Apple's American job disaster
Manufacture of its products meant good-paying jobs in the U.S. But a move to China took them away.
The death of Steve Jobs was followed by an avalanche of superlatives - brilliant, genius, and visionary among the more common. He was likened to Leonardo da Vinci, Albert Einstein, and Thomas Edison.
But in the case of Edison, there was one significant difference that went unmentioned. For more than a century, just one of Edison's inventions alone - the incandescent lightbulb - was manufactured at numerous locations in the United States, providing employment for millions of Americans across family generations.
The Apple home computer, not at all. After only one generation, all the Apple manufacturing jobs in America disappeared, as the work of building and assembling the machines was turned over to laborers in sweatshops in China and other countries. Jobs that should have provided employment for Americans for decades to come were terminated.
For Apple, the corporation, the system functioned beautifully. This year the company had more cash in its bank accounts than the U.S. Treasury. And for one day, Monday, Sept. 19, the company was the most valuable corporation on the planet, its stock worth $382 billion. It was a sum that exceeded even the worth of Exxon Mobil Corp., the world's largest international oil and gas company.
Needless to say, Apple proved a disaster for its onetime production workers. It turned out to be a classic bait-and-switch con for working folks. One day they held jobs that allowed them to do all the things people had come to expect from their employment. The next day the jobs were gone.
No one saw it coming. In fact, when new production plants came to Elk Grove, Calif., near Sacramento, and Fountain, Colo., near Colorado Springs, the future looked especially bright. Opened in 1992, the Elk Grove facility became the centerpiece of Sacramento's campaign to lure high-tech companies away from the Bay Area. Other computer-makers soon followed. By the mid-1990s, the Sacramento area was considered the computer-manufacturing capital of the United States. Apple's Elk Grove plant, which manufactured circuit boards and desktop computers, operated seven days a week and employed 1,500 people.
About the same time, the Apple plant in Fountain went into production and soon became the company's largest manufacturing facility, turning out a million power-book and desktop computers a year. It was a state-of-the-art facility that helped the Colorado Springs area attract other high-tech companies.
On the surface, Apple seemed to be following the classic pattern of industrial development in the United States: A creative entrepreneur invents a product, builds plants to make it, and markets it to consumers - all the while employing ever more people to build the product.
But Apple changed the rules. Rather than open new plants in other U.S. cities and expand existing operations, the company, as other computer- and electronics-makers were also doing, moved production offshore, largely to China. The Elk Grove plant was closed in 2004, less than a decade after full production started, "cutting out the core of what used to be one of the brightest stars in the region's high-tech constellation," as the Sacramento Bee put it. Apple sold the Fountain plant to an electronics firm in 1996. The new owners continued to manufacture Apple computers under contract for three years until production there also moved abroad. The plant closed in 2007. Today, the 250,000-square-foot building sits vacant, a painful reminder of what was once a thriving tech industry.
As recently as 2000, Colorado Springs was riding a high-tech job boom. But since then, with the closure of the former Apple plant and other facilities, the area has lost more than 40 percent of its manufacturing and information-technology jobs. More than 15,000 jobs - paying from $55,000 to $80,000 plus benefits - simply vanished, according to local economic-development officials, sucking an estimated $500 million out of the local economy.
In place of those good-paying occupations, jobs in call centers for insurance, finance, and cellphones were created, paying on average about half what those in IT paid, according to local officials.
Meet Bill Stamp. He knows all about what it's like when good-paying jobs disappear.
Stamp was one of the first Apple employees at Fountain. He was 26 years old when he joined the company in 1984 at its first major assembly plant in Fremont, Calif., recording and keeping track of the myriad parts that went into each personal computer, from hard drives to screws. When the company offered him an opportunity to get in on the ground floor at its new assembly plant in Colorado, he jumped at the chance. His fianceé, Christy, landed a job at Fountain as well, and later he moved up to a supervisory position in shipping. Gregarious and down-to-earth, Stamp is the first to tell you he was never a computer geek. He was a "materials guy" whose job was to feed the production line. "My job was to get it to the line and make sure it was a quality product ready for the line to use."
Apple instilled in him and his coworkers a quality-control ethic that made them want to turn out the best possible product. "There was such a camaraderie," he said. "When we got off work all we could talk about was Apple, Apple, Apple; we've got to do this or that. And we had the freedom, a process, to bring that up, and these things would then often come about. It was phenomenal, one big family." It was an exciting time. Stamp said the folks in the factory thought of themselves as responsible for helping to build the company. They were appreciated and well-compensated, and they basked in the glow of working for Apple.
In Colorado, he and Christy moved into a comfortable bi-level house set on five acres near the Black Forest, an area of abundant Ponderosa pines and natural beauty north of Colorado Springs. "We were living large," he said. "We thought it would go on forever."
