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Op-Ed: Here's what's worrisome about Foxconn's plan to build a plant in the US

Foxconn Technology Group Chairman Terry Gou announced from the White House Wednesday that the company will spend $10 billion to create a Wisconsin plant that will create many display panels and jobs. That sounds great but represents both good news and bad news.

Let’s start with the good news.

First, the deal will create thousands of jobs. Foxconn said it will create 3,000 jobs over four years with the potential for 10,000 more. Wisconsin Governor Scott Walker more optimistically said it would create 13,000 jobs. So the number of jobs is uncertain, but even the conservative estimate means thousands of new jobs for Americans and that — especially in the beleaguered manufacturing sector — is a good thing.

Second, President Trump campaigned on reviving manufacturing in America and bringing jobs home from overseas, and Walker has campaigned on helping blue-collar workers. So the deal would clearly be a big win for both of them, and an even bigger win if Foxconn builds additional facilities in the U.S. and other companies follow their lead.

Third, Foxconn is the world’s largest contracts electronics manufacturer, so this is major league manufacturing. The company has produced electronic devices for powerhouses like Apple, Google, Amazon, Microsoft, HP and others for years.

But there is also potentially bad news.

First, Foxconn has a spotty track record of delivering on its promises. The company caused a lot of excitement about a revival of American manufacturing when it announced in 2013 that it would build a $30 million high-tech plant in central Pennsylvania but failed to deliver. The company also announced in 2014 that it would invest up to $1 billion in Indonesia, but failed to deliver on that promise, too.

Second, as the Washington Post reported Tuesday, lawmakers and other concerned citizens in Wisconsin are concerned that the state may give away too much in incentives to attract Foxconn. Those concerns are heightened by the facts that Walker is up for re-election next year, has a low approval rating, and has run as a job-creator.

Third, it is uncertain whether the promised jobs will be stable and pay a living wage. As for job security, both the BBC and MarketWatch reported in May 2016 that Foxconn had replaced 60,000 of its workers with robots.

As for pay, Walker said the jobs would pay $53,000 plus benefits on average. According to Census Bureau data, median income for all residents of Wisconsin in 2015 was $55, 638. So if Walker is correct the new Foxconn jobs would pay right around that median amount.

But is he correct? There is some cause for doubt since Foxconn is known for paying a low-wage rather than a living wage.

Foxconn is also known for a work environment so harsh it led to employee riots and suicides. The Fair Labor Association — a non-profit formed by Nike and others in 1999 after a series of sweatshop scandals — documented in 2012 major labor-rights violations at Foxconn facilities including excessive overtime and salaries that were too low to cover basic living expenses and sometimes not paid.

The company has also been criticized for under-age workers, improper disposal of hazardous wastes, injury to workers required to clean iPhone screens with a toxic chemical, and fatal industrial accidents resulting from the failure to address known hazards.

Harsh work conditions at a variety of Foxconn locations in China led to a spate of Foxconn employee suicides in 2010. Foxconn chillingly responded to those suicide attempts by installing safety nets to catch employees attempting to jump to their deaths from company buildings. A company that cared about its employees would have done more to investigate and remediate the conditions that led to the suicides in the first place.

Some of the concerns about worker pay and safety will, of course, be less of a problem in the United States because we have much stronger laws and regulations protecting workers and more effective enforcement of those laws and regulations than China does.

But to what extent can we confidently rely on Foxconn to remain in compliance with our laws if they are complying because they have to rather than because they care about their employees and want to.

A senior executive in Latin America once told me that, in his country, a company did not have to take care of its workers any more than it wanted to because the few laws protecting workers there were weakly-enforced.

A company shows its true values in a situation like that when it doesn’t have to treat its employees well but will only if it cares about their welfare as much as or more than profitability. Foxconn’s track record does not inspire a high level of confidence that it does truly care about either its word or it employees.

Commentary by Joseph Holt, a business ethics professor at the University of Notre Dame’s Mendoza College of Business. Follow him on Twitter @busethicsdude.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

Source: Tech CNBC
Op-Ed: Here's what's worrisome about Foxconn's plan to build a plant in the US

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