Apple Inc. (AAPL) Working to Improve China Labor Conditions

Apple Inc. (NASDAQ:AAPL) has been getting a lot of heat in recent years over labor practices in it manufacturing plants outside of the U.S., especially in China. Now, after an audit by a global labor watchdog organization, Apple will be working with its partner, Foxconn, to continually improve conditions at the various Foxconn plants across China.

Apple Inc. (NASDAQ:AAPL)

Apple Inc. (NASDAQ:AAPL) is one of the major clients of Foxconn – others include Dell, Sony and Hewlett-Packard – but it is the only one that is a member of the Fair Labor Association (FLA), a labor -relations group based in Washington that monitors working conditions of laborers all over the world.  The FLA conducts audits of Foxconn upon Apple’s request, and to this point, the latest audit revealed that while progress has been made, there is still much work to be done.

One of the big challenges for Apple Inc. (NASDAQ:AAPL) and Foxconn will be to meet Chinese labor regulations, which require that he companies reduce work hours for all workers by more than a third by next year. Foxconn said it intends to cut overtime from the current 20 hours per week down to nine.

On the one hand, that would mean hiring more workers to fill the regular demand, but also it means Foxconn would have a hard time retaining workers because many work as much overtime as possible to maximize their pay because wages are so low. Cutting overtime may force some workers to leave. “It is a challenge,” said Louis Woo, Foxconn special assistant to the chief executive. “When we reduce overtime, it means we need to hire more people and implement more automation, more investment on robotic engineering. More workers also mean more dormitories and recreational facilities. It takes time.”

In a statement, Apple Inc. (NASDAQ:AAPL) spokesman Steve Dowling said, “We’ve been making steady progress in reducing excessive work hours throughout our supply chain. We track working hours weekly for over 700,000 workers and currently have 97 percent compliance with the 60-hour maximum workweek specified in our code of conduct.”

Apple Inc. (NASDAQ:AAPL) had been found in violation of several labor regulations in the past, so this work has been positive progress. But what this will mean for overhead for Apple devices remains to be seen, as it is cheaper to pay more overtime to existing workers than it is to hire more workers. But some Foxconn workers are apparently still not happy, despite the changes. “Workers have to complete the workload of 66 hours before within 60 hours now per week,” said  a statement from New York-based China Labor Watch. “As a result, the workers get lower wages but have to work much harder.”

How this will affect the cost of new devices may play a role in sales for Apple Inc. (NASDAQ:AAPL), which would affect the bottom line for investors in Apple stock, like hedge fund managers such as Julian Robertson of Tiger Management.