why america stopped making its own clothes the economics of the global garment industry

WHY AMERICA STOPPED MAKING ITS OWN CLOTHES

THE ECONOMICS OF THE

GLOBAL GARMENT INDUSTRY

IN 1960…..

• An average American household spent over 10 percent of its income on clothing and shoes – equivalent to roughly $4,000 today

• The average person bought fewer than 25 garments each year

• About 95 percent of those clothes were made in the United States

TODAY…

• The average American household spends less than 3.5 percent of its budget on clothing and shoes – under $1,800

• Yet, we buy close to 70 pieces of clothing per person, or more than one clothing purchase per week.

• About 2 percent of that clothing is made in the U.S.

THE PUSH OVERSEAS ACCELERATED IN THE 1990S

WHAT FACTORS MIGHT HAVE CONTRIBUTED TO THIS RAPID EXPANSION

AND EXODOS?

1960s1970s

1980s1990s

2000s2010s

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%BudgetForeign Made

Clothing

MADE IN AMERICA?

Is Anything Made in America?Click on the words above

Americans throw away about 70 lbs. of clothing every year, 20% of that trash is clothing that has never even been worn

HOW DID AMERICA GO FROM THE WORLD’S LARGEST CLOTHING EXPORTER TO ITS GREATEST IMPORTER?

The mid-1970s saw the emergence of large textile mills and factories in China and other developing countries in Asia and Latin America

NAME THESE COUNTRIES

BIRTH OF MODERN OUTSOURCING

• To attract foreign investment, these governments established special "export-processing zones."

• Within these centers, firms were allowed to produce goods for export without paying duties on imported components. A special enterprise zone in Singapore, 1960s

PRESSURE TO REDUCE COSTS• This coincided with the

needs of U.S. multinational corporations to improve productivity and reduce labor costs in the face of greater global competition

• These operations offered incredibly cheap labor and raw materials, as well as the capacity to quickly manufacture huge orders

THE EXODOS BEGINS

• By 1980, a handful of big retail chains like Gap Inc. and J.C. Penney began transitioning away from actually making their own clothes.

• They outsourced production to factories overseas where the work was done at a tiny fraction of the cost

FLOOD GATES OPEN

A successive wave of trade liberalization

polices in the 1990s, including the North

American Free Trade Agreement (NAFTA) in 1994, effectively wiped

out most import restrictions and duties on

foreign-made clothing.

So Long, American Jobs

Real Prices for ClothesFall Dramatically

SOUTH KOREA, A MODEL

• Established an export promotion system after the war

• Share of GDP in agriculture fell while manufacturing rose

• Per capita output doubled quickly and then grew at an annual rate of 7 percent in the 60s and 70s

THE MIDDLE CLASS EXPANDS

By the early 1990s, South Korea’s middle class had expanded vigorously, with as

much as 70 per cent of the population

identifying themselves as

belonging to the middle class.

GINI (jee-nee) COEFFICIENT

ASIA’S FOURTH LARGEST ECONOMY

LABOR COSTS IN CHINA ORIGINALLY ATTRACTED A LOT OF ATTENTION

• Start at the bottom with low-skill, basic textile manufacturing (like T-shirts)

• Work your way up to more complex garments (like suits), then to more complex goods like electronics.

• Improved quality of life and a rising consumer class will follow

• Basic textiles move on to find cheaper labor

BANISHING MAO’S GHOST

• China opened to manufacturing in the 1980s with its huge supply of low-cost labor

• In 1990 Asia accounted for 26.5% of global manufacturing output.

• By 2013 this had reached 46.5%. China accounts for half of Asia’s output today.

THE PAIN OF EVOLUTION

• Since 2001, hourly manufacturing wages in China have risen by an average of 12% a year.

• China will shed approximately 85 million manufacturing jobs in the coming years

• Jobs will expand in the more lucrative design and retail fields

BANGLADESH HAS ATTRACTED MUCH ATTENTION WITH ITS VAST SUPPLY OF YOUNG WORKERS AND LOW WAGE SCALE

A TRAGEDY OF EPIC PROPORTIONS, WILL WE REMEMBER?

Click on title

THE RACE CONTINUES

• Wages have begun to rise in Bangladesh

where workers make $68 a month

• Work is beginning to migrate to Myanmar and Ethiopia where

labor pays an average of $30 and $37 a month

respectively.A Chinese owned shoe factory in

Addis Ababa

A 2-year-old industrial park in Haiti, Caracol, financed to the tune of $124 million by the U.S.

BOTH ARGUMENTS ARE COMPELLING

• Critics of the anti-sweatshop movement say that jobs in garment factories, no matter how low the wages or how difficult the conditions, benefit low-skilled workers because they provide better conditions and compensation than jobs in the informal and agricultural sectors of developing countries.

• Moreover, export-apparel manufacturing offers these workers—and, by extension, developing countries—a “route out of poverty” through the expansion of the manufacturing sector.

• “Pro-sweatshop” pundits have not explained why the price that workers in developing countries have to pay for steady wage employment should be grueling working conditions, violations of local laws and basic human rights, and abusive treatment, except to say that there are always some workers for whom labor under any conditions will be an improvement over the status-quo.

• A comparison of prevailing wages to the local cost of a minimally decent standard of living for an average-sized family finds that garment workers still typically earn only a fraction of what constitutes a living wage

Should We Head to the Outlet Mall?