What Would a Fair-Labor iPod Cost?

http://www.businessweek.com/managing/content/jul2009/ca20090731_483871.htm

Harvard Business Online July 31, 2009, 10:10AM EST

Posted on Edge Economy: July 30, 2009 4:52 PM

Just how much of a Constructive Capitalist is Apple? There's been a ton of discussion about Apple's Chinese suppliers, and their relatively poor labour conditions recently—along the lines of, "enjoy your sweatshop produced iPods, evil Americans."

What's more interesting is the counter-factual: how much would it cost to produce a "Good iPod"? One not produced in a sweatshop, but under decent labour conditions. Like, for example, one produced in the USA—hardly a paragon of labour standards, but a starting point.

That's what I calculated. The Sloan Foundation data estimate just $4 of an iPod's cost is the final assembly in China. Using average Chinese hourly compensation costs, that's about 2.7 hours of labour. I then used American hourly compensation costs to adjust for what that final assembly might cost in the States.

The results are surprising. An American made iPod Classic costs just 23% more than a Chinese made iPod Classic: $58 more, to be precise. The same relationship holds across the iPod family (price differentials in the 20-30% range) The iPod is a durable good, so that's a difference—but smaller than one might expect.

Now, these numbers aren't exact—they're estimates I threw together in 20 minutes. Yet, if anything, perhaps they overstate the price differential, because they don't factor in scale, learning, and experience effects—and they assume Apple passes on increased labour costs entirely to consumers. But they provide enough of an indication to ask:

Is a 23% price difference between a "Good" and "Evil iPod" worth it—to Apple, society, communities, and our economy? Would Apple's business suffer from charging people $58 more for an iPod? Can we afford to pay 23% for goods made according to higher labour standards?

FULL story at link.

How far do your convictions go when it impacts your pocket book.

I look at it the other way...

When Apple or some other company lowers their cost, they pocket a bigger profit. They do not pass that lower cost to the consumer. If the iPod were made in the USA, Apple might earn 77% profit on the item instead of 100%. The upper limit will still be what the consumer is willing to pay.

their prices when they move production overseas. Look at Levi's. They moved all their production from the US to Mexico in the last few years, and if anything they have raised their prices a little.