Apple is in the middle of a labor scandal. While CEO Tim Cook recently toured a Chinese factory that makes Apple products, he said he was struck by the poor working conditions. Shortly thereafter, Apple commissioned an audit that confirmed the dangerous working conditions at its foreign plants.
Foxconn, the company that operates the factory that Cook toured, promptly pledged to improve working conditions for its employees. Some speculate that this may pressure other companies that have labor-intensive manufacturing abroad to increase wages and accept less profit.
Will it cause other factories to improve? Apple's labor controversy is neither new, nor out of the ordinary — far from it. Labor controversy is a pattern with companies that manufacture abroad. Clothing store Gap has faced criticism for its poor labor practices in its overseas operations throughout the last decade. So have Nike and Wal-Mart. Among other things, they've been criticized for sourcing materials from foreign countries, exploiting child labor, subjecting their employees to dangerous conditions, and engaging in bad environmental practices.
Despite these labor controversies, Gap, Walmart, and Nike have continued to be successful companies in the wake of their labor scandals. Why will the consequences of Apple's labor controversy be any different?
This is merely a publicity stunt to ensure that Apple has a good public image. Tim Cook was COO before he became CEO, so he already has intimate knowledge of the supply chain and the labor conditions abroad. Even though Steve Jobs never visited the factories in China where Apple’s products are made, he was outraged when he heard reports of terrible labor practices. In fact, cleaning up foreign manufacturing is precisely why Steve Jobs hired Tim Cook in the first place. This was not his first factory tour. This trip should not have been a revelation.
How will this affect American consumers? If the price of foreign labor goes up, Americans can rest assured that the price of their next iPhone or iPad will be little affected. This is because the cost of labor is a relatively small portion of the total cost of making a product in China. If the wages of foreign factory workers increase, it's unlikely to drive up the prices that consumers in America pay. However, the price of Apple products would rise considerably if Tim Cook paid homage to his blue-collar background by bringing manufacturing back to the United States.