Do you ever wonder where and who produces your the favorite phone, IPad or computer? The Foxconn City is a complex of factories that house persons working for them producing Apple, Microsoft, Dell and Hewlett Packard project. Foxconn Technology Group, who owns the complex of factories, and employs 235,000 workers, has a reputation of tough tactics and sweatshop condition for their workers producing these in demand products. According to the Daily Mail, Apple Corporation uses sweatshop environments to produce the products that are sent to the west. Apple, for example, sold 93 million IPhones, 40 million IPads, 38 million IPods and 17 million computers, yet they are involved with a company that is paying the Chinese workers far below United States minimum wage earning a whopping $1.75 per hour or $273 per month, which would require months of work in order to be able to purchase one the products they make. Reports have indicated that workers were recorded doing 24 hours shifts at a time, while others were forced to stand up during their entire shift. These people are producing the phones and apple products that are craved all over the world, while working in a monotonous, tedious, assembly line environment under what looks clean, but horrible conditions. Many workers have committed suicide because of the harsh conditions in the factories; many factories have been forced to install suicide nets around their facilities.
Even though abuses continue, Apple contends that they have sent 60,000 workers to college for free and have informed one million staff of their legal rights. Chief-executive Tim Cook claims that they are working hard to improve the conditions for workers and are trying to improve the lives of employees. He is working with Foxconn to fix the problems. However, there are still reports of 150 Foxconn employees threatening to leap from the facilities because of poor working conditions and low wages. Given the rise in Apple stock it seems that something could be done to improve the conditions of the low wages.
A Company’s main goal is to make as large of a profit as possible. These sweatshops are the most efficient way to make large gains. But do the cost outweigh the benefits? Many major companies like Apple believe in improving the working conditions of their employees. These companies are only left to wonder whether consumers would be willing to pay a higher price for their product in exchange of knowing these products are being produced the right way. According to basic economics and the law of demand, if a company raises the price of their product demand will decrease. When a product price rises, many consumers will be tempted to look at a substitute at a cheaper price, so therefore, when a company raises its price their demand will decrease.
In the passed months , the Obama administration has fought to raise the federal minimum wage above its current level. There are many people who support this and are extremely curious how much longer it will take until it has passed. What has perplexed my interest is what economists have to say about the minimum wage. In my government and economics course we had a brief period discussing over why price floors are destructive to the efficiency of production.
When the government raises price floors. They are intended to increase the money in workers pocketbooks. This in turn gives them more money to be spent elsewhere. Unfortunately, that is not the case, rather than creating a profitable working class it creates one that struggles to find employment. If the price floor is higher than equilibrium, then we find ourselves and excess in supply. Meaning that employers demand less workers because they are at a higher price. In fact, if the Obama administration gets the minimum wage at $9.40, there will be an estimated of 450,000 jobs lost. This will cause a huge hit to our finally stable employment.
Although it is probably best to keep the minimum wage where it is, there are some who want it gone for good. After all, companies are not just competing for customers, but for employees too. If you are a worker, you will go with the company that offers you the best deal. So in a way, the market also affects wages. Just as I mentioned earlier, if the minimum wage increases, you will most likely see unemployment rise. That is a sign that the market wants labor at a lower price. So naturally workers will accept a lower price so he could be employed. This will push the market back to equilibrium, and have the economy operating at maximum efficiency.
Another way to understand the effect of excess in demand is America’s college situation. We have such a large number of graduates seeking to enroll in college, yet they cannot make it because they are not the most qualified. This has caused ACT and SAT scores to rise astronomically. There are now so many students ready for college that there are not enough students to fill their place. With the standard of admittance rising, the lower income families who cant afford to send their kids to fancier schools so they can get a better chance at admittance. All this happened because there were more students ready for college than spots available.
Our economics course really opened my eyes. I understood the fact that government intervention is best when it is as little as possible, but I never understood why. Perhaps the reason why Obama and most of america wants a higher minimum wage is to give a pat on the back to those who work hard and receive little. But what they don’t understand, is that if they really want to help the workers. They should not raise the minimum wage.