Sunday, July 18, 2010

An Interesting Initiative in Textiles

There's an interesting article today on a company that has launched a living wage initiative with a new factory in the Dominican Republic. They seek to supply universities with college-logo apparel. For this specific market I think this is likely to be a very successful initiative and applaud them on it.

From a more general perspective however, I think factories such as this are likely to remain the exception without having much direct impact. They're paying workers three times the prevailing wage in the industry resulting in a 20% increase in costs. I don't know a thing about the apparel industry specifically but this seems like too much of a leap from industry norms to become widespread. At the same time, I tend to believe that too much focus on costs often impedes quality and gets diminishing returns due to an unhappy workforce. The real shifts will probably come when a larger industry player decides that a 5-10% increase in costs is an acceptable price for a happier workforce and ends abuses in their plants.

Though, while I'm speculating based on no data, I also wouldn't be surprised if a major barrier to ending abuses in these plants is a low quality of available management. Labor history shows that many reforms that aided workers when abuses were at their worst didn't really harm productivity. But when the problems are unpaid overtime and not allowing sick workers to go home my thoughts tend towards the problem being poor management that misses the role of quality and productivity in favor of a crude focus on quantity. Perhaps raising wages would be enough to shift thinking a bit but I think the problems may run far deeper than the college campus activists would like to admit with fair trade. Still, a good initiative but I'd like to see something a little more in depth about why it is so common for abuses like lack of sick leave persist even when these are likely uneconomical decisions.


  1. I think that's a smart insight. Management is much more complicated than how and what a person is paid. But the results Henry Ford got with his "efficiency wage" are impressive, too. He lowered costs by more or less tripling the prevailing wage. One problem with that, though- everybody can't pay above the prevailing wage.

  2. I read this as being a simple PR ploy. People in textile factories generally make a living wage anyway. Raising their wages is a way to sell more shirts to American college students who will pay more.

    I think these outsourced factories are very inefficient is many many ways. That's why when thr wages go up even a small bit, it becomes unprofitable to run the factory there and some even come back to the US.

    I think a better question is why do some companies in the US think it is more efficient to do these things, like not provide sick leave? My general understanding is that they see their work-force as completely expendable. I suppose this is caused by decades of underemployment of our working class. The high level of drug use among the working class is another reason. Employers don't want to give people time off when they call in sick when they really aren't, but are rather on drugs or drunk. (Seriously)

  3. Doug, it seems with the textile industry they always find it easy to move whenever the prevailing wage gets too high. If this factory gets better results the best I'm hoping for is for there to be improvement in specialized sectors. Abuses like not giving sick leave could probably end though, that's just not good management.

  4. SirW, I'd agree this is a PR plow for the brand and that there's some inefficiency problems with how the industry is run. Textiles seem to be a highly mobile industry though so I expect it to perpetuate since cost pressures seem so high.

    As for US companies, I really have no idea. Bad management I'd guess. You simply don't get good results for not giving sick leave. Even if it's abused a little bit now and then it's still better than making people work when they really are sick, it's not worth paying them for the crap productivity you'll get from them and everyone they'll infect. I'd guess it's a combination of bad management everywhere and a misplaced idea of work ethic that holds it as ideal that you just suck it up and suffer through, even if it means half the plant is vomiting next week cause you didn't stay home.

  5. Sick leave is a benefit that you pay employees. I've never had an employer care what I did on my sick leave, if I was sick or not. In fact my last employer gave very generous leave and wanted you to take it so that you would be a happier worker, not just so that you wouldn't make everyone else sick. The one I have now lets me work from home, so when I finish my work, I do whatever I want, like write on your blog. I think the problem here with these employers that have low-wage workers is that they want to control them. Now. I really wonder how that attitude came about, because really it's different that what I said before. It's some sort of trust issue. I know the drug thing is a problem, but that can't be the root of it. I believe they think if they treat the employees like dirt they will get better results some how. Even though they don't. They have enormous, costly turn-over. It makes no sense.

  6. SirW,

    I've generally had good experiences with employers. I've also usually worked for large companies which have strict procedures to prevent that kind of abuse and training materials on what you're entitled to. I assume they're afraid that low level management will abuse workers given the chance.

    I think there's probably a cultural explanation there with classist attitudes and beliefs that those on the lower end of the income scale are in some way defective. I see enough comments on blogs to that effect. I'm not aware of any academic studies looking at it, though I'm sure they exist, but anecdotally it seems that in the higher management strata they've learned good business practices and seek to avoid these abuses (except in health care, banking and law, which is a subject that can stand alone). The problem is with decentralized management practices where you get people that think being "tough" is a good thing and that have negative attitudes to their employees. Doesn't work, but it doesn't surprise me that it exists because I see the attitude pretty frequently.