Why Apple Can Afford to Do Better

Earlier this week, I argued that Apple's moral failings -- tax avoidance and sweatshop labor practices -- were all the more inexcusable because this a company drowning in profits and cash. It can afford to pay its fair share of taxes and to pay its workers better.

Now, thanks to Isaac Shapiro at the Economic Policy Institute, we have some hard numbers to back up this point. Here's what Shapiro found:

The total compensation of the investigated Chinese workers making Apple products amounts to just 3 percent of Apple’s profits. In its most recent quarter Apple’s after-tax profits equaled $11.6 billion. By comparison, over an overlapping three-month period, the total compensation of the 288,800 Foxconn workers making Apple products equaled an estimated $350 million – or 3.0 percent of its after-tax profits. (I calculated this figure based on the average monthly pay of all Foxconn factory employees, including supervisors, found by the Fair Labor Association; the number of workers are those working in the three factories investigated.) This finding parallels a finding in a recent blog by Ross: labor costs at Foxconn are a “miniscule part of the iPhone’s costs.”

In 2011 and 2012, the top nine members of Apple’s executive team had total compensation equal to about 90,000 Chinese factory workers making its products. My just-released analysis found that in 2011, Apple’s nine-person executive leadership team received total compensation of $441 million. This was equivalent to the compensation of 95,000 factory workers at Foxconn assembling Apple products (making an estimated $4,622 per year).

Shapiro doesn't address Apple's tax avoidance, but he does note that Apple has $110 billion in cash lying around, which has piled up as the company has made more and more money -- and gotten ever better at tax avoidance. Obviously it could have afforded to pay more in taxes, instead of passing that burden to the rest of us.

Meanwhile, Shapiro's is exactly right on Apple's labor issues:

Apple could insist that Foxconn pay these workers more and treat them fairly, and could easily pay for any additional costs. (The workers in question are employed in factory lines dedicated only to producing Apple products.) To offset these costs, Apple could modestly raise the price of its products to be sure, but it could also readily offset these costs through some combination of tiny reductions in profits, small trims in its cash balance, or adjustments in its pay to executives.