One Step Forward…

Dave Killion — February 20, 2012

I’ve got mixed feelings about this

“The announcement Saturday that Foxconn Technology — one of the world’s largest electronics manufacturers — will sharply raise salaries and reduce overtime at its Chinese factories signals that pressure from workers, international markets and concerns among Western consumers about working conditions is driving a fundamental shift that could accelerate an already rapidly changing Chinese economy.”

To the extent that Foxconn is raising wages and improving working conditions because Chinese labour is increasingly valuable, I think this is great. But to the extent that these changes are coming about to appease Western hysteria, we can expect some unfortunate consequences. Why? Because Westerners talk the talk, but don’t walk the walk –

“…for that change to be permanent, consumers have to be willing to bear the consequences. When people read about bad Chinese factories in the paper, they might have a moment of outrage. But then they go to Amazon and are as ruthless as ever about paying the lowest prices.”

When wages rise, automation becomes increasingly competitive. This is fine when the market drives wages up, because workers are moving in to better jobs. But when wages are artificially driven up by things like minimum wage laws or western consumers who don’t put their money where their mouth is, less productive workers simply get pushed out of employment. To some degree, that just might be the case here –

“… Foxconn has announced plans to invest in millions of robots and automate aspects of production.” 

Perhaps someone can explain to me how creating more hungry Chinese soothes Western unease, because I don’t get it.


Ashley Johnston says

I didn’t consider the automation aspect. Good call. I’m not sure, however that spending habits matter so much. Regardless of their spending habits, western outrage is part of the cost of labour, but not capital.

I like a line I heard recently from Tom Woods: ‘When trying to help the poor, it is a bad idea to look at their list of options and cross of the one they actually chose.’

— February 20, 2012

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