Foxconn's new "no suicide" approach

Hon Hai agrees to raise salaries at its Foxconn factory in Shenzhen following a series of suicides that have triggered criticism and questions about China's manufacturing miracle.

"Life is not worth living, it is too stressful, there is a huge gap between the reality and the dream," Li Hai wrote in a letter, which was later quoted by many Chinese newspapers. The Foxconn worker then took his life by throwing himself off a building on May 25, 42 days after he started working for the world's largest contract manufacturer. Li was 19 years old. 

Foxconn, a contract electronics maker, employs about 800,000 people, roughly half of whom work and live in Shenzhen, just across the border from Hong Kong. The firm operates a huge industrial park there, which it calls Foxconn City, with 15 multi-storey manufacturing buildings, each dedicated to one customer. This is where Li's suicide took place. Since the start of the year, 12 workers (Li was the 11th) have jumped from these buildings; 10 have died.

The series of suicides has triggered tides of criticism and questions about working conditions at Foxconn and, by extension, about China's manufacturing miracle that was built by millions of migrant workers who have moved far from their homes in search for a better life. Behind the economic progress, the sweeping social changes that China has undergone over the past 30 years have left many people struggling to cope.

In a bid to calm the situation, Hon Hai Precision Industry, Foxconn's Taiwan-based parent group, said yesterday that it will raise workers' salaries by at least 30%, more than it previously indicated.  

Factory workers with a monthly wage of Rmb900 ($131.77) will be paid Rmb1,200 effective immediately. "It's been a while since we increased wages, hence the decision," a Taipei-based spokesperson at Hon Hai was quoted by Bloomberg as saying.

The wage increase is higher than the market expectation of between 20% and 22% and analysts believe this will have a negative impact on the manufacturing industry and may also accelerate market consolidation.

"A 30% increase in labour costs will erode Hon Hai's 2010 to 2011 profit by 10% to 12%. The implication of this 30% increase is not just simply the erosion of Hon Hai's profitability but more importantly in our view, its effects will ripple throughout the entire manufacturing industry in China," Macquarie said in a report.

The bank predicts that because of Foxconn's salary hike, workers from other Southern China factories may rush to join the Taiwanese company and, as a result, manufacturing companies within commuting distance will have to match Foxconn's base pay. Smaller-scale companies may even need to pay a higher premium, while factories at the bottom of the food chain may be forced to exit the industry.

Apparently, the immediate aim of the wage increase -- the company's latest attempt to reassure its employees -- is to help Hon Hai offset criticism and negative publicity. However, no one knows whether the higher salaries will stop the suicides.

After the first nine workers committed suicide, the company is said to have surrounded the buildings at Foxconn City with nets, hired counsellors, and brought in Buddhist monks to pray. It even toyed with the idea of asking employees to sign a "no suicide" pledge. On an impromptu visit to Shenzhen last week, Hon Hai's chief executive, Terry Gou, insisted that he was not running a "sweatshop" and said the death toll -- a dozen so far this year -- is lower than the suicide rate among the general population in China.

That may be, but the fact that all incidents are taking place at the same factory has raised questions at Foxconn, which keeps its customers secret, rarely opens its plants to outsiders and often ignores media inquiries -- a behaviour that is partly underpinned by commercial practice.

Reporters were allowed in to tour the Foxconn plant during Gou's visit to Shenzhen, but this effort to patch the company's reputation seemingly had little effect on staff morale. Shortly after Gou left, another worker jumped to his death.

¬ Haymarket Media Limited. All rights reserved.

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