The global garment industry's fleeting hub (outsourcers getting outsourced)

MANILA, Philippines — The collapse of US apparel manufacturing has been good to Fely Curameng, a Filipina peasant-turned-factory boss.

Through windows in her air-conditioned office, she looks out upon of an army of bent backs. A hive of workers on the factory floor hunch over automatic sewing machines. The staccato of needles firing thread into fabric reverberates off cement walls. Each day, incoming bales of cloth are cut and stitched into signature American brands: Dickies, Wrangler, Lee and more.

Curameng, now a coifed 57-year old, was once a poor seamstress. She owes her ascent from the factory floor to the office upstairs to qualities Americans hold dear: hustle, ingenuity and the guts to take risks. But she also owes it to the exodus of blue-collar garment factory jobs from America to foreign shores.

When garment factories fled the US in the mid-1990s, Curameng built them in the Philippines. “Those were my golden years,” she said.

Back then, American CEOs willing to relocate garment work were courted by Filipino politicians, who slashed fees and transformed old US military bases into modernized manufacturing zones. Curameng seized the moment and opened a string of factories churning out American brands on the cheap.

“I had four factories running, 1300 workers, all of them sewing clothes for Americans,” she said. She was so enamored with her success that she named her daughter “Epza,” a nod to the state-run “Export Processing Zone Authority” that enabled her mini-empire. “The Americans were paying so much. $2.50 per shirt. It was wonderful.”

But today, bosses like Curameng, who once thrived on supplanting American labor, have become the new victims of US outsourcing. She and others have learned that US outsourcers are fickle companions. Their wandering eyes have drifted away from the Philippines and towards even poorer Asian nations with super-low minimum wages.

In the late 1980s and 1990s, American garment stitchers making low wages ($6-$8 per hour) were undermined by Filipinos paid the same amount for an entire day’s work. These days, the Philippine garment trade is being devoured by Cambodia (minimum wage: $2 per day), Vietnam ($2-$3 per day) and Bangladesh, where some apparel factories pay a little more than $1 for a day’s work.

This race to the bottom has brought scenes from America’s manufacturing decline — shuttering factories, laying off sobbing employees — into Curameng’s life. It has whittled her workforce to just 500-odd people. “I’ve lost 75 million pesos ($1.7 million) in the last 10 years. I’ve lost almost everything I created to the banks. I’ve been feeling like a super dummy,” said Curameng, massaging the stress from her temples. “The American importers now ask us to make shirts for 85 cents now. How can I compete?”

Before the downfall of US garment factories, American stitchers making low wages could expect to drive a car to work, return to an air-conditioned home and, with enough financial discipline, send their children to a state university.

The Filipino workers who replaced them commute on creaky public jeeps, packed so tightly that passengers’ limbs dangle out the back hatch. They come home to hot, concrete hovels. They share squat toilets with neighbors. They hope to send their children to trade school, perhaps to learn welding or nursing.

“I’m not poor. I’m not rich, either. I’m right in the middle,” said Evangeline Cabaliw, a 41-year-old garments trade veteran living in Manila’s gritty outskirts.

Ten years of stitching for Timberland, Levi’s, Victoria’s Secret and others have provided her with a few cherished comforts. Cabaliw’s toes twinkle, from weekly pedicures. So does the knock-off Chanel necklace that hangs around her neck. Neighborhood girls do her laundry for $5 a week. She can now afford it: Curameng, her boss, recently promoted her from stitcher to supervisor. She now works six-to-seven days a week for about $380 per month.

Cabaliw, born to a steel worker and a stay-at-home seamstress, is the most successful of her siblings. Her accommodations are basic: a neatly-kept, two-room dwelling where baby geckos crawl the ceiling. She bathes by ladling herself with water in an outdoor cement stall, a canopy of spider webs overhead. Her rent is $60 a month. Power and water cost another $12. She is saving up to replace a refrigerator destroyed by August typhoons that flooded her home with chest-deep muck.

