At every conference or trade show I attend, there is one question that's always asked: is apparel manufacturing returning to America? While there may not be one simple answer, from everything I've observed, I lean toward a pretty emphatic 'no.' Economically, reshoring can't work at any significant scale.
In recent years, there has been a considerable amount of media attention focused on companies said to be bringing production back to the U.S. Walmart, known for its vast global sourcing chain, made a major media splash when it pledged to sell more U.S.-made goods in order to boost domestic manufacturers, while Everlane, a small venture-backed e-tailer known for its radical transparency, has attracted attention for its practice of highlighting each of its factory partners on its website -- and many of them are based in America.
While these examples clearly stoke the fires of hopeful return, a resurgence of manufacturing in America seems highly unlikely. Of course, American apparel manufacturing does exist. In fact, I am wearing an American-made pair of twill pants from Adriano Goldschmied right now. And Adriano Goldschmied is not alone in manufacturing in the U.S. American Apparel, J Brand, Save Khaki, Karen Kane, New Balance and many others all have domestic supply chains in place. But to assess the real potential of a return to domestic production, we have to be honest about the facts.
What We're Bringing In
In the past two decades, apparel imports to the U.S. have surged 160 percent, from $35 billion to $91 billion , and now comprise an estimated 95 to 97 percent of all apparel sold at retail In 2013, measured in dollar value, apparel imports grew 4 percent over 2012, faster than the overall apparel market. What's more, companies have been consistently shifting production away from China, where labor costs continue to rise, to even cheaper countries like Vietnam and Bangladesh. In 2013, apparel imports from Vietnam, for example, grew by 14 percent (compared to 2.5 percent for those from China).
Niche premium brands can still create healthy, profitable businesses producing domestically and selling to socially-conscious, patriotic or otherwise discerning consumers. But only a small fraction of American consumers are willing to pay premium prices for U.S.-made apparel. The majority of consumers think of fast fashion, discount retailers, dollar stores and coupons when it comes to purchasing clothing; country of origin is simply not top of mind.
I have met with many apparel retailers who are concerned about lowering the cost of their goods. The solution, more often than not, is exploring alternative sourcing from countries in Asia. In the context of cutting cost, no company of any size has ever asked me how to bring production back to the United States.
Where, and at What Cost, It's Being Made
My stance on American apparel manufacturing is very simple: it won't work at scale because of basic economics. U.S. cut-and-sew wages have increased by more than 13 percent in the past seven years (inflation adjusted) to an average of $14.79 an hour. Assuming an average workday is eight hours, that comes to $118.32 per day, a figure that stands in marked contrast to wage rates in low-cost countries like Bangladesh and Vietnam.
In the past year, Bangladesh's government has finally agreed to a new salary structure for its workers, which took effect in December 2013. It brings the nation's new monthly minimum wage to 5,300 taka ($68), a 77 percent increase from the previous minimum wage of 3,000 taka ($39) -- yet still the lowest worldwide wage rate in the apparel industry. Meanwhile, workers in Vietnam saw a monthly minimum wage increase to between VND 1.9 million and VND 2.7 million ($90 to $128) depending on the region, a raise of 15 to 17 percent over the previous year. In India, depending on the region, monthly wages range from $130 to $150.
This means that, despite the increases, in one day an American worker will earn what a Bangladeshi worker earns in two months, or an Indian worker earns in roughly one month. And while working conditions in low-wage nations have been under scrutiny since the terrible Rana Plaza building collapse in Bangladesh last year -- and things are said to be improving -- the reality is that no matter how much costs increase to accommodate better Asian working conditions, labor costs in America will always be higher.
Of course, U.S. employers have to follow building codes and pay social security taxes, workers' compensation, health insurance and overtime. What's more, underperforming workers often have to be documented by human resources departments and given multiple warnings before they can be replaced. And if a factory in America fails to follow the rules, there are serious legal consequences, not to mention the likelihood of negative national media coverage. By contrast, let's just say, if a factory in Cambodia needs its workers to push out extra units to make a delivery and save the factory from forking out dollars to send their goods by air, the factory owner won't need to do much coaxing to get these workers to stay and work those extra hours. For apparel companies weighing their sourcing options, all of this makes doing business domestically cost prohibitive and complex.
Clearly, the labor conditions that exist in the Third World, or the "developing world," as it's euphemistically called, are often subpar -- but this is our reality. And if retailers are currently responding to rising costs in China by taking their business to Bangladesh, how is it even conceivable that they will decide to switch gears and produce in the U.S.?
Putting aside wages for the moment, clothing manufacturing has always attracted unskilled workers. From New York's garment district to Japan, Korea, China, India and now Bangladesh, production has always migrated from one low-cost country to the next, based on who could offer the most competitive price.
Why would America want to reshore an industry that is having a hard time paying its workers $100 a month in the Third World? Instead, shouldn't we be training and developing the future American workforce for higher skilled manufacturing -- where the superior education and training many workers receive in the U.S. could offer us a competitive advantage?
What Are We Better At?
Over the past decade, U.S. textile and apparel employment has plunged by nearly 50 percent, to a record low of 363,000 jobs. According to the U.S. Bureau of Labor Statistics, there are only 110,000 cut-and-sew apparel workers in this country, (for both highlighted above) a number that has been declining each month. Those apparel factories that have remained here in the U.S. are facing a labor shortage - more than a touch ironic, as one of the major reasons many give for supporting domestic apparel manufacturing is job creation.
In looking at the prospect of bringing apparel manufacturing back to the U.S., I see the world not through a domestic lens, but a global one. If America is indeed to see a surge in domestic apparel manufacturing, it will be because its engineers and scientists develop new machinery and new software that can automate, speed up and lower the costs of production, thereby enabling the country to compete with the likes of low-cost Bangladesh. There is opportunity here. But are we allocating our energies and resources to the right battle?
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