NEW YORK, United States — At every conference or trade show I attend, there is one question that’s always asked: is apparel manufacturing returning to America?
In recent years, there has been a considerable amount of media attention focused on companies said to be “re-shoring” production back to the US. Walmart, the world’s largest retailer (and one known for its vast global sourcing chain), made a major media splash when it pledged to sell more US-made goods in order to boost domestic manufacturers, while Everlane, a small venture-backed e-tailer known for its “radical transparency”, has attracted attention for its practice of highlighting each of its factory partners on its website, many of them based in America.
While I find these examples interesting, a resurgence of manufacturing in America seems highly unlikely. Don’t get me wrong; American apparel manufacturing does exist. In fact, I am wearing an American-made pair of twill pants from Adriano Goldschmied right now. And Adriano Goldschmied is not alone in manufacturing in the US. American Apparel, J Brand, Save Khaki, Karen Kane, New Balance and many others all have domestic supply chains in place. But to assess the real potential of a return to domestic production, we have to be honest about the facts.
In the past two decades, apparel imports to the US have surged 160 percent from $35 billion to $91 billion and now comprise an estimated 95 to 97 percent of all apparel sold at retail. In 2013, apparel imports grew 4 percent, measured by dollar value, over 2012, faster than the overall apparel market. What’s more, companies have been consistently shifting production away from China, where labour costs continue to rise, to even cheaper countries like Vietnam and Bangladesh. In 2013, apparel imports from Vietnam, for example, grew by 14 percent (compared to 2.5 percent for China).
This doesn’t mean niche premium brands cannot create healthy, profitable businesses producing domestically and selling to socially-conscious, patriotic or otherwise discerning consumers. But, realistically, only a small fraction of American consumers are willing to pay premium prices for US-made apparel. The majority of consumers think of fast fashion, discount retailers, dollar stores and coupons when it comes to purchasing clothing. Country of origin is simply not top of mind.
I have been in many meetings at apparel retailers where the topic of discussion has been lowering the cost of their goods. The solution, more often than not, is exploring alternative sourcing from countries in Asia. In the context of cutting cost, no company of any size has ever asked me how to bring production back to the US.
My stance on American apparel manufacturing is very simple: it won’t work at scale because of simple economics. US cut-and-sew wages have increased by more than 13 percent in the past seven years (inflation adjusted) to an average of $14.79 an hour. Let’s assume an average workday is eight hours. That comes to $118.32 per day, a figure that stands in considerable contrast to wage rates in low-cost countries like Bangladesh and Vietnam.
In the past year, Bangladesh’s government has finally agreed upon a new salary structure for its workers, which took effect 1 December 2013, bringing the nation’s new minimum wage to 5,300 taka ($68), a 77 percent increase from the previous minimum wage of 3,000 taka ($39), yet still the lowest worldwide wage rate in the apparel industry. Meanwhile, workers in Vietnam saw a monthly minimum wage increase to between VND 1.9 million and VND 2.7 million ($90 to $128) depending on the region, a raise of 15 to 17 percent over the previous year. In India, depending on the region, monthly wages range from $130 to $150.
This means that, despite the increases, in one day an American worker will earn what a Bangladeshi worker earns in two months, or an Indian worker earns in roughly one month. And while working conditions in low-wage nations have been under scrutiny since the terrible Rana Plaza building collapse in Bangladesh last year — and things are improving — the reality is that no matter how much costs increase to accommodate better working conditions, labour costs in America will always be higher.
Of course, US employers have to follow building codes and pay social security taxes, workers’ compensation, health insurance and overtime. What’s more, underperforming workers often have to be documented by human resources departments and given multiple warnings before they can be replaced. And if a factory in America fails to follow the rules, there are serious legal consequences, not to mention the likelihood of negative national media coverage. By contrast, let’s just say, if a factory in Cambodia needs its workers to push out extra units to make a delivery and save the factory from forking out dollars to send their goods by air, the factory owner won’t need to do much to get these workers to stay and work those extra hours. For apparel companies weighing their sourcing options, all this makes doing business domestically cost prohibitive and complex.
I am certainly not praising the often subpar labour conditions that exist in the Third World, but this is the reality. And if retailers are currently responding to rising costs in China by taking their business to Bangladesh, how is it even conceivable that they will produce in the US?
But let’s put aside wages for the moment. Since its inception, clothing manufacturing has always attracted unskilled workers. From New York’s garment district to Japan, Korea, China, India and, now, Bangladesh, production has always migrated from one low-cost country to the next based who could offer the most competitive price.
Why would America want to “re-shore” an industry that is having a hard time paying its workers $100 a month in the Third World? Should we not be training and developing the future American workforce for higher skilled manufacturing where the better education and training many workers receive in the US could offer us a competitive advantage?
Over the past decade, US textile and apparel employment has plunged by nearly 50 percent to a record low of 363,000 jobs. According to the US Bureau of Labor Statistics, there are only 110,000 cut-and-sew apparel workers in the country, a number that has been consistently declining each month, so apparel factories that have remained here in the US are facing a labour shortage, which is more than a bit ironic as one of the major reasons many give for supporting domestic apparel manufacturing is job creation.
This article may turn heads. I may seem pessimistic or unpatriotic, but I am trying to be honest and realistic about the prospect of bringing apparel manufacturing back to the US. I look at the world not through a domestic lens, but a global one. And if America is indeed to see a surge in domestic apparel manufacturing, it will be because its engineers and scientists develop new machinery and new software that can automate, speed up and lower the costs of production, thereby enabling the country to compete with the likes of low-cost Bangladesh. There is opportunity here. But are we allocating our energies and resources to the right battle?
Edward Hertzman is the founder and publisher of Sourcing Journal, a trade journal covering the apparel and textiles supply chain.
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