Apple’s shine is fading

Apple is rapidly becoming the symbol of what’s wrong with our economy: a highly profitable enterprise where all the gains go to those at the top and the vast majority, including those with college degrees, struggle to get by. Saturday’s New York Times  article by David Segal deepens the story beyond Apple’s complicity in exploiting Chinese manufacturing workers. According to Segal, “About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year.”

That $25,000 annual salary works out to $12.02 an hour for someone working full-time for one year (2,080 hours paid, either for work hours or paid leave). That’s pretty low; about $1 above the “poverty-level wage” (the poverty line for a family of four in 2011 was about $23,000, equivalent to an hourly wage of $11.07). Segal’s article starts off talking about a former Apple employee, Jordan Golson, who earned just $11.25 an hour. Many of these Apple store workers are young, so one wonders how Apple wages compare with those of other young college graduates. The short answer is “not so good,” or even “terrible.” The hourly wages of young college graduates (those ages 23-29) in 2011 was $21.68 for men and $18.80 for women. To be fair, Segal notes that, “The company also offers very good benefits for a retailer, including health care, 401(k) contributions and the chance to buy company stock, as well as Apple products, at a discount,” so including benefits may offset some of the discrepancy between pay by Apple and pay by other companies. The information necessary to calculate this offset is unavailable, but it is not believable that these benefits fully or even significantly make up such a large shortfall in wages.

How do Apple store wages compare to those of all college graduates? As the table below shows, $12.02 is far below the 20th percentile wage of college graduates, the wage that 80 percent of college graduates earn more than and 20 percent make less than. That’s right, Apple’s store employees’ wages are in the bottom 20 percent of all college graduates. In fact, $12.02 is $2.24, or 16 percent, less than the 20th percentile college wage in 2011. For college-educated men, $12.02 hourly is on par with the wage earned at the 10th decile, $11.87, meaning 90 percent of college graduates earned more than that in 2011.

Table 1 Table 1 (continued)

Hourly wage for college graduates, selected percentiles, 2011

Percentile* All Men Women
10  $   10.80  $   11.87  $   10.12
20      14.26      15.49      13.09
Median (50)      23.07      25.96      20.25
*The Xth percentile wage is the wage at which X percent of the wage earners earn less and (100-X) percent earn more

Source: Author's analysis of Current Population Survey Outgoing Rotation Group files

It is already well-known that Apple benefits from the extremely low wages and harsh working conditions of the Chinese workers who manufacture its products. As EPI’s Ross Eisenbrey and Isaac Shapiro recently wrote, “Apple workers in China endure extraordinarily long hours (in violation of Chinese law and Apple’s code of conduct), meager pay, and coercive discipline.” Together with the mediocre pay for Apple employees, even compared with other retailers, it is clear that Apple’s success does not translate to high or rising living standards for the workers who one would hope would benefit from its success. Apple could readily afford to pay the Chinese Foxconn workers building iPhones because their costs are a miniscule part of the phone’s costs. Raising pay is not that heavy a lift for Apple: In 2011, Apple’s nine-person executive leadership team received total compensation of $441 million, equivalent to the estimated compensation of 95,000 Foxconn factory workers assembling Apple products.

The discrepancy between Apple’s profits/executive pay and its compensation to its workers is a particularly glaring example of what is occurring in the wider economy. The gap between CEO compensation and that of a typical worker is now 231-to-one, where it used to be just 58.5-to-one in 1989. Corporate profits are now higher as a share of corporate-sector income than in any year since the early 1940s when we had a War Labor Board consciously suppressing wage growth. And, this all contributes to the phenomenon that productivity—the ability to produce more goods and service per hour—has been rising rapidly but the hourly compensation of both high school and college-educated workers is totally flat. It does not look like much will change soon unless there’s a broad change of thinking among policymakers and a mobilized workforce. After all, current outcomes have been dictated by persistent high unemployment, low and weakly enforced labor standards (witness the failure of Apple to abide by California’s wage and hours law mandate of two 10-minute breaks a day, reported in the Times story), the inability of unions to set high labor standards, and the dominant political/policy influence of the wealthy and the business community. Apple’s labor practices and the overall failings of the economy have not been dictated by any economic laws. Rather, they are the result of eminently changeable public-sector policies and private-sector practices.


  • http://www.facebook.com/people/Bob-Gort/100000573755301 Bob Gort

    This pay disparity seems entirely consistent with Steve Jobs’ lifelong attitude toward others, based on reading Isaacson’s biography.

  • B Leet

    2% of Apple’s price on its iPhone equals its labor costs, see the Ross Eisenberry article at EPI: http://www.epi.org/blog/apple-iphone-profits-dwarf-labor-costs/  ——- for a $631 product they realize $319 in profits, and instead of enriching their workers they pocket the profit for shareholders and management. OK, that’s just Apple. What if all corporations behave the same way? “Annual compensation for the typical private sector worker” has risen by 5.7% over 33 years, according to Mishel, see: http://www.epi.org/publication/ceo-pay-231-times-greater-average-worker/  — The GDP per capita has risen more than 67%. William Lazonick says that 94% of corporate profits have gone to dividends or stock buyback during this period. The American corporation has become a vampire. How much blood is left? Isn’t it just a predictable period before the victim is sucked dry? Floyd Norris in the NYT 11.25.11 said “Wage and salary income was only 43.7 percent of G.D.P., the lowest number for any period going back to 1929. That figure first fell below 45 percent in 2009.” It was 54% in 1970. And total compensation, including benefits, was the lowest since 1955 at 54.3% of GDP. http://www.nytimes.com/2011/11/26/business/for-companies-the-good-old-days-are-now.html — The writing is on the wall. Look at all the other factors. It is writ. 

  • vql1

    Yes, this has all been pretty obvious since the Foxconn scandal and now I am just waiting for the inevitable product boycott that just might induce Apple to take care of its employees and other workers who build their products.