iPhone7 Supplier Cuts Workers’ Wages

Tuesday, September 6, 2016
Read this report in Chinese

Pegatron is one of the largest iPhone7 suppliers for Apple, currently recruiting more than 60,000 workers. Since the beginning of this year, the treatment of workers in Apple’s supply chain in China has clearly worsened. By comparing the wage structure in May 2016 and September 2016, we can see that workers’ real wages have decreased substantially from 457 USD to 354 USD, a reduction of 22.6%.  Also, it is important to note that this is happening against the background of a steadily increasing minimum wage in China.

Compared to September 2015, Pegatron workers’ rewards and subsidies have declined from about 150 USD to merely 54 USD in May 2016, and the individual payment of social insurance (about 50 USD), which was paid by Pegatron, is now paid out of workers’ pockets. (Please see Table 1 and paystub samples below)[1]

Apple claimed that wages had raised an average of 13% each year. [2] According to the Ministry of Labor and Social Security, the legal minimum wage in China has been increasing at a rate of 13.1% in the past five years and wages in Pegatron has remained the same as the local minimum wage. [3] As such, the increase in wages is unrelated to Apple’s efforts and in no way reflects an improvement in the treatment of workers. Rather, it is the result of Chinese law. In addition, through examining the 93 Pegatron paystubs in September 2015 and 194 paystubs in May 2016, we find Pegatron workers’ real wage in May 2016 is even lower than that in 2015. In April 2016, Shanghai Municipal Government raised the legal minimum wage from 2020 RMB to 2190 RMB (303 USD to 328 USD), and Pegatron raised base wage of workers’ accordingly. However, as the company was under pressure from Apple to lower prices, Pegatron managed to lower labor costs by cutting welfare in addition to having workers share insurance payments. As a result, after the “raise”, workers’ wages in reality, dropped by about 103 USD. (See table 1)

China Labor Watch (CLW) sent the report regarding the reductions in wages in Pegatron to Apple three weeks ago, but Apple has yet to respond. CLW executive director Li Qiang said: “The decrease in production costs of the iPhone7 has been transferred to workers. Because of the cuts in real wages, workers have to put in more overtime hours to earn the same amount as they did when manufacturing the iPhone6. Apple is, in fact, acquiring large profit margins at the expense of workers’.”

Source: Pegatron paystubs collected by China Labor Watch; 93 copies in September, 194 in May. Numbers in this table are means calculated by CLW according to these paystubs. 
Supplement pay is made when a worker’s wage (base wage plus performance bonus), after social insurance being deducted, is below 2190 RMB (328 USD), the legal minimum wage of Shanghai.

Sample Paystubs

Sample 1: a paystub of September 2015

Sample 2: a paystub of May 2016

[1] Workers’ pays are converted into US dollar by China Labor Watch according to the exchange rate on September 6th, 2016

[2] Karen Turner; As Apple’s profits decline, iPhone factory workers suffer, a new report claims; September 1st, 2016, The Washington Post; https://www.washingtonpost.com/news/the-switch/wp/2016/09/01/as-apples-profits-decline-iphone-factory-workers-suffer-a-new-report-claims/

[3]为企业减压最低工资标准调整周期延长; May 21st, 2016; 21jingji ; http://epaper.21jingji.com/html/2016-05/17/content_40211.htm