by Fred Gates
Remember Apple’s iconic “Think Different” ad, narrated by Richard Dreyfus? If not, here’s the video:
It closes with the admonition that only the “crazy” ones are the ones who can really change the world — but has Apple embraced the status quo on cheap foreign labor instead of trying to lead? More importantly, has Apple missed a real opportunity to be seen as different by taking a little of its own “Think Different” advice in this area?
I have already described one idea, based on Henry Ford’s creation of a new class of consumers by tripling the wages of his employees while he was vilified as crazy and a socialist for doing so.
But there are many more.
First, some context. Apple’s latest quarterly report has far exceeded Wall Street’s expectations and driven the stock price up 10%. It shows that Apple is generating unheard-of profits at a rate of close to a billion dollars a week! Apple also now has a $97.6 billion “cash hoard” on hand.
Perhaps it is understandable that there are very few stories in the mainstream media about the depressing factory issues that might be the only thing that can sully their immaculate corporate image: not only as a design and business leader, but as a “green” company with fair practices.
As usual, the only one with the cojones to take on Apple seems to be Jon Stewart:
I’ve scolded the media enough here for keeping information like this from people who, I believe, have a real interest in seeing it. Perhaps our collective denial has much to do with our love of the very products these people manufacture for us (I have a iPod touch, which is basically an iPhone as I can do everything, including making calls through Google Voice, that can be done on a iPhone — and I DO love it). Maybe Apple has used our complicity to tamp down a possible level of consumer outrage (along the lines of the Kathy Lee Gifford sweatshop scandal in the mid-90’s) and, as a result, has gotten away with making essentially no public statements on this.
But is Apple missing an marketing opportunity to show that it’s still willing to “Think Different?”
Apple could afford, as we’ve seen above, to pay its workers more.
Isn’t it worth it? Not just for humanitarian reasons but to reposition apple as a global leader in “fair trade?” Imagine how much more well-loved the brand would be if Apple announce it would pay all of its workers a true living wage. Are we really such slaves to the Wall Street “bottom line” sensibility that the idea of Apple being a global “good guy” is only appealing to OWS and the far left? Apple could do this and shame its competition in the process. With virtually no support from the media, consumers would prefer to not educate themselves about the horrors iPad and iPhone workers face daily — and who can blame them?
On the other hand, Apple could easily get ahead of the story, break their silence, and make themselves look great by adding literally pennies to the hourly wages (now about 30 cents an hour!) being paid to Chinese workers. Crazy? Maybe. Thinking “Different”? Absolutely.
Apple can do better.
A few hours after this blog was posted, The New York Times released a major article on the same subject. It is well worth reading — perhaps this will begin an new era of MSM coverage?
How much would it actually cost Apple to make a significant increase in its workers salaries? Here are some very rounded calculations (I am not an economist!) that might shed some light on the subject:
Foxxcon employs roughly 800,000 people… let’s round this up to 1 million for the sake of argument. Making $.50 an hour (again rounded up as wages are as low as .30 in many cases) and working an average of 50 hours per week, that would put labor costs at $25 per person per week, or $1,300 per person per year. That makes Apple’s Chinese labor costs (again in this greatly simplified model) $1.3B per year. Doubling that amount would be 2.6B (addition of 1.3B in overhead); tripling it would equal $3.9B (additional overhead of $2.6B).
At the current pace, Apple is making $1B per week in profit. With no price increases, tripling all of China’s workers salaries would take $2.6B away from that, or 5% — just over 2 and a half weeks worth of profit.
Apple reports selling more than 15 million iPads in the last quarter of 2011. At this pace, that would make 60 million per year (this is iPad only). If the iPad’s retail cost was increased $20.00, 60 million units would generate $1.2B, or slightly less than half of the amount needed to triple all worker’s pay in China. iPhone sales were even more impressive, 37 million were sold in the same quarter. Round down to 30, and that makes 120 million annually, and this is likely to increase. Increasing the cost of iPhones $10 per unit would basically cover the second half of the 2.6B needed, and these calculations do not include any other products.
In summary, Apple could triple its worker’s wages in China with only a slight increase in its prices, or with a single digit percentage loss in it’s profitability, or a combination of both.
The wave of great publicity and free press that would be generated by such a move could increase Apple’s market share and stock price even further. Imagine the impact of a headline like this:
Apple Commits To Tripling Chinese Worker’s Salaries
This would involve vision and risk, but it is a great example of how Apple could, if it chose to, “Think Different” on labor issues in China.