[Simply Business] Foxconn Factory: A reality check on Indonesia wages

There’s a lot of fuss concerning how Apple treats its manufacturing partner Foxconn in China, news of Foxconn employees being paid in such low wages of $1.78 per hour making expensive iPhones and iPads.

Then it hit me, is $1.78 per hour cheap? The workers work 12 hours a day, let’s assume that they work 5 days a week. That would make about $1.78 x 12 hours x 20 days equals $427.2. That’s bigger than my first salary at an IT company in 2004! Not to mention it’s still a starter salary for most small companies in 2011.

Let’s compare that $427.2 wage with the Indonesian blue collar workers. The minimum wages allowed by the government for is 1,1 Million IDR per month which is about $120. The pay for an outsourced workers at PT Petrokimia Gresik is Rp. 64.000,- per day which is about $7. This article says it is worse, claiming that the standard wages for blue collar workers is $0.33 per day. Or is it $0.6 per hour? Well whichever it is, it’s looking bleak as it is.

But then again China does have a bigger GDP per capita. According to World Bank China is on $4,428 while Indonesia is $2,946 (2010 data) which means China generates 1.5 times more in GDP per capita than Indonesia. A fine accomplishment knowing that China has the biggest population in the world.

So by roughly counting the GDP comparison, the blue collar workers’ salary in comparison to China is supposed to be $427.2 x 2/3 which is $284.8 or about 2.5 million Rupiah. That’s twice the minimum wages allowed by the government as mentioned above and yet it’s about as much as an entry level salary for programmers in Yogyakarta, Bandung and other areas.

I guess it’s rather obvious now that our country’s condition is worse than the ‘standard of worst’ the world has been using so far, which is painful to acknowledge, but  a good reality check nonetheless.

Looking back at Foxconn. Even with the ‘dire’ condition of the workers and the widespread news in China about it, 3000 people are still lining up every week to work at Foxconn. It’s not that they don’t care about the working condition, but rather because the alternative is not looking better either.

The truth hurts, but pretending that it doesn’t exist will not make it go away.

This has been a dose of reality check.

Aria Rajasa is the CEO of gantibaju.com, a clothing startup not dissimilar to Threadless but with a touch of Indonesia and a very strong design community. His passion in entrepreneurship has gotten him to start a number of companies since leaving university