Posted on 05/04/2013 4:32:40 PM PDT by rickmichaels
Before last week, Loblaw’s Joe Fresh was known mostly as a hot spot for cheap, stylish clothing. Few customers likely cared how the clothes were made. That all changed with the deadly collapse of an eight-storey factory complex used by the retailer in Bangladesh. Nearly 400 people are dead, and the owners of the complex—and the factories within it—that was reportedly built without proper permits, have been arrested on charges of negligence. Bangladesh’s government has vowed to inspect every manufacturer in the country.
The worst industrial accident in Bangladesh’s history offers an uncomfortable glimpse into the fast-growing garment industry there, and the treatment of its workers. According to a 2011 report by the consulting firm O’Rourke Group Partners, a generic $14 polo shirt sold in Canada and made in Bangladesh actually costs a retailer only $5.67. To get prices that low, workers see just 12 cents a shirt, or two per cent of the wholesale cost. That’s one of the lowest rates in the world—about half of what a worker in a Chinese factory might make—and a major reason for the explosion of Bangladesh’s garment industry, worth $19 billion last year, up from $380 million in 1985. The country’s 5,400 factories employ four million people, mostly women, who cut and stitch shirts and pants that make up 80 per cent of the country’s total exports.
For that $14 shirt, the factory owners can expect to earn 58 cents, almost five times a worker’s wage. Agents who help retailers find factories to make their wares also get a cut, and it costs about $1 per shirt to cover shipping and duties. Fabric and trimmings make up the largest costs—65 per cent of the wholesale price. Toronto-based labor rights activist Kevin Thomas says wages ultimately get squeezed most because businesses can easily control them, unlike the price of cotton or shipping.
A cost breakdown only partly explains the maze of relationships in the garment-supply chain. The retailer H&M, which had no connection to the collapsed building, works with 166 different factories in Bangladesh. It has published its supply chain, listing every factory around the world that makes H&M clothing in an effort to prove what most major stores claim: that it knows where its clothes come from. But according to observers, many don’t. Though most brands have a regular stable of factories, they may contract hundreds more for short stints. “It would be a very high risk to have a limited number of suppliers,” says Adriana Villaseñor, a senior adviser with the global retail consulting firm, J.C. Williams Group. Smaller factories often take on more than they can produce, Thomas says, and then subcontract later on—without the retailer’s knowledge. This week, Wal-Mart said it had “no authorized production in [the collapsed] facility,” but added that if unauthorized production were discovered, it would take “appropriate action.”
Amid mounting protests, both in Bangladesh and abroad, and calls for boycotts, retailers have pledged to improve working conditions. Primark, a U.K. chain that made goods in the ruined factory, and Loblaw Companies Ltd., have said they will compensate victims’ families. But Bangladesh is just one country in a vast supply chain. H&M, for instance, uses hundreds of other factories, including 262 in China. In Vietnam, workers make only slightly more than in Bangladesh: 14 cents per shirt. Real reform will mean paying a lot more than $14 for a shirt.
Didn’t say it was solely Walmart, just that it began there.
Worth repeating from tjic.com:
Say that we had first contact with some super (economically) advanced aliens.
…and pretty soon they set up factories here.
…and I was offered a job in one of these factories, doing software engineering.
The pay is $400k/year.
The work week is 20 hours long.
The work environment is far better than I’m used to – great internal decoration, well tended plants, a zen-like water garden near my desk, massages every other day.
…and then left-wing alien “sentient being rights activists” started protesting, because I was being forced to work for less than a quarter of the prevailing wage in Alpha Centauri, and my work hours were twice as long as the legal norms in Alpha Centauri, and I didn’t have every mandatory benefits like “other other year off”, and “free AI musical composition mentoring”.
…and then left-wing alien “sentient being rights activists” wanted to make it illegal for my employer and I to contract with each other at mutually beneficial terms.
…then I would be rip shit that some elitist who had never visited me, or knew of my actual alternatives on the ground presumed to decide that I shouldn’t have this opportunity.
Which brings me to my core point: Chinese factory conditions may not be the exact cup of tea for a San Francisco graphic designer or a Connecticut non-profit ecologist grant writer … but they’re, by definition, better than all the other alternatives available to the Chinese workers (or the factories would find it impossible to staff up).
Butt out, clueless activists.
Somehow that doesn't make sense. The Yuan/$ exchange rate's market driven and varies. Are you talking about the Hong Kong $ which is pegged?
Obviously, but I was in a hurry and it got you to do a nice job of penning the summary. I just wish the posters here would set aside their obsession with labor costs for an understanding of the costs of regulation in that 'overhead' component here in the US. IMO, it's a bigger reason for driving production offshore (deliberately and with the same beneficiaries) than is the cost of labor.
As to the yuan, that was pegged as a way for the Chinese elites to accumulate cash at the expense of savers. With a labor pool the size of theirs, they could get away with it, for at least a decade or two. The consequence was the need to both appease labor and to find a way to use the cash to consolidate power and transform historic urban squalor into a secure police state. For a long time they parked excess young people in the military, but that's just as much a long term threat as it is a way to maintain power. Hence Agenda21 instacities, mass transportation, etc. Now all they have to do is to fill them. They will, and at gunpoint if necessary.
It's happening here too obviously, but the trend will be to squeeze the burbs back into 'safe zones' within urban hell. At that point, whether China or the US, the 'gun to the head' will be the threat to simply cut the electrical power.
We all know where your bread is buttered, you’ve made no secret of it, so I’d think playing dumb over the yuan peg would be beneath you.
