All we then need to show is a reasonable ROCI.

    Global wage parity is a long way off.

    Indeed. And I suspect there will be sufficient shocks, unforeseen advances and changes in behaviours that it won’t, as I suggested, happen in quite the simplistic way laid out in #5 & #6.

    #4 is even more stark and, probably gets it right. Approximate economic parity but different foci. The “Mediterranean culture” versus the “Protestant work ethic”, as an example. Quieter life, with siestas, or higher material prosperity? Increased leisure is an output of improving efficiency, as Tim regularly reminds us.

  9. It’s worth remembering at this point that (other than by money supply manipulations) the national income (in the long run) cannot change. As such, the per capita income cannot change either. So when people argue that competition will drive down wages, one has to ask, “where will the money disappear to?”.

  10. This is fast spiralling out of control: the point I was trying to allude to (perhaps I should have spelled it out) is that the robots will put us out of work and the foreign cheap Labour too, so where’s the purchasing-power going to come from to buy the stuff churned out by the machines?
    Major Douglas had his ideas post 14-18 war (the National Dividend) but capitalism chose to ignore the long-term inevitability of robot production and has spent decades searching out cheap trainable labour in ever more far-flung places.
    If the system is going to adapt to everybody not doing much work and paying for things with the National Dividend (basically an unearned Income for All, although there are variants) then this may indeed be Utopia but …..!!

  11. @DBC people have been worrying about that sort of thing since Ned Ludd. Yet I can’t help but notice that we are all far richer than they were in Ned Ludd’s time.

  12. DBC, see my above comment.

    This is the general problem with that ghastly “Protestant Work Ethic” nonsense. People think the purpose of the economy is to provide “work”. It isn’t. It is to produce the maximum possibly goods and services for the minimum amount of work. The Utopian ideal isn’t full employment, it is no employment; no need to work, ever. While we wait for that, we seek the greatest possibly production with the minimum amount of work. A robot is better for doing that than a man driving a tractor, which is better than a man with an oxen drawn plough. Which is better than a man with a digging stick.

    The whole point of robots is to free people from work, while increasing production.

  13. Ian B
    Which raises a further philosophical question. Is that freedom from work as desirable as we think ? OK I know we can still do ‘work’ but as something we want to do rather than have to do but is that actually what we want ? Is the having to do something and the resultant production more rewarding than just doing a thing for the fun of it ? Obviously for the most part it isn’t but when we are finally free from having to do stuff just to stay alive or solvent will we find we’ve lost something, maybe even everything ? I don’t know but I am deeply sceptical of any kind of utopia and I think we dismiss the Protestant work ethic far too easily.

  14. As per the Ian Banks “Culture” novels. Many people will find things to do. And probably stuff we would consider ‘work’, if not a ‘proper job’. Some will be loafers. The problem with loafing on the dole isn’t the loafing, it’s the taxing of the rest of us to pay for it.

    It’s the old schoolboy saw – the best result isn’t an A for achievement and an A for effort, it’s an A for achievement and a F for effort.

  15. Is that freedom from work as desirable as we think ?

    Oh, absolutely. Can’t wait. It’s why many people stay on benefits if they can; much more pleasant way to live than working. Aristocrats did it for centuries, and had a thoroughly nice time of it. I really think we shouldn’t fear leisure; because leisure isn’t time when you do nothing, it’s time when you do the things you want to do. Leisure in the midst of plenty is what every human dreams of, and for good reason; even the Bible represents our exclusion from that life as a punishment by an angry God.

  16. Been rehearsing this elsewhere to little applause but let’s try it here:

    Per IanB & SE’s ref to the ‘Culture’ novels.

    Banks character says in a short story set in the Culture’s all stuff’s free for the asking, no-one has to work.
    “The future’s Red……….”

    It isn’t is it?

    To everyone according to his needs, from everyone according to his abilities is climax capitalism.

    Marxists backed the wrong horse.

    If productivity keeps rising the end point is zero price of goods infinite price of labour.

    But does this actually happen or would the diminishing returns on innovation towards the end of the process slow it to a stop?

  17. I’m with Ian on this, I’d love to not have to work. There’s books to be read, films to be watched, holidays to be taken, subjects of interest to learn. More of all of the above than I will be able to do in a lifetime.

  18. @17
    But what is work & what is leisure?
    Maybe I’m lucky but the last few things I’ve done I’d’ve done anyway. Getting paid for it makes it possible & is a way of keeping score in the success stakes but not the motivation. I’d rather make a ring or give someone the bathroom of their dreams without having to worry about the cost.
    Latest project is great fun but non- money productive so far. So what? It’s still fun if I don’t go broke.
    I do feel that the “from each according to his abilities” in the above post could be a lot more productive than “from each just to put food on the table”. That a lot of folk have talents that are wasted doing things they don’t enjoy & aren’t particularly good at.

    This is not an ad for home thrown pottery (shudders)

  19. Futurism is always wrong, and wildly different civilisations hard to describe, especially Utopian ones. But one thing I’ve thought (and I’ve thought about this a lot, not least because I’ve got this Utopian future story one day I’ll get around to actually creating) is that you may end up with a very high premium on bespoke work. Humans love to compete for status. The future may well have an infinitude of commodities, and people seeking status will display their status by purchasing bespoke work from craftsmen, like what they used to do before industrialisation.

