Skip to comments.What does that $14 shirt really cost?
Posted on 05/04/2013 4:32:40 PM PDT by rickmichaels
Before last week, Loblaws 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 complexand the factories within itthat was reportedly built without proper permits, have been arrested on charges of negligence. Bangladeshs government has vowed to inspect every manufacturer in the country.
The worst industrial accident in Bangladeshs 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 ORourke 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. Thats one of the lowest rates in the worldabout half of what a worker in a Chinese factory might makeand a major reason for the explosion of Bangladeshs garment industry, worth $19 billion last year, up from $380 million in 1985. The countrys 5,400 factories employ four million people, mostly women, who cut and stitch shirts and pants that make up 80 per cent of the countrys total exports.
For that $14 shirt, the factory owners can expect to earn 58 cents, almost five times a workers 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 costs65 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 dont. 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 onwithout the retailers 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.
TSA paid about $75/shirt of taxpayer dollars for Mexican made uniforms.
Worst case scenario we open the factory in New Jersey and pay union workers $40.00 per hour, how much would that move increase the labor cost and by how much?
Let's say for argument that is takes 5 minutes to make one shirt(probably less time than that but we will go with 5 minutes of labor). the labor per shirt in Bangladesh is basically free. The labor per shirt in out New Jersey union factory per shirt is 1/12 hour times $40.00 = $3.33 per shirt.
So now the shirt would cost about 3 dollars more. Approx $17.00. OK that sounds like a lot but if you reduce the duties and shipping costs that would reduce the price a dollar to $16.00 per shirt. To me the 15% increase is offset by the decrease in social costs of the lower IQ chronically unemployed....
Takes alot of fabric to make XXXXXL shirts.
You can buy a 10’x10’ tent on Amazon.com for only $100.
I imagine that if clothing had to be made locally, we’d soon have machines that were doing the entire process. Right now, there’s no major incentive to invest in the research to make automatic sewing machines because labor in certain third world countries is so cheap that the machines would not be able to compete. But if the third world gets its act together, and their economies expand and their wages increase, machines will become more viable.
Another "benefit" was to mask inflation so that the Fed could keep printing money without apparent consequence, loaning it to the big guys who built factories overseas with it.
Bingo, and it will happen. I have a few ideas of what to do about it, but few would like them without making serious adjustments in their thinking.
--and to everyone else it's better to buy the shirt for $2 less, provide a living wage for hundreds of workers, and still have funds left over to feed the "lower IQ chronically unemployed" in Jersey.
You really hate the USA, hater GTH
I know someone to whom this happened. But this isn't a Walmart thing - it's a universal thing. With the destruction of local and regional chains, national price competition finally became a universal phenomenon. I am personally acquainted with someone who once operated a mom-and-pop grocery. There was no way she could compete with any large scale player. Big players have higher turnover and can dictate prices to the vendor. Mom-and-pop stores have inventory that sits for a while and definitely cannot dictate prices to their suppliers.
I also personally know someone who was a domestically-based Walmart supplier, and went out of business when he couldn't meet the price they demanded, and did not want to take the trouble to move his business abroad. It's the way of the world, and not a Walmart-specific phenomenon. Walmart is just bigger, so it touches more people.
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 $400k/year.
The work week is 20 hours long.
The work environment is far better than Im used to great internal decoration, well tended plants, a zen-like water garden near my desk, massages every other day.
and then left-wing alien sentient being rights activists started protesting, because I was being forced to work for less than a quarter of the prevailing wage in Alpha Centauri, and my work hours were twice as long as the legal norms in Alpha Centauri, and I didnt have every mandatory benefits like other other year off, and free AI musical composition mentoring.
and then left-wing alien sentient being rights activists wanted to make it illegal for my employer and I to contract with each other at mutually beneficial terms.
then I would be rip shit that some elitist who had never visited me, or knew of my actual alternatives on the ground presumed to decide that I shouldnt have this opportunity.
Which brings me to my core point: Chinese factory conditions may not be the exact cup of tea for a San Francisco graphic designer or a Connecticut non-profit ecologist grant writer but theyre, by definition, better than all the other alternatives available to the Chinese workers (or the factories would find it impossible to staff up).
Butt out, clueless activists.
Somehow that doesn't make sense. The Yuan/$ 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:
To get prices that low, workers see just 12 cents a shirt, or two per cent of the wholesale cost. Thats one of the lowest rates in the worldabout 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.
Ironically, it's automation that's driving this, not labor costs. When a business of any kind becomes dominated by automation, then access to cheap/reliable power becomes far more important than access to cheap labor. In North America, a lot of this "near-shoring" has been driven by the plummeting price of natural gas in recent years.
Interestingly, the Chinese government saw the folly of their ways when being linked to the U.S. dollar became a BAD thing as the dollar declined against other world currencies. When the global price of oil (priced in U.S. dollars) escalated dramatically after 2005, the Chinese found themselves paying exorbitant prices for oil simply because the dollar lost a lot of its value.
Our operations involve animal management, botany, geology, microbiology, forestry, hydrology, construction, engineering... It is a type of work for which robots are spectacularly unsuited: too dirty, difficult terrain, distances from energy stocks too large... I don't care how much GIS information they have, it will never be enough and cannot be processed by any algorithm with certainty (although there is a huge need for better locational information aps). The critical needs for proximity and site familiarity defeat the very idea of central command and control. It is a new industry, with a huge demand for tool and process development including sensor and information processing, automated contract management, manufactured equipment ranging from weed bags to autonomous walking houses, portable food production, and composting units, etc.
