Foxconn to Double China Worker Wages by End of 2013

Foxconn, the world’s leading contract manufacturer, will boost the minimum monthly salaries of its China workers by 100% by the end of 2013, according to the Taiwan-based Chinese-language newspaper Want Daily.

Foxconn founder and CEO Terry Gou declared on May 16 that the average monthly wages of workers in China should be doubled to 4,400 yuan ($690) by the end of 2013, according to the paper.

Earlier in May Gou is reported to have said in Shanghai that the average wages of Foxconn workers in China will exceed Taiwan’s minimum wage by the end of the year, suggesting a rise from 2,200 yuan ($350) to 4,000 yuan ($630).

The most recent wage hike, if true, would be Foxconn’s fourth increase during the last two years adding up to a five-fold salary increase for the company’s 1 million China workers since 2010.

As the main contract manufacturer for Apple iPhones and iPads Foxconn is in a better position than any other company to set the pace for increasing wages in China. China’s manufacturing standards have improved dramatically in recent years, leading to higher value-added contribution by workers there. Even higher salaries are expected to make Foxconn the manufacturing employer of choice, creating an even stronger incentive for the hardest workers to work there and to be more productive.

The salary boosts have had little impact on Foxconn’s bottom line. The first salary increase added about 200 million yuan ($31.5 million) to the company’s payroll for its 800,000 China workers. During the first quarter of 2012, Foxconn’s parent Hon Hai Precision Industry posted only a 0.5% dip in gross profit margin over the first quarter of 2011.

But in Foxconn’s home base of Taiwan average salaries are now the same as the levels of 14 years ago, with wage increases unlikely in the near future.

In the first quarter of 2012 Taiwan’s average monthly salary was NT$37,160 ($1,250), according to Taiwan’s statistics bureau, with wages increasing just 1.87% over the prior 12 months. That’s an increase of just 0.58% after accounting for inflation.

The average increase of Taiwanese workers who reported getting an increase during the past three years was just 1.66%, according to a recent study from Taiwanese job bank 1111. Over half the respondents reported no salary increase in over three years. Taiwan is expecting a new wage of wage freezes in the second half of 2012.