Analysis: Time for the supply chain to improve for workers

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Analysis: Time for the supply chain to improve for workers

Simon Quicke
The question of how people are treated throughout the supply chain is one that is edging closer to being a significant issue as the developments with Foxconn's Shenzhen factory illustrate.

The background to this story is a sad one because it involves deaths, with a number of suicides of factory workers. That would be unfortunate regardless of the geographic location but the Foxconn factory does work for several household Western IT names and as a result it has not been possible to contain the issue to China.

The positive that has come out of it is that pay at the factory has increased and the conditions that led to the deaths has become international news. The management announced last week an overhaul in the pay structure at the plant and there was talk about the time being right to apply international standards.

So from the start of next month workers will get a 30% wage increase and those who hit their targets could get an additional 66% rise at the start of October. In practical terms that more than doubles the pay of those on the assembly line.

The likely impact of the rises for the Foxconn workers is that other plants in China making components and hardware for Western firms will feel the pressure to follow suit. There have been strikes in some factories already this year over pay and conditions.

In reports those responsible for the situation at the Foxconn factory have talked about the need for those richer suppliers in the West to put their hands in their pockets to help eradicate low pay and the impact on staff morale.

The Financial Times quoted a statement from Foxconn's parent Hon  Hai Precision Industry that said the time has come for the global food chain to face the issues of raising pay for workers.

That of course is a positive but the negative, from the point of view of those that will have to pay, is the way that those salary increases will be paid for with the Western companies being asked to cough up to make a contribution.

In the case of the Foxconn workers the pressure will come onto the likes of Apple, Sony and Dell, which have contracts with the manufacturer.

Despite the increased costs, which you could imagine will have to be passed on to the customer via the channel, it cannot be a surprise to those working in the IT industry that we have reached this situation.

A few years ago the pressure came on vendors to prove that their supply chains were green from start to finish but with more documentaries and awareness about sweat shop labour and low pay the Foxconn developments are unlikely to be the last time vendors are asked to pay to improve the lives of those making their products.

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