“Growing up,” she said, “I just wanted to marry a rich man, live in a big house and do nothing.” But when that adolescent fantasy faded, she said, sewing clothes for Americans was the opportunity that gave her security and independence. “I’ve never worried that I took some American’s job,” she said, laughing. “I wasn’t the one who took it anyway. It was their factory owners.”

The widely held belief in America that overseas factories extract dehumanizing toil from workers is amusing to stitchers like Romeo Pallorina, a 38-year-old father of three. “It’s strange to me that anyone would consider this to be a bad job,” said Romeo, who works alongside Cabaliw making clothes for Wrangler, Lee, the girly US brand Dollhouse and others. “We think of Americans as educated people who watch CNN. We assume they know better.”

The job itself is maddeningly repetitive. In assembly-line fashion, each employee at the factory performs the same task — sewing buttonholes, stitching collars — on 400-plus shirts each day.

But Pallorina, a 38-year-old high school dropout, is mindful of the men and women who loiter outside the factory gates with applications. “They would like to have my job,” he said, his tone turning serious. “But it is essential to my family and I will do anything to keep it.”

Locating countries fit to make cheap, US-branded clothing is a Goldilocks game. Well-off nations like America will no longer do: the costs of labor and benefits are simply too high. The poorest of the poor nations won’t do either. Their power grids short out and their governments are prone to dysfunction.

But if a country can offer dirt-cheap minimum wages and tax incentives, while keeping the lights on and the ports running, it can compete to stitch US brands. In this unprecedented era of Asian development, the number of eligible countries keeps growing.

America’s former battlefield foe, Vietnam, is now its second-largest apparel supplier to the tune of $7.2 billion per year. Indonesia, having stabilized after decades of strongman rule, is the third largest. US garment brands such as H&M and J.C. Penney have helped turn impoverished Bangladesh into America’s fifth-largest apparel supplier. Its minimum wage is among Asia’s lowest: a mere $10.75 per week.

At those prices, even China, America’s number one apparel provider, is sweating the competition. Why pay a Chinese laborer his weekly minimum wage, roughly $50-60, when a Bangladeshi will work the same shifts for a fraction of the price?

“The problem with profit is that it has no nationality,” said Ernesto Herrera, a long-time Philippine lawmaker and secretary general of the Trade Union Congress of the Philippines. “From the businessman’s standpoint, if he’s running a labor-intensive industry, he’ll always go for a country that provides the lower wage.”

Though the United States remains the top importer of clothes stitched by Filipinos, orders have dwindled and jobs have disappeared. Its current $1.2 billion in clothing exports to the US is now tripled by Cambodia, a tiny, deeply impoverished competitor. In the last five years alone, the Philippine garment industry’s workforce has shed 400,000 jobs and shriveled to just 180,000 workers.

The same Philippine government that once successfully lured US garment conglomerates is now tapping into America’s outsourcing anxiety. In a last-ditch effort to revive their apparel trade, Filipino politicians are proposing a new deal: send us shipments of American fabric, we’ll stitch it into clothing for you and we’ll both agree to waive duties and fees. The intent of this still-pending “Save Our Industries Act” is to revive the Philippine garment industry and America’s beleaguered textile trade in one go.

Among the bill’s supporters is boxing dynamo and Philippine congressman Manny Pacquiao, who tells factory workers in a televised public-service announcement that “the Philippine garments industry needs champions like you to revive this dying industry.”

“It’s a shame about these layoffs,” Herrera said. “These Filipino workers are skilled. They have dexterity in their fingers. The regular Filipino can speak English. And they’re conscious of sanitation. When they come home, they take a bath and brush their teeth. This may not be true in some other Asian countries.”

But none of these qualities are apt to sway factory bosses who know the cost of one Filipino worker pays for four workers in Vietnam. Herrera sees only one way out: producing high-quality clothing and selling more of it to rich and middle-class Filipinos with American tastes.

Wrangler’s US advertising imagery evokes blue-collar grit: men in yellow hard hats, blondes leaning against antique gas pumps. Endorsements are provided by country music legend George Strait — who promotes his own “Cowboy Cut Collection” — and NASCAR’s Dale Earnhardt, Jr.