Soil is everything to the continuity of civilization. It is time to rebuild a planet full of life. And what do you know but I own the first patented business method for free-market environmental management! (like I'll ever see a dime from it, but at least they can't do it now).
Anyway, that's the gist of it, with the side benefit that a large, distributed, and independent population is immune to tyranny and a bulwark of civil defense for the settled population. All of that's Biblical btw, a new book that is still in rewrite.
The way I see it, the yuan-dollar link became much more tenuous once the governments of China and Australia announced a few weeks ago that they would conduct their trade directly rather than use the U.S. dollar as a medium of exchange. This basically means that for those transactions between China and Australia, there is no bearing on the value of the U.S. dollar anymore.
Look this is the next big battle.
China is now the world’s predominant exporter. America is number two.
China is growing at 7%.
We are doing nothing.
We must stop this, and find a way to turn this around. Or we are finished.
Bring back AMERICAN jobs. Now.
Don't use facts about WalMart. Some guy will say everything he saw in the store was made in China, like he looked at all 140,000 (more?) SKUs.
He has a personal interest? Please explain further.
I still buy Egyptian cotton sheets and pillow cases in high thread count. Why? Because we do not need that many sets of sheets and pillow cases plus we like them. I would pay more for made in USA “if the quality was like up to 1960-70 or so. Unfortunately, I have had my fill of the American workers work ethics and total lack of pride in their work with the exception of a plumber or an HVAC type or so. Anyone who owns a house knows how damn lazy most of these white boys are today. I am ashamed of them as I worked construction every summer when in high school. These 20-30 years olds will not leave the damn bar to paint, mow a lawn, or do anything to make money. They’d rather steal and/or draw Gov bennies.
And most likely machines would do the work. Yes, they would need some workers.
Obamacare is the end to any hope of more jobs.
You paint with a very broad brush, take a dim view of your countrymen and even introduce race into it.
There are far more Americans who work their @sses off and take pride in their work than there are dysfunctional substance abusers willing to work temporarily in construction for the artificially depressed wages paid to modern-day Coolies to build shoddy houses formerly sold at inflated prices, then go back on unemployment.
Shoddy construction is not limited to lazy white boys, I can tell you that much with certainty. Shoddy construction is, however, accepted by lazy and even corrupt contractors who are mostly white boys, because it’s more profitable to use idiots and green foreigners to slap it up than it is to use skilled labor.
Bring back US jobs now.
We have been exporting our very means of national support now for 2 (or 3 even) decades.
We have now made China a bigger manufacturer, than America. China, with over a billion population, and a communist government, now has an unemployment rate which is what ours USED to be.
China is now growing at 7%.
China is taking over. While we complain.
QUIT COMPLAINING. We need jobs.
I don't think there's any logical connection between our trade policies and rapid Chinese growth. Half the countries in the world have lower salaries than China. Why aren't they all growing at 7%? India's and Egypt's per capita GDP have been growing in the low single digits for decades, and they've had the same access to US markets for the past 30 years.
Ultimately, the Chinese economy is growing because the regime has abandoned the command economy in favor of private producers using the profit motive as the primary criterion for deciding what to produce and how much of it to produce. They are privatizing formerly wholly-state owned companies just about as quickly as they can. Government regulation of private business is almost wholly non-existent, sometimes to the detriment of an unlucky few until some major outrage hits the headlines.
We can't prevent China, or any country that wants to, from modernizing because they can buy the expertise by hiring current, laid off or retired employees from every corner of the earth. Because Japan is close by, they are putting up ads in Japan and hiring plenty of retired contractors and employees from the keiretsus who are either bored or looking for extra income. Sophisticated American or European machine tools are available for purchase complete with training personnel to familiarize the buyer with the full capabilities of the equipment.
Show me any white boy 20-35 doing any real roofing. Yes,I see fellow caucasian’s types working their asses off in convenience stores, and; in fact, some have three jobs.
You are talking about the exception-not the norm. Join a union. I would not hire you based on attitude.
Thanks for your detailed response.
I think it is time to be tougher with China.
We need an equal system. Right now we have one-way everything.
One-way American jobs sent to China. One-way Chinese exports flooding American stores.
That won’t work. We are running out of options.
Just my .02.
(The GOP is just as involved in this as the Democrats BTW)
We need someone who will look out for America.
Exactly. China has taken our capitalism market without all the left wing Regs and taxes plus Obamacare. Those who think this country is going to bring back jobs are delusional. Obamacare is going to cost many more jobs or hours lost. Many business owners will cut work to 28 hours and pay the $2000 fine.
Sort of. The Chinese gov't has tried to keep a more or less stable exchange rate with mixed results:
--but if we really want call that 'pegged' then we need to decide which peg.
In contrast here's a list of 17 countries whose currencies have been pretty close to a dollar or a multiple for much longer time periods, and here's ten more countries that just use dollars period. No matter what you might hear on this thread from the hyperactive set, I had nothing to do with it...
Do you write comedy for a living. LOL.
Let me guess: you’re an itinerant roofer picking up “day labor” out of the Home Depot parking lot and paying them cash under the table?
Good luck to any company that has you in an actual hiring capacity, they’re going to need it.