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China Review News: Foxconn’s Pay Raise and the End of the China Model

A Foxconn spokesman confirmed that all lower-level laborers’ wages have been raised 30% starting from June 1, according to China Review News on June 7, 2010. It is understood that Foxconn’s pay raise decision is related to the recent employee suicides. The pay raise means that the labor costs will increase 2.281 billion yuan (334.130 million U.S. dollars) each year. For an OEM business model company whose profits are very limited, this cost increase is substantial. Upon publication of the news, Foxconn’s share price immediately plunged on the Hong Kong stock market.

“Labor-intensive enterprises have smaller profit margins. In order to grab the largest profits, the employers purposely lower employees’ wages, which has seriously hindered the harmonious development of society. More and more incidents demonstrate that the “China Model,” which sacrifices the well-being of ordinary people for economic development, has come to an end.”

Source: China Review News, June 07, 2010