  20. @bis, A pretty good working definition is work is anything that you need to be compensated in order to do. (This would also include housework where the compensation is the clean house)

  21. One of the main reasons China hasn’t replaced all types of manufacturing in other countries is because they haven’t nailed down quality assurance and quality control in so many areas. In my opinion the ability to do so is cultural, and it is by no means a given that China will master it: Italy has been a manufacturing specialist for years, but their construction quality rarely matches their brilliance in design. In the oil and gas procurement chain we have no-end of problems with inferior products originating from China, often goods which come with a western logo and all the right certificates but failure investigations show the mill which produced the ingot from which a valve body was cast is churning out defective steel.

    Thus far China has proven adept at churning out tat under Chinese management, and some high-end stuff under foreign management; but has yet to prove it can make quality stuff across all fields under their own management. When people across the world are comfortable flying a passenger jet which has been designed, manufactured, and assembled in China, or oil and gas workers are happy to fly to their rig in a Chinese helicopter wearing Chinese life vests, that’s when we can worry that we’ll have nothing left to do.

  22. I quite agree that a leisured life is very pleasant but my real point was psychological from an evolutionary perspective. Given that as animals we had to work, in the form of hunting and gathering, I’m assuming that there was selective pressure towards those who got pleasure from their work passing on their genes and that it is therefore something innate in us. If we no longer need to expend an effort to gain sustenance will that have adverse effects ? I think the things we enjoy doing most are those that mimic the hunter gatherer life, we enjoy out leisure so much I feel because we can contrast it with all the dull and difficult times we’ve had earning a crust, if this contrast isn’t there will we miss something and will we substitute for it by seeking more risk activities ? It’s interesting, I think and possibly alarming, that war seems to be particularly attractive to a society that feels it has got lazy and is having things too easy, think of the way August 1914 was seen at the time as a chance to cleanse the nation’s soul. I’m not suggesting that there’s anything wrong with a life free from drudgery but as I said I don’t believe in utopias and if we get close to creating one I think we’ll get an overwhelming urge to unmake it.

  23. You’re being a gloomy old sod Thornavis. But I think you might be right about this one: as Chris Dillow often points out, the unemployed tend to be substantially unhappier than the employed, and I suspect that’s partly because we benefit from something that gives life a bit of structure and makes us feel busy/productive, even if we don’t actively enjoy it. How happy does this guy sound? http://www.bbc.co.uk/news/business-17015699 I don’t think he’s just unhappy because he’s skint, or because he’s suffering PWE-guilt.

    What Ian B said about bespoke products sounds spot on to me too though – relative to the cost of mass-produced, unpersonalised stuff that’s only going to rise in value. Not a new phenomenon of course, for all the socialist grounding of the Arts & Crafts movement, their work could only be afforded by the wealthy!

  24. As manufacturing costs rise in China and it gets cheaper to install robots won’t one of two things start to happen:

    Either we don’t outsource manufacturing to China and install robots in factories here because our productivity tends towards China’s and we don’t have all the overheads of looking after those contracts? Or, we outsource our manufacturing somewhere, maybe Africa, which is then good for Africa?

    And aren’t we better off either way with cheaper goods?

  25. “Another interpretation of why the unemployed tend to be unhappier than the employed is that they’re skint.” Yes, but as I said, does that guy sound unhappy primarily because he’s skint?

    He’s actually a great beneficiary of something approaching IanB’s high-tech, cheap-almost-to-the-point-of-free Stuff utopia. Despite being unemployed he can afford a heated electrified living space, a computer, a connection to the internet (Everything In The Whole Wide World, Ever). Obviously he can only afford that because of the welfare state (and he gets valuable goodies like free healthcare to boot) but a relatively small amount of money has given him access to Stuff beyond the wildest dreams of anyone in a similar situation 100 or 50 years ago.

    Okay, if he could get a bit more money he could get out a bit more and do more things (or: if transport, entertainment etc had fallen similarly in cost to electronics and communications… and when it comes to entertainment Baumol’s cost disease bites) but I don’t think that’s fundamentally what’s causing him to feel so miserable.

  26. I do. I don’t want to pull the tiny violin out, but have you ever actually been unemployed? Or, just seriously skint?

    I think there’s a bit too much of this Daily Mail Syndrome, where everyone unemployed is living the life of Riley and has a flat in Mayfair or something. Sure, there are people playing the system well. But the general experience of being on welfare is being poor, and severely constrained in what you can do. Sixty quid or whatever it is a week for food, clothes, energy, internets, and what have you really is not a lot of money to spend.

    I am sure you would find the same unhappiness among people on low wages. It’s the lack of money that grinds people down. We live in an expensive society. Have you seen the price of a beer lately? How many nights down the pub can you afford on that sixty quid? Not many is it?

