Living Wages Only Cost 1%? Not That Cut and Sewn.
There are loads of facts and figures that do the rounds in clothing. How far those stats travel largely depends on the media outlets that pick them up. Forbes, Vox and The Cut picked up this juicy nugget in 2018 and there has been a number of influential articles written since, including by the increasingly popular platform for measuring a brand’s ethical impact; Good On You. Now if you’re not familiar with this stat already, this figure was derived from a couple of studies. One by the International Labour Organisation in 2014. And verified through The Clean Clothes Campaign, who try to demystify the complexity of a garment’s cost structure. Although, as someone who has been employed for many years in a role that is responsible for garment costings, it is a rather oversimplification. Generally great for communicating to consumers with a disposable income. It’s not helpful for those in industry, or those without a disposable income. Largely because of how complex it is in the first place, but they do a great a job where they can.
The report released in 2014 by the ILO is the most comprehensible study of wage calculations ever produced. There were 5 manufacturers involved through 4 sports brands which covers clothing and sports shoes. The result is a comprehensible list of actions a buyer or product developer can take to reduce garment costs without impacting living wages. I myself have used these techniques since I read it in 2015, and honestly, it’s game changing. However, there does need to be a level of trust between brand and supplier which can take a while to build up. And in the early stages those negotiations on product costings can go on for hours. Once that time has been invested and a relationship built up, it is mutually beneficial when you have visibility on each others monetary needs.
The problem arises when stats like the one above are filtered through click bait headlines without considering the what is missing from the report. The largest one is duty. And I can see why, working out duty is complicated and about as exciting as watching the roof being closed on centre court at Wimbledon. No one turns up for that alone. The ILO report was based on production in Cambodia and Vietnam, both of which are duty free countries into the UK. But duty is not calculated based on the country the garment was sewn in. It is based on where 65% of the garments components are produced (this is based on UK duty regulations and does vary depending on country and the type of trade agreements made. If you’re in the UK you’ll know how much the government like to talk about trade agreements in terms of food. I don’t believe I was the only person shaking their head watching Liz Truss get very excited about trading British cheese for Japanese soy sauce). Duty on clothing is between 8-20% of it’s total cost depending on the material, but the average for fabric produced in China is 12%. This is on top of the import costs for the fabric in the first place. So you’ll pay 12% of the fabric cost to get the fabric into the country it’s being produced in, then 12% of the garment cost to import it into the UK. Vietnam and Cambodia are not big fabric producers, and even less so at the time of the report. Meaning fabric was most likely coming from China, Taiwan or Thailand.
Image from Clean Clothes Campaign
Another notable factor in the ILO study, that wasn’t reported in the mainstream, is that Vietnam and Cambodia are high volume production countries. On average the MOQ for sewing facility there is between 3,000 and 5,000 pieces. The more pieces you make, the more efficient the line in economical factors. Factories establish a garment cost by working out the sewing minutes, and changing lines over factors into that cost. The more you have to change the line for styles or colours, the more the sewing minutes increase, and therefore your cost per garment. The brands participating in the study; giving the ILO access to their designs, development, production and pricing hierarchy, were some of the largest sports brands in the world. One brand alone can often use as much as 100% of a factory’s capacity. The more products they make with a factory, the more competitive their prices. It literally pays to produce more. Just like plastic bottle companies who send their products straight to the recycler in what is defined as pre consumer waste, it’s cheaper to keep the lines running than starting and stopping them. Meaning the product costs for these brands were already at the lowest for the apparel category.
When it comes to assessing wages in a factory, in order to make it simple they need to asses the average wage on a line and whether the average achieves living wages. Given that many sewers start life as apprentices it does make sense to start them on minimum wage while the employer spends the money training them up. Sewers are ranked in grades from A for the most skilled sewers who can perform all tasks on the line, to D who are the apprentices and generally perform only one simple task. The make up of the line will determine the average; if you have more A sewers the average wage will rise and the gap between average wage and living wage will be smaller than a line with a higher number of D sewers. In terms of line efficiency, if a style is complicated it is preferable to have a higher number of A sewers who can produce more in a shorter time frame. Each factory has it’s own way of managing sewing lines depending on the type of product they usually produce. If you’re a factory specialising in casual t’shirts, your need for A grade sewers is lower and therefore the average sewers pay is lower than those in factories who specialise in technically complex garments.
So to conclude, the percentage retail cost given in the media is rather misleading. It’s just not that easy. We can hope that at the very least headlines like this will make brands look at the cost they are paying for an item. If it costs less than a cup of coffee as an FOB price then you can bet living wages aren’t being paid. But we need to open up the conversation across the whole apparel industry, to be collaborative and transparent in order to make this industry ethical. Hiding behind Anti Competition laws like H&M just won’t cut it anymore.
