The Big Price Of Apple's Slim Savings

Mainstreet US Under Fire

I love the idea of a Mom and Pop Shop– a small, family-owned establishment where the owners and employees probably live just a short drive from the store.

Maybe it’s a restaurant that locally-source ingredients from nearby farms. If it’s a boutique, maybe they reach out to local artisans and craftsmen for products.

When you make a purchase, you feel like you’re supporting your community.

My Dad is a local business owner; maybe I’m a little biased, but local businesses just feel genuine.

Local businesses are great—everyone is a fan, but let’s do a quick reality check.

I need to own a smartphone in order to function in today’s society, and no one in my neighborhood knows how to design or manufacture one. Do I just submit to being phone-less?

No. I go to the Apple store, and I purchase the newest model of the iPhone for a cool $500.

I am able to send e-mails, emojis, and filtered photos from the palm of my hand because Apple has the resources to develop and manufacture technology, transport it to a retail outlet conveniently located near my home, and then charge me an exorbitant amount to purchase it.

When I hold my iPhone, I’m holding a combination of parts that are made in Taiwan, Korea, China, and a list of other countries.

Small Advantage, Major Burden Of Outsourcing

Of the 200 million phones Apple sold in 2014, none were made in the United States.

Not one of those phones even had components assembled in the U.S. Outsourcing is clearly a huge part of the Apple business model.

Then again, outsourcing is now the standard of the international market.

To say otherwise would be isolationist and irrational.

Today’s economy is no longer a direct, local exchange—a two way street of buying and selling.

It’s international. As companies grow, it becomes necessary to look into foreign markets and investments.

The question here is not if America deserves these jobs, but if the American workforce is able to sustain the level and speed of production to which Apple and its consumers have become accustomed.

I would argue that the United States simply lacks the labor capacity.

In the United States, it would take nine months to hire and train the 8,700 engineers that it takes to manage 200,000 factory workers.

In China? Two weeks.

When I think of Apple, I think of this story:

Chinese Labor: Faster; More Fluid; Cheaper

In 2007, only a few weeks before the release of the original iPhone, Steve Jobs decided he wanted to replace the plastic iPhone screen with the glass that we all have now.

Jobs was told by American suppliers that it would be impossible to meet the production demand in such short time.

Jobs turned to China, where a factory actually constructed dormitories for its employees so they could work 12-hour shifts.

They did this before the contract was even signed, to prove to Jobs that they meant business.

Over the course of those several weeks, factory employees lived and worked at the factory, fitting the glass screens to the phones.

They were able to produce 10,000 iPhones per day.

There were some blatant human rights issues here, but that’s for another day.

The point I’m trying to make is that the level of production that occurred in that small span of time would never be possible stateside.

Asian factories produce quickly, at a larger scale, and with more flexibility than in the U.S.

It should be noted also that Apple does provide Americans with jobs—more than half a million of them.

Since 2008 alone, the company has added 21,000 U.S. jobs to the working pool.

Let’s discuss the flipside for a minute, because it’s not just U.S. companies that are outsourcing abroad.

Foreign auto companies like Toyota (Japan) and BMW (Germany) have chosen to operate factories in the United States because it is more cost efficient to manufacture the product near the source of the most demand.

These factories employ thousands of American people and contribute to the American economy.

No Longer Just An American Sickness

It’s not solely the foreign auto industry that employs American people.

Chinese, Indian, and Mexican companies have all expanded operations to America with industries spanning from retail to agriculture. Last year, it was estimated that foreign companies employed 5.6 million Americans. Even Anheuser-Busch, the maker of Budweiser, (aka America’s Beer) is owned by a Belgian company.

Foreign investment has helped keep our unemployment rate stable. It has contributed to the health of our economy, and kept single-industry communities from turning into ghost towns.

Outsourcing is a debatable subject. What’s not debatable are financial ethics.

No one is going to deny the value (and necessity) of foreign investments.

Apple is basically supporting the entire economy of Taiwan with its smartphone sales.

It scares me to think about what would happen to Taiwan’s economy (and people) if Apple were to vacate.

These countries have little to no diversity in their economy—they depend on high-tech manufacturing.

Still, it definitely seems a little greedy when Apple ships off all its manufacturing jobs just to save four dollars per iPhone.

However, the real savings the company accrues are through… wait for it…

From Al Capone to The iPhone

Tax Evasion.

Apple, using some vague, peripheral tax loopholes, has managed to dodge both US and EU tax regulations by filtering its sales through Ireland.

In 2011, the U.S. Senate found that Apple was paying just $2.5 billion in taxes on $128 billion in sales.

As opposed to the 35% tax on profits that Apple would have to pay for US-made iPhones, the company is only accountable for 2% while the profits remain overseas.

Over nine years, the company has accrued more than a trillion dollars in sales with very minimal taxes paid.

To put this in perspective, let’s think about the average American taxpayer.

I am a single tax payer. I have no children, and I am under the age of 65 taking a standard deduction.

With my average income, I am paying approximately 10% federal income tax.

Include FICA, and we can bump that up to almost 18%.

I don’t have a problem with this, because I believe in providing for the necessary infrastructures that make this country function.

I do have a problem when large corporations like Apple, who are more than able to afford an honest tax rate, dodge the rules that the rest of us are following.

I have a problem with large corporations that are driven solely by an unhealthy level of greed.

That greed negatively impacts all Americans, our national GDP, and the public good.

Once you factor in the entirety of Apple’s dodgy schemes, the several thousand U.S. jobs the company provides look meager.

Apple’s financial success is partially at the expense of the American economy from which it was born.

As Americans, our most basic civic duties are to support the country’s infrastructure through taxes, and to abide by the law of the land. Apple is disregarding both of these.

The issue arises when Apple reaches the peak of its success through robber baron tactics, bullying, and evading international financial regulations. Apple has forsaken the ethical and financial obligations it has to its country of origin—the country where Steve Jobs’ garage still stands, where the legacy all began.

At this point, it would cost Apple over $4 billion dollars to bring manufacturing back to the United States.

On top of that, they would face a $600 million increase in labor costs—thanks to our labor and human rights standards.

Ultimately, it’s pretty unlikely that Apple will uproot the company’s entire manufacturing network to return to the United States. They have no reason to, unless we as a people demand some real enforcement.

Maybe we need to urge Congress and the rest of the international finance network to close the silly loopholes that enable companies like Apple to weasel out of their tax obligations.

Or maybe we should just find companies that do it better, smarter, with a longer time horizon in mind….

Greed is Good? Sure… But Only When it’s Smart

Maybe, next time you’re due for an upgrade, consider Android for a moment.

Because if investing in a company with long term sustainability, and, more importantly, long term profitability is your goal, look at the fundamental principles behind the corporate culture.

Google sees the value in cutting a little profit for the sake of grander economic viability. Apple doesn’t.

Who do you think will continue to grow? To innovate? To reinvest in itself and its surroundings to create the most expansion-friendly conditions?

I think you know the answer already.