    Our hypothetical unemployed chap is not living anything like the hypothetical workless Utopia. The latter we may speculate will arise when mankind’s desires can be satisfied by advanced production methods. Unemployed Man is not in a situation where his wants are being fulfilled. He’s simply got no income that the State doesn’t give him, and that is fundamentally different.

  27. IanB: empirical studies suggest the link between unhappiness and unemployment is not entirely explained by the pecuniary loss. There’s something else there too, perhaps some kind of social effect. Have a look at http://www.iza.org/conference_files/Welf2011/gielen_a2338.pdf .

    I’m unfortunately far too aware that being skint is not a lot of fun, unemployed or not. I was just being a bit naughty in raising the point that in purely material terms, Unemployed Man has got it good right now (historically). Especially in consumer goods, and that’s partly courtesy of Chinese manufacturing. But not all wants can be afforded from such limited income and not all wants are Stuff (in fact you listed some of the same constraints I did, and like I said, I’m not convinced the cost of things like a night’s entertainment will come down anytime soon).

    Anyhow, in case you’re looking for antiwork inspiration for your book, here’s one of my favourite essays and two other things I’ve come across. Suspect you may know them all already:

    “Whoever gives his labor for money sells himself and puts himself in the rank of slaves.” – Cicero, De Officiis (influential for millenia, better in Latin)

    “A strange delusion possesses the working classes of the nations where capitalist civilization holds its sway. This delusion drags in its train the individual and social woes which for two centuries have tortured sad humanity. This delusion is the love of work, the furious passion for work, pushed even to the exhaustion of the vital force of the individual and his progeny. Instead of opposing this mental aberration, the priests, the economists and the moralists have cast a sacred halo over work.” – Paul Lafargue, The Right To Be Lazy (fascinating, bit weird, Marxist – his son-in-law after all – and astonishingly dated)

    “No one should ever work.

    Work is the source of nearly all the misery in the world. Almost any evil you’d care to name comes from working or from living in a world designed for work. In order to stop suffering, we have to stop working.

    That doesn’t mean we have to stop doing things. It does mean creating a new way of life based on play; in other words, a ludic conviviality, commensality, and maybe even art. There is more to play than child’s play, as worthy as that is. I call for a collective adventure in generalized joy and freely interdependent exuberance. Play isn’t passive. Doubtless we all need a lot more time for sheer sloth and slack than we ever enjoy now, regardless of income or occupation, but once recovered from employment-induced exhaustion nearly all of us want to act. Oblomovism and Stakhanovism are two sides of the same debased coin. ” – Bob Black, The Abolition of Work (unhinged, anarchist, Situationist, utterly radical, surprisingly entertaining – I highly recommend reading the whole thing: http://theanarchistlibrary.org/HTML/Bob_Black__The_Abolition_of_Work.html )

    Another entertainingly radical writer, the rogue priest, anti-medicalization campaigner and occasional nef favourite Ivan Illich, wrote “The Right to Useful Unemployment” which apparently covers similar ground but I’ve never read it. Anyone know if it’s any good?

  28. @Thormavis, you’re right about that selective pressure favouring the hard-workers for the last few billion years. Fortunately we are now applying some compensatory selective pressure in the opposite direction.

  29. JamesV

    I’ve been doing my bit for the opposite direction for a long time now, it’s the least I can do, I haven’t passed my genes on though, which is just as well for all sorts of reasons.

  30. OK, let’s give IanB something to chew on.
    I got some advice above I’ll repeat here:

    @bis, A pretty good working definition is work is anything that you need to be compensated in order to do. (This would also include housework where the compensation is the clean house)

    That is something I’d have to disagree with. The compensation isn’t just the clean house. It’s also the pleasure & satisfaction of having performed the task. Sound odd? It’s that Protestant Work Ethic thing eating at you. The old PWE wants you to see work as something virtuous but also as a form of purgatory. Part of the price of the ticket to heaven. The Good Protestant should suffer the work with a smile for the good of his soul. And then there’s leisure which PWE doesn’t like because the Devil finds work for idle hands. Sloth & indolence.

    Not everyone thinks like that. There’s a lot in Japanese culture that sees the performing of a task itself as a benefit rather than just what the task achieves. Subsistence farmers may not even understand the concept of work & not work. Everything they do is connected to providing a living. The act of sitting resting before making the next effort is just as much part of the labour because the one is impossible to do without the other.

    So if you want to imagine a world of the future, don’t make the mistake of the 50s sci fi authors & build yourselves a home town America in space. The future will be the sum of all the cultures on the planet. It may well be diverse but it will be very different. as culture blends with culture & priorities shift.

  31. An interesting future for the poor is some sort of war.
    Already there is proliferation of gangs , agressive religious groups and idiological groups.
    There is something attractive in beating other people, stealing and smashing and raping.
    It is the history of the world.
    Civilisation is unatural.

  32. “It’s also the pleasure & satisfaction of having performed the task”

    My point still stands, its just that for you tasks around the house are not work on account of you like doing them. For me, it is work and if it wasn’t for the compensation of a clean house, I wouldn’t do it. (An truth be told, sometimes the compensation of a clean house is just not compensation enough).

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