Living in China for a while can change how you think. Beliefs that were rock solid in the comfort of fully developed countries can go wobbly when confronted with the realities of China. Working in a Shenzhen sweatshop seems like a miserable existence until you wander around a few desperately poor provincial villages and see the destitute alternative.

Thus, I am left wondering how to react to last week's report from the British Mail on Sunday that workers assembling iPods are working for low pay and in harsh conditions. We all want to feel good about the products we buy, and we don't generally like to be reminded of the economic realities that drive a great deal of global manufacturing, especially in the high-technology industry.

Did Cesar hear about the sweatshops?

The original report is not online, but it has been summarized by MacWorld UK and widely discussed elsewhere. The report has also made it into Chinese press, including Sina.com (in Chinese), which has also republished some of the photos that accompanied the original story and which has a longish--though not very interesting--discussion thread devoted to the topic. Apple's by-the-numbers holding statement is here. Apple's supplier code of conduct is here.

Without being able to read the original story in full it's hard to know exactly how to respond. However, at first glance, it sounds like the conditions described are typical of many large manufacturing operations in China. Among the things mentioned in the story are sinister sounding "military-style drills" in which the employees take part every morning. Anyone who has spent time in China knows that even restaurants conduct military-style drills prior to the dinner rush. As for the contract manufacturer Hon Hai (a.k.a. Foxconn) investing millions more in China to take advantage of the cheap workforce, it is one of many. The report notes that housed workers make US$50 per month, which is low but significantly above the rural per-capita income of about US$400 per year (most of these laborers will be rural migrants). More worrisome are reports of 15-hour days with little time off, something that would seem to be in direct contravention of Apple's supplier code.

As a PR person, the problem that I see is not just that cheap Chinese labor is being used to assemble iPods in possibly poor conditions--that makes Apple the same as virtually every other computer and consumer electronics manufacturer--but also that this image is so destructive to the Apple and iPod brands. If Apple were a car parts manufacturer making brake pads this wouldn't raise so many eyebrows, although it would be equally worrisome. But while Apple markets itself as stylish first and foremost, it also markets itself as progressive, intellectual and as "thinking different". Remember its marketing campaign featuring labor leaders? Or its affiliation with conscience-rockers U2? These leave it open to damaging accusations of hypocrisy in the same way that Google's "don't be evil" mantra became a criticism magnet when it had to answer charges of censoring its Chinese results. Thus, it will be interesting to see if or how Apple reacts. So far, it has said little other than that it is conducting an investigation.

Two of more lucid analyses of this report are "Judging Apple's sweatshop charge" by Leander Kahney of Wired Magazine and "The hard truth about iPods" by IDG News Service's experienced China and Taiwan tech reporter Sumner Lemon.

Kahney writes:

The situation is too murky for a rush to judgment on Apple's ethics here, and it may well meet minimum global standards. But for a company that has staked its image on progressive politics, Apple has set itself up as a potential lightning rod on global labor standards. Sweatshops came back to bite Nike after its customers rose up in arms; and Apple can expect a similar grilling from its upscale Volvo-driving fans in the months ahead.

Tech companies' records in China are in the spotlight for a wide variety of human rights issues. Google and Yahoo have weathered a lot of criticism--quite rightly--for censoring search results and cooperating with the Chinese authorities cracking down on dissidents. I'm not naïve enough to expect companies to behave morally like individuals, but I find Google's corporate mantra "don't be evil" to be especially galling. It dropped that one pretty quickly.

All of these should put Apple on notice that doing business in China in anything less than an exemplary fashion is a recipe for a PR disaster.

Apple needs to not only meet minimum standards, but set an example by exceeding them. It's the right thing to do, of course, but it's also smart business--something (Steve) Jobs should surely understand. For Apple's demographic--well-heeled urbanites--human rights and labor practices are, presumably, important matters. They buy fair-trade coffee, but iBooks and iPods are not an issue?

Meanwhile, Lemon writes:

In most cases, electronics manufacturing isn't handled by the company that sells the final product, but by a contract manufacturer. Vendors squeeze the contract manufacturers hard to boost their own profit margins, often playing one off against another to get the lowest price. In turn, contract manufacturers look to reduce their costs as much as possible, and that means keeping wages low.

This hard truth explains how corporations can produce affordable electronic products, such as computers, game consoles, and digital music players that are exported to the US and Europe.

"The monthly wages earned are, yes, low. However, the buying power of those wages can put food on the table," said Danny Levinson, publisher and editor of BDL Media Ltd's ChinaCSR.com, a corporate social responsibility Web site.

The greater purchasing power of the renminbi, China's currency, was noted in a 2005 report on Chinese factory wages commissioned by the US Bureau of Labor Statistics. "Prices of goods and services vary greatly among countries, and the official exchange rate is not a reliable indicator of the relative difference in prices between China and other countries," the report said.

Most manufacturers, including Hon Hai, rely on migrant workers for labor. These workers, usually young women, come from China's poorer rural areas in search of jobs and a salary. For these workers, a monthly salary of US$50, plus room and board, is more than can be earned at home and provides an important financial boost for their families.

No one wants to be an apologist for the abuse of migrant laborers or their unfair exploitation. And the notion of a US$250 iPod nano being made for US$50 a month is a little jarring. Consumer brands like Apple have a strong stake in ensuring that their products are manufactured in humane conditions. But, right or wrong, the idealism of suburban prosperity often meets a harsh fate in the hands of China's economic realities.

Update: Perry Wu of technology news site ChinaTechNews.com has also written a column strongly criticizing the sensationalism of the original report.