"For onshore to have a future, it has to be profitable to retailers and manufacturers with properly paid workers"

"For onshore to have a future, it has to be profitable to retailers and manufacturers with properly paid workers"

Can mass-market clothing be made legally - or ethically - in the UK or the US if it’s competing with low-wage production? Not according to Mike Flanagan, who calls Western labour practices "onshoring’s dirty secret."

Official data seems to show three fundamental truths about making garments onshore.

  • Production is hardly growing. In the US, for example, Clothesource Tradetrak estimates the volume of garments that retailers bought from domestic sources in the first three months of 2015 grew just 2.5% over the previous year, while imports grew 6.1%. In the EU, garment production fell 7% over the same period, while imports grew 4.3%.
  • But it’s not falling much either. In the first quarter of 2010, US production was about a fifth of what it had been 20 years earlier: by 2015, it was more or less the same as in 2010. In both the EU and US, it has stopped falling off a cliff.
  • Jobs, though, are falling more consistently. In the first quarter of 2015, there were 3.5% fewer jobs in the US than in 2014. While we don’t yet have the Q1 numbers for most of Europe, the EU’s Eurostat statistics agency shows that in the UK they were more than 30% down on 2014.

Upstream, in the US, weaving mills are still closing, while there’s a boom in new spinning mills, though they employ almost no-one. But garment-making jobs – the official data seems to show – are falling, while output is flat or up a bit. The productivity of Western garment making is improving. Or so the statisticians tell us. But what do they know?

Possibly not that much.

In 2008, US academics began studying American factories to see if small businesses in big cities were obeying America’s minimum wage laws, and whether they were reporting what they were making, how long their staff were working or what they were paying.

They started interviewing workers – and concluded that around 20% of workers in Chicago, and around 30% in New York, were being paid significantly less than the minimum wage. In Los Angeles, similar research in 2010 found rather more factories were underpaying – with 58% of garment workers getting less than the law required.

Since then, almost every month has seen successful criminal prosecutions of an American garment factory – usually in New York or California – for wage theft, with many other prosecutions for offences like involuntary unpaid overtime or money laundering.

Then academics in Leicester – the main hub of the UK’s apparently reborn garment industry – decided to use the same approach in their garment factories. In February, they reported that around 70% of garment workers were being paid substantially less than the minimum wage.

These studies shared several similarities:

  • No-one has seriously suggested the findings or methods are flawed.
  • They were very different from official investigations. The UK’s Revenue and Customs department was charged with scrutinising accounts for evidence of underpaying, and then publishing offenders’ details. In the 18 months between October 2013 and March 2015, it detected just £635,000 (about $1m) of underpayment across the whole UK (population: 64.1m). In LA County alone (population 9.9m), researchers estimated $1.3bn a year in illegal underpayments.
  • Both countries had largely immigrant workforces (in LA, 56% of those underpaid were in the US illegally), with poor command of English, falsified records, and a culture of workers instructed to lie to official inspectors. Investigations among (mainly immigrant) garment workers in Paris and Italy’s Prato describe much the same thing.

Bluntly: there’s strong evidence over half the garment workers in the West are being illegally defrauded. Britain’s use of its tax checkers isn’t even scratching the surface of the problem. So what can be done? So far there have been three kinds of suggestion:

  • More government scrutiny. In mid-May, the LA City Council voted to raise its current $9 an hour minimum wage to $15 by 2020. At the same time, it directed its city attorney to draft an ordinance for an ‘Office of Labor Standards’ to enforce the wage and other basic labour standards – but envisaged just five inspectors. San Francisco, with less than 1m inhabitants, has 25 – but in 2013 collected just $1.5m ($60,000 per inspector) in unpaid wages, which implies the inspectors are costing more than the unpaid wages they collect.
  • Better buyer scrutiny. The Leicester report believes that buyers need to scrutinise more, in particular using "existing systems in the garment industry such as predetermined time standard (PTS) systems." That is: if a garment takes 20 minutes to make, and the minimum wage is GBP6.70 (US$9.30) an hour, there must be at least GBP2.20 of labour in the price. But few buyers – and even fewer Asian garment factories – these days use a PTS: there are no standard workers or standard factories any more.
  • Better system-wide training. Britain’s Ethical Trading Initiative (ETI), which commissioned the Leicester study, has developed a programme of "training and support for suppliers and manufacturers, helping them build robust management systems and to ensure that wages meet legal requirements, as a minimum." But I suspect training’s not the problem.

Garment factories rip their staff off because, with minimum wages of GBP6.70 going up to $15 an hour, they can’t compete with Chinese workers any other way – and there’s no shortage of vulnerable immigrants from cultures where even the meanest boss is more trustworthy than a government inspector.

Retailers simply don’t have the margins to make less on rich-country manufacture. Most clothes are produced in Asia because customers weren’t interested in paying premium prices to make in Leicester 20 years ago, and neither are they now.

The truth is that mass-market clothing can’t be made legally (or ethically) in Britain or the US if it’s competing with low-wage production. Most factory owners in Leicester and LA aren’t breaking the law because they’re stupid or evil: they simply understand economics better than self-deluding onshore fanatics.

For onshore to have a future, it has to be profitable to retailers and manufacturers with properly paid workers. Which starts with choosing the right garments to make here.