But in 1996, the moneymen on Wall Street decided Apple was not living up to their expectations. Earnings had sagged. To raise cash and bolster the bottom line, the company was forced to unload assets. The Fountain plant was sold, just four years after it had opened. The plant was profitable and well-run, but Wall Street's relentless focus on short-term earnings demanded results. An Alabama-based electronics vendor and outsourcing specialist, SCI Inc., bought Fountain for $75 million with an agreement to continue manufacturing Apple computers on site for three years.
The plant's ownership wasn't the only thing that changed. Stamp recalled that the new managers were "arrogant as hell," dismissive of Apple veterans, and uninterested in feedback from employees. "What a culture shock that was," he said. After having grown up in a collaborative work environment that encouraged ideas from the ground up, all they ever heard from the Alabama imports were relentless orders to "Git 'er done." When the contract to make Macs expired in 1998, Apple didn't renew, and the manufacturing shifted offshore.
Discouraged about Fountain's future, Stamp left in 2001. He tried his hand in real estate in Colorado and held a series of supervisory jobs for less pay in distribution and warehousing in fields as disparate as retail and electronics, first in Colorado and then in California. In 2008, when his last job was shipped to Singapore, he hit a stone wall. Before, he had always been able at least to secure an interview that often led to a job - if only for a while. Now he would send out resumés listing his lengthy experience and wasn't even getting a call.
As the months ticked by, Stamp and his wife drew down their savings and tapped into retirement accounts to fund the fruitless quest for work and try to hold on to their home. As so often happens, in the end they lost the home. For family reasons, they moved back to California in 2003 and settled in Milpitas, near San Jose, where they rented a two-bedroom apartment. In the summer of 2011 - at the age of 53, after he had been out of work for three years - Stamp found a temporary job as an inventory control analyst. The job came without benefits and there was no indication whether it might become permanent, but at least he was working again.
Stamp remembers reading an article years ago, when he was still with Apple, predicting that the average worker in the future would undergo four career changes and hold as many as 10 different jobs. And he thought: "Not me. I'm staying right here." Little did he know that would never be an option.
That's because Congress and Wall Street had other plans. The jobs that provided a good living for Stamp and thousands of production workers in Fountain, Elk Grove, and Fremont are now in China. Every Apple product - Macs, iPods, iPhones, and now iPads - is made in China. Unlike companies in the past, which manufactured in the United States for decades, Apple shipped its jobs offshore in less than a generation. For a point of comparison, the last plant in the United States still making lightbulbs, a General Electric factory in Winchester, Va., turned out the lights and closed its doors in September - more than 100 years after Edison introduced his invention.
The move to China came about quietly and was little noticed at the time because of the way Apple went about creating its offshore presence. Rather than build plants that proudly displayed the Apple name, as it did in California and Colorado, the company turned to outsourcing firms that partnered with the Chinese to establish plants where the products are made. Apple's plants in mainland China bear the name of their Chinese contractor, but inside they are making Apple products. The arrangement is a convenient buffer insulating Apple from oversight of its offshore workplaces.
Apple production workers in Fountain and Elk Grove bought homes, sent their kids to school, shopped locally, saved for their retirement, and lived the dream, if only for a short time.
What's life like for Apple's workers in China?
Shenzhen is a throbbing megalopolis of 10 million an hour north of Hong Kong. Just outside the city is a massive fortress-like compound surrounded by walls and protected by tight security where guards at the entrance stop each vehicle and check the identities of occupants by using fingerprint-recognition scanners.
Within the walled city are dozens of factories, dormitories, support businesses, and an on-site television network, all humming round the clock. This is the Longhua Science & Technology Park, one of the most dense concentrations of high-tech manufacturing in the world. Owned by Taiwan-based Foxconn Technology Group, the largest manufacturer of electronics and computer components in the world, Longhua is home to as many as 300,000 workers.
They work in enormous factories, row after row of them bent over workstations that seem to stretch endlessly into the distance. They assemble iPods, iPhones, iPads, and products for other electronics-makers. Occasionally, photos surface showing workers, mostly young women, wearing spiffy white coats and caps, going about their work in what appears to be pleasant, well-lit surroundings, just as workers once did at Elk Grove and Fountain.
But that's the only similarity with Apple's former plants in the United States.
Workers at Longhua and other Foxconn plants in China work under grueling conditions - usually 10 to 12 hours a day, sometimes for seven days straight without overtime pay. They're not allowed to speak to one another on the job or to leave their workstations - not even to go to the bathroom - without permission from guards. Some of them perform repetitive tasks for up to 10 hours at a time without a break. Supervisors berate workers with foul language and warn that if they fall behind on production they will be replaced. Some have reportedly been beaten for mistakes they allegedly made on the assembly line. For all this they earn a little more than a dollar an hour at most.