Running a quick search turns up a sufficient number of credible sources to allay any confusion:
http://www.bing.com/search?q=yuan+pegged+to+dollar&form=APIPA1
To get prices that low, workers see just 12 cents a shirt, or two per cent of the wholesale cost. That’s one of the lowest rates in the world—about half of what a worker in a Chinese factory might make
I don't understand why there's a fixation on Chinese wages. The current reality is that Chinese wages are now higher than Mexico's, which are in turn middle-of-the-road for Latin America:
Mexico's hourly wages are about a fifth lower than China's, a huge turnaround from just 10 years ago when they were nearly three times higher, according to new research by Bank of America Merrill Lynch.Stagnant salaries in Mexico, fueled by strong population growth, will give Latin America's second-biggest economy an edge over China in the U.S. market, Bank of America Merrill Lynch economist Carlos Capistran said on Thursday.
Average hourly wages are now 19.6 percent lower in Mexico than China whereas in 2003 they were 188 percent more costly, according to the Bank of America study.
Walmart got big because it revolutionized retail trade and introduced data management on a very large scale.
Walmart knows to extremes what customers want and then provides it
There is a near Biblical acceptance here that Walmart sell China junk and that is not true. Walmart buys world wide, including the USA. It canbe argued that most of what Walmart sells is of USA origin.
The sad thing is that you could add 20 cents to the cost of that shirt and most buyers wouldn’t blink an eye, but the standard of living for the sweatshop worker would rise greatly if it went to increased labor costs.
I don't think that's correct. Every East Asian country that has adopted the Japanese export model, including China, has pegged its currency to the dollar, with dirty floats being the rule. It's mooted as a way of keeping costs for domestic and foreign investors predictable, and preventing a rapid escalation in local costs. Has it been beneficial for their economies? I can't really tell, because every one of them has done more or less the same thing. I suspect this is because everyone of them knows that what came out of the Japanese economic sausage machine tastes good, but nobody knows which sausage ingredient can be left out and still produce equally good results.
We all know where your bread is buttered...
--as if I personally affected the Yuan's exchange rates. The problem with the left-wingers that have infested this forum is they know they can't handle ideas to they quick change the subject to personal attacks.
Rates paid on deposits in China are effectively negative. It is why some invest their money in America.
Has it been beneficial for their economies?
The game has diluted because there isn't the buying power left in America to fund it. We have exported our wealth, not just in cash, but mostly in manufacturing technology that is now collecting unemployment, social security, and food stamps.
The phenomenon largely began with China and regardless of presumed Chinese wage growth, which is actually more attributable to an uptick in exchange rate of the Renminbi in a nod to those complainig about the peg, China remains symbolic of the severe economic pressure to which the American lower and middle classes have been subjected for two decades.
Some are more concerned with Americans than Chinese, just as some are more concerned with Chinese than Americans, although Americans who are concerned over the economic well-being of Americans are derided, with individuals attempting to speak to their own self interest termed nativist xenophobes and worse, while Chinese doing the same are not.
This does not change the basic facts, however. Impoverishing a market while wrangling over access to that market and being dependent upon it is so stupid as to be irrational, for all involved.
Still playing dumb, I see. You deny that there has ever been a formal yuan peg to the dollar, and you deny that there is still a de facto peg despite claims that the currency has been floated? You know better.
Odd that you’d find someone pointing out that you have a personal interest in offshoring as trade policy to be a personal attack.
Pinging “All” doesn’t ping anyone but the screen name “All” by the way. Maybe “All” will chime in someday but hasn’t thus far.
I agree. Thanks.
I don't see how the first can be the case. The yuan is pegged to the dollar. This means that a yuan buys more gasoline today at 6.5 yuan to the dollar than it did at 8.25 yuan to the dollar just a few years ago.
Why some Chinese investors invest in the US probably has to do with getting a bolthole in case of problems back home. The US is one of the few countries that does not automatically extradite anyone on the Chinese government's wanted list, does not aggressively go after visa overstayers and has a large enough Chinese community that homesickness is somewhat alleviated for involuntary exiles. It's also a place where the natives actually attempt to help foreigners who face the danger of being killed back home, which is not a universal phenomenon on the planet.
Real estate prices are skyrocketing in response to rapidly rising Chinese wages, and businesses are expanding pell mell to deal with the rising consumption that has resulted from these wage increases, which have to do with productivity increases that come from using modern equipment to do things rather than the labor-intensive methods of old. There is no shortage of investment opportunities in China.
Maybe you'll have more luck in expressing this to our fellow FReeper expat-panama, who persists in claiming that it's not. I'm just a southern textile yahoo and a nativist to boot, what would I know.
I'd be interested in hearing your ideas.
Without a minimum wage, unemployment, social security and food stamps, much of that labor would still be employed. The problem here is that we've imposed layer upon layer of regulation and welfare state bennies that have removed most incentives for people on the lower end of the IQ scale to work. I think in the first few decades after welfare benefits were first legislated, most of that cohort continued to work simply out of this sense that it wasn't moral to impose on your fellow countrymen. The unfortunate reality is that economic laws eventually ride roughshod over both morality and cultural norms. People eventually figure out that a family of 4 with the parents stuck in low-end jobs can generate more income from government welfare programs than by working minimum wage jobs.
I posted this earlier but you asked....
I visited a closed plant in North Carolina to assess the equipment being exported to Bangladesh. It was aa fully automated process for converting raw cotton to T shirt Yarn. Raw cotton came in one door and yarn ewnt out another. It was of Japanese manufacture and about 9 years old. It was fully automatic and required few employees.
What it means in Bangladesh is that similar labor intensive plants must close and there will be a net loo of jobs along with increased production.
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