Free-trade vs. Fair-trade iPod


Umair Haque, writing for Harvard Business Publishing, posits what Apple’s (s aapl) iPods would cost if they were made in the U.S., and it turns out it’s not as much as you might think.

According to Haque, “an American made iPod Classic costs just 23 percent more than a Chinese made iPod Classic: $58 more, to be precise.” That is surprising, and in light of Apple’s perennial troubles with manufacturers in Asia, worth thinking about further.


Claims of “iPod sweatshops” have been around for years, with some of the more damning accusations likening manufacturing facilities with worker dormitories to prison barracks. At best, the pay is low and workload high. More recently, Apple manufacturing contractor Foxconn came under scrutiny regarding the apparent suicide of a worker over an iPhone missing from a sample shipment. Since then, both Apple and Foxconn have expressed regret for the death, with Foxconn compensating the family of Sun Danyong. However, beyond that compensation, it’s unlikely anything will change in labor practices abroad.

That’s where Umir Haque’s thought experiment for building a “good” iPod in the U.S. comes in. The estimated costs of labor in the U.S. and China are $24.59 and $1.47 per hour. The estimated amount of labor required for final assembly is 2.7 hours, creating a difference in manufacturing cost of $58.19. Using that number, Haque extrapolated the costs for iPod categories. I took that a step further, listing every model of iPod and iPhone, iPhone cost being the subsidized price.

Obviously, the lower the price, the greater the differential. The shuffle would likely be hurt the most in the eyes of the consumer. That’s who the chart is really for, in my opinion. It’s a rhetorical question concerning whether you would pay more for an iPod or iPhone built with a living wage, as there is no chance Apple is going to move its manufacturing to the U.S. This isn’t to say Apple is bad. After the death of Sun Danyong, the company reiterated its stance that suppliers “treat all workers with dignity and respect,” and the company has broken no laws, least of all the Iron Law of Wages.

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