Having an unlimited supply of migrant workers is helpful in payroll terms, but how can a workforce of almost one million people be efficient?
As the cost of manufacturing in China rises, you would expect factories in places like the Pearl River Delta would start working smarter. Foxconn, quietly getting on with the business until it began raining workers, employs 800,000 people in its China plants, mostly doing the assembly work for Apple, Dell and other electronics makers.
But seriously, 800,000 workers! All doing unskilled, stick-and-push, screw-and-go functions that any half decent robot could perform 24 hours a day.
There is no way a factory can be efficient with a workforce close to a million people. Sure, it can pay abysmal wages of US$1 per hour and obtain concessions because it is such a huge employer, but all those people have to be housed and fed and prevented from bumping themselves off.
Can you imagine the size of the HR department. It is enough to send a shiver down the spine.
There are also fast emerging signs that the young people of today are far more demanding, ambitious and less accepting than their parents. They are certainly technology savvy and can organize impromptu protests that sometimes end in higher wages.
So as tempting as it may be to have a gigantic worker base doing menial assembly tasks for ultra low pay, it is a flawed strategy. Surely if much of the assembly process was automated, it would be radically more efficient and ultimately cost less in wages and the need to house migrant workers in compounds near factories.
Of course, the problem is that companies outsourcing their manufacturing are indirectly in the employment business, at least as far as China is concerned. Quid pro quo. And the mainland has enough home grown social problems without the people adding chronic layoffs to their list of complaints.
So no matter how efficient it may be to replace millions of humans with machines, it’s not going to happen. The actual manufacturing and assembly of the high-end goods by giant employers like Foxconn is a fraction of the costs of an iPhone, for instance. The margins are so high that even if labour costs rise by a couple of million a month, it won’t have much of an impact.
So with no real pressure on their bottom line – not even from their outrageously large workforces wanting a couple more yuan a month – there is no incentive for high-end manufacturers to change the system and risk the wrath of Beijing in the process.
* In a potentially ominous sign of slowing trade, China’s two biggest ports, Shanghai and Shenzhen, reported lower volumes in June compared to May. Shanghai throughput fell 4.7 percent in June (2.44 million TEUs) while Shenzhen was down 1.4 percent (1.91 million TEUs).