Thursday, May 27, 2010

Incentives Matter: Suicides at Foxconn's iPad Factory

There have been a dozen suicides at the Foxconn factory where Apple's iPad and iPod are manufactured. The incentive structure in place means that Foxconn cannot stop the suicides:
Foxconn finds itself in the position of paying 110,000 yuan (£11,000) in compensation to every person who jumps. For a depressed Foxconn employee, who still feels an obligation to repay his family for the cost of his or her upbringing and who would like to give his parents a lump sum that could transform their lives, this is a very tempting sum.

For a worker on the basic rate of 900 yuan a month, the compensation amounts to the equivalent of over ten years of gross salary. For a worker who is doing overtime and earning 1500 yuan a month, the compensation is still worth six years of salary.

If these enormous payments don’t stop, the suicides are unlikely to either.
Even in China, you get what you pay for and that's why incentives matter.

2 comments:

thrmshield said...

Has anyone done a suicide study on McDonald's. What is the suicide rate for thier employees.

Foxconn employs over 400,000 employees at the "factory" in question. As such, the suicide rate in the factory is half that in Ladue.

Or, they employ 60% more people than live in the City of St. Louis. How many suicides have we had in St. Louis.

dsm said...

@thrmshield Good point!

A quick search revealed that there were about 11 suicides per 100,000 people in the US in 2006. St. Louis city looks to be around that average while St Louis county had fewer suicides based on the CDC's data.