Following recent trends for pay rises, Apple Supplier Foxconn last night announced a third pay rise in less than 10 days, offering its production line and senior workers in Shenzhen (S. China) a performance-based monthly increase of 800 yuan, or more than 65 per cent.

“The monthly wage for all first-line employees and their line leaders and supervisors in Shenzhen will be elevated to 2,000 yuan (Almost US$ 300) as early as October 1,” the Taiwanese firm said last night.

Overall, work conditions more than pay should have been the leading contributer to the spate of suicides for this employer.   A key factor in work conditions are the work hours and associated pressure in many factories across China – ODM expect more Chinese workers to make Labour-Leisure Trade off decisions as wages increase.

So what does all this mean for companies buying from China?

  • Longer term, a more basic salary should allow factory workers to do less overtime for the same pay.
  • To keep the same production schedule companies will be forced to employ more staff driving up labour demand especially on the coast.
  • Products will be more expensive coming out of China.
  • Lead times for production will need to lengthen to take account of continued labour shortages in some areas..
  • Increased Automation will be applied where possible -as Robotics become more affordable than labour for more tasks.
  • China will loose competitive advantage for some labour intensive production to SE Asia and other markets.

Interesting times…