Cost vs. Benefit of Fair Trade: Would You Pay More for a US-Made iPod?
Making its way through the business blogs this week is a discussion of an article Umair Haque wrote for HarvardBusiness.org blog musing about how Apple could produce its devices in the USA under fair labor conditions and how much more it would cost them and cost the consumer:
how much would it cost to produce a “Good iPod”? One not produced in a sweatshop, but under decent labour conditions. Like, for example, one produced in the USA — hardly a paragon of labour standards, but a starting point.
That’s what I calculated. The Sloan Foundation data estimate just $4 of an iPod’s cost is the final assembly in China. Using average Chinese hourly compensation costs, that’s about 2.7 hours of labour. I then used American hourly compensation costs to adjust for what that final assembly might cost in the States.
The results are surprising. An American made iPod Classic costs just 23% more than a Chinese made iPod Classic: $58 more, to be precise.
A 23% increase in price would almost certainly deter a subset of consumers, but one has to assume that the fair labor practices would attract a different subset, and one that would potentially exhibit loyalty to Apple as it demonstrates the values these consumers espouse. In the end, would it even out? Who knows. It’s a meaningful thought exercise, though, and moreover, it’s the kind of question American businesses should be asking in order to aid the recovery our own economy and workforce.
Hague goes on to say:
If goods cost what they should, we would consume what we could authentically afford, instead of overconsuming what we couldn’t. If their prices reflected real human costs, perhaps yesterday’s unsustainably large macro imbalances wouldn’t have built up in the first place. And that, from an economic point of view, would be good for everyone.
I couldn’t agree more.
But how about you? Does this seem like an unnecessary step, or is it a change Apple should be exploring immediately? What is your take?