Wrangler’s ad campaigns in Asia, however, evoke indie cool. The waifish, fair-haired models in Wrangler’s regional “Find Your Edge” campaign are shown traipsing through fields while draped in American flags.

Wranglers, affordable and folksy in the US, are a pricey status symbol in the Philippines. “It’s very fashionable. You want people to see that brand name,” Cabaliw said. The cost of a pair of Wranglers in Manila, roughly $40, is equal to half her weekly pay. “They’re too expensive for me,” she said. “If my son walked in with a Wrangler shirt on, I’d say, ‘Hey, who bought that for you?’”

Curameng built her operation up by sewing American brands for Americans. But today, she must resort to sewing American brands, such as Wrangler, for rich Filipino shoppers.

“We mostly sell American clothes on the local market now. Exports are no longer profitable,” Curameng said. She last shipped orders to the US in 2008, the year America’s economic plunge nearly bankrupted her entire operation. Like US workers before her, who resent the American outsourcers who cash in on outsourcing jobs, Curameng despises Filipinos who now fly abroad to train droves of newly hired Cambodian or Vietnamese sewing machine operators.

“They’re stealing jobs from Filipinos. They’re robbing our industry,” she said. “It’s almost treasonous.”

Unlike her mother, who escaped farm life by sewing US military uniforms in the 1970s, Epza was born into relative affluence. Slight, pretty and fluent in English, she is the living embodiment of her family’s success.

Now 23, she attended university thanks to profits saved by her family during the roaring era of lucrative US contracts. So did her little brother, Bepz, his name inspired by the government-run “Bataan Export Processing Zone.” (Curameng once ran two factories in her native Bataan province, best known for a World War II-era death march during Japanese occupation).

“I’m not worried about the future,” said Epza, who holds down a management job at the family factory as well as a product development gig with Wrangler’s Philippines division. “Western brands will have a hold here forever.”

“Maybe my Mom is too idealistic,” said Epza, clad in a hoodie, T-shirt and jeans. “I mean, of course American companies are going other places. All these fashionable clothes, like you find at H&M, the owners are just looking for the lowest possible labor costs. That’s just how it works.”

Manufacturing garments at tiny margins for big US retailers is hard, painstaking work.

Not one in ten-thousand Americans would be willing to do the work, even at wages better than minimum-wage salary. And welfare, SNAP, free phones, etc.... assure that.

Having the world’s reserve currency has allowed America to avoid making choices, and has allowed Americans from making even more difficult adjustments. This trend will remain in place until the FED and the US Gov’t destroy the currency.

Captitalism is not a race to the bottom. Globalism, on the other hand, is.

Globalism is why we have disintegrating clothing. My wife claims that most of her blouses last at most 2 washes. These aren't inexpensive junk. She buys mid-market labels like Liz and Alfred Dunner. There also are no size standards anymore, at least for women. Every single top in her closet is a different size.

On the other hand, I buy a lot of stuff at surplus stores. Most of my dress shirts were made for the USN thirty years ago. They still come out of the wash crisp, sharp and blinding white. If they ever wear out, I'll get some shirts made. Pants are trickier, but if you look hard you can still find ones made in the USA.

As long as there is cheap labor somewhere the garment industry has little incentive to be innovative in the manufacture of clothing. Someone sitting at a sewing machine stitching pieces of cloth today is not much different than it was a hundred years past.

Compare the garment industry with labor intensive farm harvesting. More and more machines are being developed to reduce the labor and thus costs of harvesting of grapes, nuts, lettuce, tomatoes etc. just as corn and wheat harvests became mechanized.

But in garment production the way to reduce costs is simply reduce wages by moving to lower wage countries, a process that has it’s obvious limits, instead of changing how its product is made.

So I would say one effect of cheap labor is that innovation in the garment industry has been stifled and hurt U.S workers at the same time.

Next stop, Mumbai!

Final stop: back in the USA, when robotic systems finally can produce a shirt for less money than it costs to feed a Third World peasant.

At which point the Third World peasants starve to death.

