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As Apple’s profits decline, iPhone factory workers suffer, a new report claims

A labor rights group has accused Pegatron, a supplier of Apple products in China, of misconduct. (Eugene Hoshiko/AP)

As Apple watches its profits decline for the first time in 13 years, tightening production costs are pushing iPhone factory workers to working longer hours for less pay, a new study reports.

The report, released last week by China Labor Watch, revealed worsening labor conditions at Pegatron, one of Apple's major iPhone factories based outside of Shanghai. The factory implemented excessive overtime hours that spanned up to 90 additional hours per month, according to the report, and overall wage cuts from $1.85 to $1.60 per hour on Pegatron workers over the past year.

Apple has been criticized in the past for labor conditions in the Chinese factories that produce their popular products. They have responded by launching yearly audits to ensure factories are meeting specific standards, such as a weekly cap of 60 hours per worker.

But China Labor Watch's latest report claims that these standards have not been met at Pegatron, which employs up to 100,000 workers at peak season to create iPhones and iPads.

The report comes on the heels of Apple's announcement of the iPhone 7 release next week. As the study reports, excessive overtime tends to kick into high gear right before a new Apple product release.

The study dug deep into worker conditions, reporting that during high volume months, 40 to 70 percent of factory workers worked more than Apple's standard 60-hour workweek. Workers were often forced to stay overtime and were rarely granted leave. Student interns, though forbidden by law from working overtime, put in an average additional 80 hours per month.

The report also examined Pegatron's wages closely. Hourly wages technically were increased in 2016 to meet the new minimum wage of $2 per hour as set by the Shanghai government. But as wages were increased, worker subsidies such as workday meals, medical insurance and retirement were abolished. When accounting for these additional costs, the report found that wages actually decreased by 25 cents per hour from 2015 to 2016.

"Workers are very unhappy, but they feel that there's nothing that they can do about it," said Li Qiang, founder and executive director of China Labor Watch, adding that many workers depend on overtime pay because base wages are so low.

China Labor Watch is an independent watchdog group that focuses on labor practices in China. They have published reports on work conditions in factories producing products for Samsung, Adidas and Walmart. The group has also devoted multiple reports to Pegatron's factories that create popular iPhones and iPads.

The group collected and analyzed 2,015 pay stubs from Pegatron workers between May 2015 to May 2016. Pay stubs were spread throughout the months covering both low and high season. Pay stubs were not evenly collected, with a high number of stubs coming from one high production month out of the year, but China Labor Watch adjusted its analysis to account for months that are peak season or have more holidays than others. They also sent five investigators undercover to work at the Pegatron factory.

In response to the report, Pegatron insisted that they have taken measures to ensure that workers do not exceed the 60-hour limit per week, including switching to electronic record monitoring. They claimed that their 60-hour workweek compliance was very high, around 95 percent, contrary to the excessive overtime claimed in the report. "We work hard to make sure every Pegatron facility provides a healthy work environment and allegations suggesting otherwise are simply not true," a Pegatron spokesman said in a statement.

Apple responded with claims that 97 percent of factories stick to no more than 60-hour workweeks and that factory wages have raised an average of 13 percent per year. "Our commitment to these issues will never waver and we have teams of Apple employees on the ground working with our suppliers to ensure we continuously raise standards and offer safe and healthy working conditions," Apple said in a statement.

But Li insists that the pay-stub analysis and on-the-ground reports tell a different story. "Pegatron or Apple can make any justification regarding their overtime hours and regular hours, as they have set the standard themselves," he said.