Foxconn sought flexibility in meeting average wage target

Foxconn chairman Terry Gou and Gov. Scott Walker hold up the signed contract.

Last updated on July 2nd, 2019 at 09:11 pm

When Gov. Scott Walker and Foxconn chairman Terry Gou announced an agreement on Foxconn’s Wisconsin project, the numbers were fairly straightforward.

Foxconn chairman Terry Gou and Gov. Scott Walker hold up the signed contract.

Gou and Foxconn would invest $10 billion and create 13,000 jobs with an average wage of $53,875. In exchange, Wisconsin would offer $3 billion in state tax incentives.

The deal sketched out on the governor’s letterhead did not require an average wage, but the memorandum of understanding signed by both sides in late July 2017 made it part of Foxconn’s commitment.

The MOU, however, did not say how to calculate the average wage figure. Critics of the Foxconn deal have questioned whether the company would pay wages well below $53,875 to a large portion of employees only to balance the average out with a few high paid executives.

New documents released by the Department of Administration show the state originally planned to count only wages under $100,000 while the company argued there should be no “artificial cap” on how the average was determined.

In comments on two drafts of the state contract, attorneys for the company wrote, “Foxconn expects all wages to be considered for the average annual wage calculation.”

In response, the Wisconsin Economic Development Corp. expressed a willingness to increase the cap first from $100,000 to $200,000 and then again to $250,000.

Ultimately, the state’s contract with Foxconn counts wages paid up to $400,000 annually as part of the average. The company is also eligible for $1.5 billion in payroll tax credits and earns those on wages paid up to $100,000.

The agency declined to comment on specific parts of the negotiation.

In a statement, Foxconn said it is developing Wisconsin recruiting plans and will announce details “in accordance with different phases of project development.”

“This includes determining competitive remuneration for employees at all levels, and ensuring that we meet all our contractual obligations with the relevant government agencies,” the Foxconn statement said.

Under a $100,000 cap, Foxconn could theoretically pay 65 percent of its workers a $30,000 salary and still meet 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.

Whether Foxconn’s workforce would actually be divided that way is another story. The WEDC staff review supporting the state’s contract with the company indicates the lowest average starting wage would be $23.02 per hour for operators, nearly $47,900 per year. The company planned to hire 4,995 people for the position, according to the staff review.

But Foxconn’s plans have also been evolving since the project was originally announced. Plans originally called for a generation 10.5 thin-film-transistor LCD fabrication facility intended for making large display screens. Executives have since said the company will start with a Gen 6 facility, which makes smaller screens and provides more flexibility in determining which products to make.

Executives have said the company’s work in an experimental production facility in Mount Pleasant has shown a need for increased reliance 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.

“While there will be a mix of employment opportunities, the majority of our employees in Wisconsin will be knowledge workers focused on high-value production assignments and research and development,” the Foxconn statement said.

“Across all of our global operations, Foxconn offers every employee remuneration that is in compliance with all relevant laws and regulations and is competitive for the respective levels and our industry in each specific location, and this is the approach we are taking with our Wisconsin operations.”

An increased emphasis on higher-skill and research positions would suggest higher wage levels, making it easier for the company to hit its wage targets. A higher cap on average wages only adds additional flexibility for the company.

Foxconn will also be able to count jobs created in Milwaukee and Green Bay towards its 13,000 job total, so long as the positions benefit operations in at the Mount Pleasant campus, WEDC spokesman Mark Maley confirmed in an email.

The Milwaukee operations are expected to include 500 employees as part of Foxconn’s North American corporate headquarters and an innovation center. The company said its Green Bay operations would include 200 high-tech jobs.

As for Foxconn’s evolving plans for its Mount Pleasant campus, WEDC officials said it is up to the company to determine the best use for the facility.

“We would not be surprised if the company’s plans for its advanced manufacturing campus change as the facility is being constructed because technology keeps changing,” said Mark Hogan, WEDC secretary and CEO.” One of the reasons we aligned with Foxconn in the first place is because this is a company that has been at the leading edge of technology for the last 44 years and continues to evolve and lead the way in the industry. They have done it successfully and we expect that success to continue going forward.”

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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