Foxconn hikes pay for 2nd time a week; days of cheap labour over

BEIJING: Hit by a spate of workers suicides, attributed to poor pay, China's biggest foreign firm Foxconn today announced a second wage hike in less than a week, taking the overall wage hike a whopping 70 per cent, a move that's expected to have a cascading affect, ending the era of cheap labour in the world's factory.

Foxconn, a leading IT contract manufacturer of computers, game consoles and mobile phones for Apple, HP, Sony, Nokia etc, announced a 30 per cent hike last Wednesday for its 4 lakh workers in its various Shenzhen plants. It followed up with yet another wage revision today, taking the impact of the two hikes to around 70 per cent. Salaries would be hiked from 1,200 yuan (USD176) to 2,000 (USD294) from October 1.

Ten workers committed suicide in the past few months in the Shenzhen plant, while two more jumped to death elsewhere in China. The Thaiwanese firm employs over 8 lakh in China. Pay rise for the rest of the workers was expected to announced from July 1.

A statement from Foxconn, said the second pay rise would lessen the pressure on workers to do overtime. "While overtime work is always voluntary, this wage hike will reduce overtime work as a personal necessity," it said.

"This wag increase has been instituted to safeguard the dignity of workers," said Foxconn founder and chairman Terry Gou. Foxconn declined to say why there have been two large wage hikes in a week.

Gou who visited the factories recently said he was having trouble sleeping and dreads receiving distress phone calls from managers reporting yet another suicide.

The company also lined up psychiatrists and installed safety nets around the dormitories to deter distressed employees from jumping down. Majority of the suicides were committed by employees jumping off the windows of the high rise buildings.

The pay rise however did not go well with its investors as its shares fell sharply on the Taiwanese stock marker after the announcement. Trading in the company's shares on the Hong Kong Exchange was suspended on Monday following steep fall.

The increase in Foxconn workers salaries coupled with 24 per cent salary hike announced by Japanese company Honda, China's second largest automobile manufacturer was expected to have a cascading affect all over China ending the "cheap labour cheap goods" concept that propelled China's exports all over the world.

Beijing also announced hike in minimum wage to prevent labour unrest, eventhough the work forces were not organised.

Many foreign firms prefer China as an investment spot due to efficient infrastructure linking to supply chain. The increase in wages though, is expected to make Chinese exports less profitable.