Foxconn’s Solution to Labor Unrest

There are a couple of ways to spin the news that Foxconn Electronics Inc. is replacing Chinese workers with robots.

The first is admittedly the most cynical: Robots don't complain about lousy working conditions, and they don't commit suicide. Maybe all that nasty PR about exploiting workers will go away. Here's the more moderate reaction: Foxconn is leveling the playing field for global manufacturing. If China's biggest competitive edge is low-cost labor, and labor is taken out of the equation, what's left?

OK, there are other advantages: a huge base of manufacturing facilities, an established supply chain network that shouldn't be dismantled, and a billion or so consumers buying electronic goods manufactured close to home. But if the world's largest contract manufacturer is going robotic, you can bet other manufacturers will follow. To stay competitive, smaller EMS companies will have to meet costs.

This could be the opportunity of a lifetime for all those companies that say they really, really want to manufacture onshore again. Stop worrying about labor costs, and put those robots to work. But this isn't going to create jobs. (We're using robots.) And job creation is the real force behind the bring-back-manufacturing movement we've been hearing so much about, isn't it?

There is a jobs angle to this, at least in the US. A recent 60 Minutes report looked at the alleged shortage of qualified workers for US manufacturing jobs. With unemployment so high, how could there be a job gap? The report was eye-opening. First, there are still US manufacturing jobs -- the $25 billion Alcoa Inc. was among the companies interviewed for the story. And, yes, it is having trouble finding workers. These days, entry-level manufacturing jobs require skills like trigonometry to calibrate the high-precision equipment used in manufacturing. The available workers are either overqualified (Alcoa doesn't need EEs) or underqualified (they have only a high school diploma). The perfect manufacturing employee will have about two years at a community college and/or a mechanical engineering degree.

There are a number of bigger issues at play here. An educational system that doesn't match employment needs is one. The cost of training employees is another. Then there’s China. If the recent unrest regarding working conditions disappears, will progress ever be made? As EBN readers have pointed out, the real problem is an environment that tolerates human rights abuses. Again (taking the cynic's view), removing humans from the employment equation solves that problem.

I think progress will be made because the Chinese are acutely aware that things are different outside their nation. Western companies manufacture there, and the products they make give citizens an open window to the rest of the world. China can't exist in an economic vacuum. But it is ironic that one of the quickest solutions to charges of worker abuse is to get rid of the workers.