The L.A. Apparel Industry Gets Involved in the Debate on Minimum Wage

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According to the Los Angeles Times, California’s newly proposed $15/hour minimum wage by 2022 could spur more local apparel manufacturers to exit the state if not leaving the country. For example, the American Apparel, the biggest clothing maker in Los Angeles, has announced it might wipe out about 500 local jobs and outsource the making of some garments to another manufacturer in the United States.

Statistics from the Bureau of Labor Statistics (BLS) show that the number of employment in the L.A. apparel manufacturing sector (NAICS315) decreased by around 32% from 61.8 thousand in 2005 to 42.0 thousand in 2015. Meanwhile, average hourly wage for sewing operators in California increased by around 25.5% from $8.98/hour to $11.27/hour. As another source,  the California Fashion Association says that the hourly wage for LA apparel workers was around $15/hour in 2014 (all occupations).

As reported by the Los Angeles Times, many apparel companies see L.A. increasingly become a difficult place to do business because of the expensive and limited commercial real estate, the rising pressures of raw material cost and the difficulty of finding sufficient skilled workers who can afford to live in the city. Companies expect the situation to get even worse after the minimum-wage hike further raises their operation expenses in the years to come.  

Some industry professionals suggest L.A. may “become for apparel what Silicon Valley is for technology: the hub for the design, but not the manufacturing, of products”. Data from the California Fashion Association shows that in May 2012, 3,770 independent fashion designers worked in Los Angeles, earning about $30 an hour in Orange County and $35 an hour in the L.A. County metro area. However, such a prospect is unclear given the advancement of technologies such as the CAD system which makes location less critical for fashion designers. On the other hand, L.A. is facing competitions from other apparel hubs such as the New York City for design businesses and talents.

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Minimum Wage in the Apparel Industry Continues to Rise in Most Asian Countries in 2016

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Apparel producers across Asia may face a more than 5% minimum wage increase in 2016, according to an industry source. India, Malaysia, Thailand and Pakistan may see the biggest increase of minimum wage (up more than 15%) among the leading Asian apparel producers, whereas minimum wage in Bangladesh and Philippine may remain roughly unchanged from last year.

As noted by the industry source, this year’s minimum wage increase comes from various reasons. In Cambodia, the increase is mostly pushed by local labor unions. Indonesian government raises the wage aiming to shorten the gap between minimum and living wage in under-developed regions. Additionally, countries such as India adjust their minimum wages more based on economic factors such as inflation rate, GDP growth rate and consumers’ price index.    

Data further shows that the gap in minimum wage between Asian apparel producers somehow is widening. For example, monthly minimum wage in some parts of China has reached $321 USD in 2016, which is $253 USD higher than in Bangladesh ($68 USD/month), up from $225 USD in 2015. A wide gap in minimum wage is also found within some Asian countries. For example, in Philippine, Indonesia and China, the highest minimum wage could be almost twice as high as the lowest minimum wage in the country.

Despite the increase, minimum wage in Asia remains a fraction of the level in the developed countries. For example, minimum wage in the United States was $7.5/hour in 2015, meaning a worker’s monthly minimum wage shall no less than $1,200 (assume working 40 hours/week, 4 weeks/month).