These practices have been documented in numerous reports by a Hong Kong-based human-rights group, Students and Scholars Against Corporate Misbehavior (SACOM). Of working conditions at one Foxconn plant making iPhones, SACOM concluded: "Workers frequently endure excessive and forced overtime in order to gain a higher wage. If they cannot reach the production target, they have to skip dinner or work on unpaid overtime shifts." SACOM calls Foxconn's Apple workers "iSlaves."
Most young workers live on-site in cramped high-rise dormitories near the factories, where as many as a dozen workers squeeze into small rooms with three tiers of bunk beds. Most of them are peasants in their late teens or early 20s who have been lured to the city in hopes of earning money for themselves and their families back home, only to find themselves yoked to brutal production schedules that can become unbearable.
Upwards of two dozen workers at Apple plants in China have killed themselves in recent years, often by jumping from their dormitories. The deaths were so common for a time that Chinese bloggers began referring to the Shenzhen plant as the "Foxconn Suicide Express." SACOM concluded that many of those who took their own lives were exhausted, overworked, verbally and physically abused by supervisors, or publicly humiliated when they failed to meet their production quotas. SACOM reports tell the story of some of these young victims:
Hou, a 19-year-old woman from Hunan province, hung herself in the toilet of her dorm room June 18, 2007, shortly after she had assured her parents that she would soon be coming home.
Sun, a 25-year-old college graduate from Yunnan province, jumped to his death from his 12th-floor room July 16, 2009, after he was allegedly blamed for losing a prototype for a new iPhone. According to SACOM, Sun was detained by security officers, placed in "solitary confinement," subjected to "psychological pressures," and allegedly beaten. In a final chat with friends shortly before he killed himself, he described the relief he felt in planning to take his own life, "thinking that I won't be bullied tomorrow, won't have to be the scapegoat, I feel much better."
Feng, a 23-year-old college graduate, jumped to his death from his 14th-floor room Jan. 16, 2009. Police found a suicide note: "Too much work pressure; unstable emotions."
Ma, a 19-year-old native of Henan province, was found dead near a stairway of his dormitory Jan. 23, 2010. An autopsy concluded that he had fallen to his death. His sisters later insisted their brother died from a beating after he had accidentally damaged equipment at work.
After a rash of suicides at the Foxconn plant in early 2010, the company took action: It strung nets around the dorms to catch any workers who might try to kill themselves by jumping. It also sealed balcony doors and barred access to roofs. Workers were reportedly urged to sign a statement promising not to kill themselves and to "treasure their lives." Apple said later in a report on Supplier Responsibility that it was "disturbed and deeply saddened to learn that factory workers were taking their own lives" and pledged to take steps "to help prevent further tragedies." The company launched a search "for the most knowledgeable suicide prevention specialists" and commissioned a study so as to better "support workers' mental health in the future." Apple also commended its contractor Foxconn for taking "quick action," including "attaching large nets to the factory buildings to prevent impulsive suicides."
Once the nets were installed, the number of suicides dropped, but working conditions at Longhua and other Foxconn plants have changed little if at all, according to SACOM. Although Apple has pledged to work with Foxconn to improve conditions, in SACOM's view the company failed to follow through and insist on reforms, and so many of the conditions that prompted the suicides still exist.
Following the suicides, Foxconn and Apple stepped up plans to move more iPhone and iPad production inland to cities in central and western China, where there is even less oversight of living and working conditions. One major center for iPad production is now Chengdu, in western China, nearly 1,000 miles from Hong Kong.
In the plant's first year of production, an explosion apparently caused by faulty ventilation rocked the plant, killing three workers and injuring 15 others. SACOM investigators interviewed workers at Chengdu and found that many of the same conditions afflicting Apple workers at the east coast plants were present at Chengdu: Workers labored for hours at a time applying chemicals, sealants, and parts to iPads, assembling objects they knew they would never have the money to buy. One young worker lamented that he couldn't even dream of owning an iPad because it would "cost two months' salary." Again, a far cry from the early days of Apple in the states. Bill Stamp remembers early in his career when the company asked workers to come in on a Saturday and gave everyone a new Macintosh as a reward for a job well done.
To Stamp it's amazing to realize how quickly it all changed - how the door to so much opportunity and a secure future suddenly slammed shut after Apple began to subcontract out the making of its basic products and then shipped all the work to other countries. One day they had great jobs and the next day some were nomads, going from one employer to another, never knowing how long each job would last.
Stamp never got the joint memo from Congress and Wall Street: If you are over 50 years of age, only a lucky few will obtain meaningful jobs in the future. Everyone else is out of luck. Congress has decided that people must continue to work until their 70s, but has refused to provide the economic structure to do so.
Unlike so many people, Stamp now sees his future clearly. As is the case with tens of millions of other Americans, it does not include retirement. Says Stamp:
"I figure I'll drop over dead somewhere because I'll still be working." If, that is, he can find work.