Foxconn Deal Allows Low-Ball Wages
Documents show state will allow 93 percent of workers to earn less than $15 hour.
It hardly seems possible, but the Foxconn deal has gotten even worse. Yet again.
New documents released by the Wisconsin Department of Administration, and reported by Milwaukee’s BizTimes, show the administration of Gov. Scott Walker signed a deal with Foxconn that would allow the company to pay up to 93 percent of its workers just $30,000 a year, or slightly less than $15 an hour. For a family of four, that’s a low enough salary to be eligible for federal food assistance, and is anything but a family-supporting job.
At issue was the company’s promise to pay workers at Foxconn an average wage of $53,875, which the state was requiring in order for the company to get the massive, multi-billion state subsidy — the largest ever given in America to a foreign company — the Walker administration was promising. The story by reporter Arthur Thomas, who continues to scoop the Milwaukee Journal Sentinel in covering Foxconn, reveals the Walker administration originally proposed to count only wages under $100,000 in computing the average wage while Foxconn’s negotiators wanted no “artificial cap” on the average wage. “Foxconn expects all wages to be considered for the average annual wage calculation,” attorneys for the company wrote.
The agency was just as lax in dealing with Foxconn. Instead of sticking to its position that only wages under $100,000 count for a subsidy, WEDC representatives “expressed a willingness to increase the cap first from $100,000 to $200,000 and then again to $250,000,” Thomas reports. Ultimately, the agency agreed to count a salary of up to $400,000 annually in computing the average salary.
Under a $100,000 cap, Thomas notes, Foxconn could have paid 65 percent of its workers a $30,000 salary and “still met its average salary commitment. A $400,000 cap allows for 93 percent of the workforce to be paid $30,000 while still meeting the requirement.” In short, WEDC simply caved in to Foxconn’s demand.
It’s hardly surprising Foxconn wanted as much flexibility as possible to pay low wages. A key reason it grew from a tiny 1970s business into the world’s largest contract electronics company was Foxconn’s ruthless efficiency at keeping labor costs low by exploiting its employees.
But why did the Walker administration give in so easily to a company with such a history? Representatives of WEDC “declined to comment on specific parts of the negotiation,” Thomas reports.
Thomas notes that since the contract was signed, Foxconn officials have predicted they may rely increasingly on robotics and a workforce that skews toward higher levels of training. “Peter Buck, a Foxconn senior advisor responsible for the Wisconn Valley Science and Technology Park, told attendees of Foxconn’s groundbreaking celebration the split would be about 70-30 between knowledge workers and those with a more basic skillset.”
This could mean only 30 percent of workers might be paid a low-ball salary — but that assumes Buck’s claim turns out to be true.
Keep in mind this is a company with a long history of breaking its promises and walking away from deals. The latest information from the company says it could be building not a $10 billion plant but a $2 billion to $3 billion one, which would mean far fewer employees would be hired. The company has said it is still committed to a $10 billion plant and 13,000 employees but might get there in “phases” whose details weren’t spelled out. These later phases will come after the November election, which if Walker is reelected could open the door to Foxconn demanding yet more subsidies, after state and local taxpayers have already invested $1 billion in the project, as Urban Milwaukee has reported.
But in fact Walker knew that up to 93 percent of these jobs could be anything but high tech and instead could pay so low a salary the workers could be eligible for Food Stamps. At $30,000 for a family of four, these workers would also be eligible for a tax-paid subsidy of more than $7,000 under the Affordable Care Act.
This, in short, is a deal that offers a guarantee that only 7 percent of the jobs being offered will pay family supporting salaries. And to get this the state has agreed to give Foxconn a total subsidy that is now at $4.1 billion and counting, and which will cost the state’s taxpayers $1,773 per household. Yet even with this massive subsidy, the greatest ever given to a foreign company in America, the taxpayers could also be on the line to help pay federal subsidies for food assistance and health care to these workers.
“It certainly is my fiduciary role to protect taxpayers in the state,” Walker has said of the Foxconn deal. And it’s now crystal clear he failed to do this.
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