California’s new wage legislation disrupts the made-in-USA dream of retail
The state of California is planning to launch a garment wage experiment that could easily hamper retailers’ search for Made-in-USA apparel. Seemingly well-intentioned California lawmakers may have gone too far to achieve any level of social justice and equal pay in their local apparel industry.
California has laws aimed at eliminating “wage theft” in their state’s apparel sector. Your local clothing industry is the largest clothing division in America and perhaps the last bastion of centralized domestic clothing manufacturing. The terminology âtheftâ refers to payments in factories that are below the minimum wage when they are not adequately linked to labor productivity. While the concept of the bill is worthy of the bill, the bill itself is likely to need additional scrutiny. It is currently on Governor Newsom’s desk, awaiting his possible signature until October 10th.
Obviously, the state legislature wanted to eliminate the occurrence of sweatshops in California, but they must be careful with the language of the bill and not seek to kill a domestic garment assembly industry that is already hanging by a thread (sorry for the pun). The problem is that some of the laws may go too far and many of California’s 46,000 entry-level apparel jobs will be at risk. Remember, California is a state that already has an unemployment rate of 7.5% (which is the second highest unemployment rate in America).
The SB62 law is called the Garment Workers Protection Act and was passed by both the State Assembly and the Senate earlier this month. The legislation is heavily politicized and everyone has to decide (before Governor Newsom signs the law) whether this solves one problem or creates a new one.
When reading the legislation, the first point a clothing manufacturer will notice is the abolition of the piece rate system (which measures labor productivity). The legislative idea is to replace the piece rate wage with the California minimum wage of $ 13 or $ 14 an hour. Those who live the dream of making garments will tell you that success or failure in a garment sewing facility depends heavily on the number of units produced per operator per day. In an industry that doesn’t yet need to be automated, employee productivity plays a huge role, and proper use of a unit pricing system helps to achieve this goal. In fact, California factory work is already overseen by compliance with Labor Law 226, which requires the recording of piece wages. Any unscrupulous agents who could ignore these procedures are unlikely to change their course of action because of the new legislation. The question that remains is, why punish the entire California apparel industry for the misdeeds of a few?
Another aspect of the piecework versus minimum wage discussion is that the bill allows piece-rate wages to be used when a factory is covered by a collective agreement. Without commenting on whether that is good or bad, the legislation seems to include a concept that factories would have to be unionized in order to remain productive, which in itself seems like a very strange regulation.
Another important point is that a buyer placing an order (either directly or indirectly) with a factory creates financial liability for that buyer in the event of wages breach by anyone (including an unaffiliated third party).
To be fair (and not political) the whole idea of ââresponsible sourcing in the supply chain is taken very seriously by all major brands and retailers. Buyers do not intend to place contracts with companies that encourage âwage theftâ. However (politically) there are people pushing California’s SB62 bill that suggests that some of the big retailers are involved in the “wage theft,” and frankly, that’s just not true.
In any industry, there will always be unscrupulous third parties who could subcontract an improper establishment, and it can happen without a buyer ever knowing, and it can happen anywhere in the world. SB62 makes buyers financially responsible, and when it does become law, buyers and brands are likely to avoid (rather than endorse) California’s âMade in USAâ efforts. Companies are just reluctant to be held liable for situations they cannot control.
The truth is that everyone wants to produce more in the US, but American apparel manufacturing is currently trading at 3% market share, with 97% imported. Most of the domestic apparel manufacturing is done in the Los Angeles area.
The problem with making garments is that labor is already an oversized cost component as companies try to stay competitive in the world market. By moving to an hourly wage, proposed California law creates a drag on the goal of being competitive. It should also be noted that garment factories can meet or exceed the minimum wage in the piece-wage system.
The reality is that some legislative ideas sound great on the surface, but digging below and listening to experts in the field would certainly help political understanding that there are better ways to get the same result.
And finally, an important reminder for California lawmakers comes from the once good citizens of the ancient city of Troy (in western Turkey). They once believed they had repulsed an attack by the Greek army and thought they had won a battle. After the battle they received a victory present from the Greeks and dragged a large wooden horse into their gates for all to see. During the night Greek soldiers (hidden in wooden horses) opened the gates to Troy and let the Greek army march in. Unfortunately they destroyed the city. The Trojan horse symbolized the supposed victory of a battle when they actually lost the war in the end.