It's actually poor quality control on the part of the US company. As cotton prices and Chinese labor costs have gone up over the last couple of years, we've been seeing the American companies switching to "cheaper" factories in China (and there are so many, there is always a lower cost option) to try to hold costs down. The result is a big mess - garments that look like their patterns were made (and probably were) by first year students, terrible problems with fit, poor-quality fabrics on the finished product that don't match what we saw at the trade shows, and uneven sewing. The US companies, of course, try to deny that anything is wrong - but in the fashion business, one bad season and you are DONE. Nobody gives you a second chance.

The proper solution is for the US labels to stick with the better factories and pass the higher costs along to the retailer and consumer (The Obama Premium?), but they won't do that. The market behavior of the majority of Americans has proven convincingly that when it comes to apparel, price is the only thing that matters.

"America’s former battlefield foe, Vietnam, is now its second-largest apparel supplier to the tune of $7.2 billion per year."

I check the labels and don't buy anything made in VN or a Mooze Lame country. It takes a while, but you can find plenty of clothes made in India, the Philippines, and so on.

The things from India always seem better made and fit the way you expect them to based on the stated size. That may vary by brand but in my experience if you get shirt that fits and one that doesn't both from the same company, they'll be made in different places.

The market behavior of the majority of Americans proves they do not have unlimited funds to spend and have to make choices about how their money is spent. They do what any rational person does, they try to obtain what will serve their needs at the lowest possible cost.

My family has to decide how much to spend on food, how much to spend on entertainment, how much to spend on new clothing. If more is spent on one less is spent on another.
If I spent $100-$150 on a pair of U.S. made Levis I'll have to decide what the family will give up in return.

Families with children see clothes outgrown before the clothes wear out so buying something cheaper only makes sense.
The real answer is not passing along costs to a retailer who can find another supplier or to a consumer who can find another retailer but reducing costs by reducing labor imparts to the final product since the price of raw materials isn't likely to drop dramatically.
Not cheaper labor but less labor.

Not cheaper labor but less labor.

Well, clothes have to be designed and the patterns have to be made by people who know what they are doing. That part of the labor equation is practically irreducible - but US importers are trying to get away with reducing it, anyway. Thus, the major quality problems we see these days at all of the chain stores.

The labor costs for the actual sewing are almost irrelevant - but if you mess up the design, you mess up your reputation.

Alternatively, they can find one good design and produce it exactly the same way year after year with no changes. Men won't care - women will freak out. :)

The Levi's you mention are an example of this. You can probably find a pair of excellent Chinese-made jeans every bit as good as the Levi's for a US retail price of around $50. Or you can get a poor-to-mediocre pair of Chinese-made jeans for $25. Or a horrible pair of ill-fitting Chinese-made jeans for $12. People who buy the $50 jeans might be doing their family budget a big favor - people who buy the $12 jeans most definitely are not - for they will have to be replaced almost immediately. Yet we see the American consumer continually gravitating toward the $12 jeans at stores like H&M and Target - because our disposable culture has never trained them to appreciate the value of quality.

Wranglers are not US made, so I guess they are in the $50 category.

"Made in the USA" really doesn't guarantee "high quality" any more. As often as not it really means: "Made in a sweatshop in L.A. by illegal aliens." Consumers need to think about exactly what behavior is being rewarded when insisting on "Made in the USA" or remaining loyal to a brand with slipping quality.

It takes more than sewing to produce a garment, a low wage country has lower wages all down the line, managers, maintenance, machine makers, etc. The whole process must be streamlined, including design and pattern making, before it can become a high wage industry providing a reasonably priced product.

If I buy a decent quality dress shirt it'll cost me $50. The cloth in it doesn't cost that much so everything over the raw materials cost is labor and markup. The one area that seems most available to reduction is labor, labor which is being done as it was a hundred years ago.
The process of making clothes is outdated and only mechanization can make it profitable in the U.S.
Yes, there are high end specialty makers but the average person cannot afford them. And most of us don't wear the latest expensive designs anyway but low end imitations of them.

Going to a low wage country may lower costs for a while but as countries develop they don't want to be low wage anymore and if the U.S. worker doesn't have a job even cheap goods may be out of reach.

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