New Voices: Apple's profits from cheap labor give little incentive to innovate

from orlandosentinal.com

It's no secret that Apple has become the darling of Wall Street, given its success in the smartphone arena. The company's ability to invent consumer electronics blending form and function so seamlessly has earned it the largest market cap in history, nearing $600 billion, and crowned its founder as the "secular savior."

To suggest the company's success has come from anything but sleek marketing and design would be equivalent to telling an Apple fanboy that Microsoft Windows is superior to Mac OS. This, however, is exactly the case. There is a more important factor that has lifted Apple in its ascendancy — the exploitation of cheap overseas labor.

While this is no surprise to a world that has purchased more than 240 million iPhones to date, it is clear that the fanboy mentality has gotten the best of us. There is too wide a disparity for us to comprehend that the maker of our favorite e-gadgets indirectly employs workers at $1.25 per hour to manufacture its products.


To bridge that gap, it is helpful to break down those numbers to a digestible form. Foxconn, Apple's preferred manufacturer, employs more than 400,000 workers at its Shenzhen, China plant responsible for producing Apple products. Employees make $350 per month, and account for 2 percent of the cost per iPhone.

In comparison, an American paid the federal minimum wage and working the same roughly 70-hour week as the Chinese worker would make $2,030 per month. Over five years (about one year less than that of iPhone production through 2012), Apple paid Foxconn employees $40.3 billion less than it would have paid American workers under the same hourly requirements.

Let's say Apple hired American employees over the past five years to manufacture its products. Employees would have earned $48.7 billion, assuming they worked 30 hours of overtime per week at minimum wage. The personal savings rate in the U.S. has hovered around 5 percent over that time. Therefore, those workers would have spurred the economy in its most desperate times, spending $39.3 billion on domestic goods. The $7.3 billion in taxes generated would fund Big Bird's Corporation for Public Broadcasting for the next 32 years.

In reality, Apple would have depended upon labor from 700,000 Americans working 40-hour weeks, rather than that of their 400,000 wage slaves. Adding that many people to the labor force would have reduced the unemployment rate 0.5 percent to 7.3 percent.

But none of this occurred. Instead, Apple has $100 billion in cash on hand — about half of which can be accounted for due to exploitation of foreign workers — sitting idle on its balance sheet. Meanwhile, the company continues to ration its products one frivolous upgrade at a time, generating gross margins above 50 percent on iPhone sales.

Instead of using its resources to innovate, Apple can choose to spend its cash from misconceived globalization by swallowing up competing patents, and to litigate against those companies that pose a challenge by offering alternative platforms.

No matter your moral stance on the treatment of foreign workers, or your political affiliation as it stands in the upcoming election, there is something to be said about the role of corporate responsibility and how we, as consumers, regulate it. It's easy to fall into fanboy mode as we play with our apps and watch Apple's celebrity ad campaigns confirm our self-serving attitudes. But we also have a responsibility to check those powers that can control us.

Numbers don't lie. We're rewarding Apple for paying overseas workers low wages, stifling innovation and harming the American economy.

Now if only the iPhone 5 were restocked so I could forget about all of this and upgrade to the sweeter screen.