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US Garment Industry Faces Crossroads

Under competitive pressures, companies are boosting productivity with technology, or opting for sweatshops

It's a sight you wouldn't have seen this sight five years ago: a New York showroom with a computer that stores images of designs and tracks the complex comings and goings of the company's orders.

It's but one example of how technology is penetrating a business still largely dependent on low-skilled workers.

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Yet across the country, a more shocking scene also portrays the state of today's garment industry: a cutting-and-sewing factory outside of Los Angeles, surrounded by barbed wire, where illegal immigrants have worked under sweatshop conditions.

These two scenes sketch a story of an industry in flux, attempting to shake the longest economic slump in its history.

Apparel sales in the United States are down for the fourth year in a row. Consumers are more inclined to spend on big-ticket items than on fashion. The number of retailers is shrinking after a spate of buyouts and bankruptcies in the early 1990s.

Meanwhile, a growing number of the country's garments are being cut and sewn overseas. The American apparel and textile industry has lost some 500,000 jobs since 1980, according to the US Census Bureau.

These factors are forcing a transformation in the business. What was once a well-structured industry, in which designers worked with manufacturers who contracted out the sewing and sold to department stores, is being reshuffled.

Today it's the retailers who call the shots. In a chase for the ever-fleeting customer dollar, they are taking more control over the apparel designs, offering more styles and changing them rapidly.

"As a manufacturer, I'm in less and less control," explains Terry Friedman, vice president of Jump Apparel Company, a manufacturer considered a model in the industry. "It's the stores that dictate prices, deliveries. Three or four years ago an item would sell for $18, now it's $16. There comes a point of diminishing returns."

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Most retailers now have their own private labels - clothing lines that they design and ship overseas to be made cheaply. At Sears, 50 percent of the merchandise is sold under the company's own label.

In the garment-industry shakeup, two paths are emerging. Factories are turning to new technology to fashion goods more efficiently, or they are opting for cheap, illegal labor.

As a result, after being largely wiped out by unions in the 1940s, sweatshops are now on the rise. Labor Department figures show that garment factories rife with labor-law abuses are thriving in centers of the industry such as New York, Miami, El Paso, and Los Angeles, and in rural regions such as in Pennsylvania and the South.

Two-thirds of New York's 7,000 garment shops are reported to be sweatshops, says the US General Accounting Office. Labor officials add that one-fifth of Los Angeles apparel factories are underground.

"Sweatshops are a growing phenomenon," says Bruce Herman, president of the Garment Industry Development Corporation in New York. "And the growth of sweatshops ... is seen as a significant pressure on reducing everybody's wages and standards."

After a high-profile sweatshop raid this summer in Los Angeles, in which 72 Thai immigrants were found working in slavelike conditions, the Labor Department, the unions, and the public are asking how to keep the industry from sliding back into the appalling conditions rampant at the turn of the century.

Unions aren't as much of a fire wall as they once were. Union membership in New York is half what it was 50 years ago. Apparel industry centers are moving from staunchly unionized cities such as New York to southern towns, such as Albemarle, N.C., where a Fruit of the Loom plant employs everyone within city limits.

And Los Angeles, never as heavily unionized as the Northeast, is the new clothesmaking capital of the country. Some 140,000 of the country's 950,000 garment workers (compared with New York City's 94,000) work there, according to American Apparel Manufacturer's Association figures.

The other traditional line of defense against illegal factories - government investigators - is also shrinking. In 1989, 15 percent of Labor Department investigators' positions were eliminated. The department's Wage and Hour Division - the one that checks timecards and inspects for fire hazards among other things - has concentrated its efforts on the garment industry for the past two years. But Labor Department officials say there just aren't enough employees to monitor it closely.

Today, some 800 investigators patrol the 113 million full- and part-time workers that federal labor laws protect from minimum-wage infractions, overtime abuses, child labor, and an unsafe working environment. A proposal before Congress would cut the number of investigators by another 12 percent.

As a result, it falls to concerned consumers and the apparel industry itself to play a larger role in stamping out sweatshops, say unions and the Labor Department. But can an industry, especially one so competitive and so dependent on immigrant labor, adequately monitor its own players? And how can consumers use their purchasing power to support reliable companies when it's nearly impossible to track all the stops a garment makes in production?

"Major retailers have enormous power in this industry," Labor Department Secretary Robert Reich says. "They often inspect [factories] for quality and cleanliness.... It's not too much to ask them to help avoid abuses of workers as well."

Retailers disagree. They contract out to tens of thousands of shops and claim they cannot patrol all of them, or stay abreast of the Labor Department's complicated regulations. One retailer compares it to asking grocery shoppers to be responsible for conditions at the farm where their produce is grown.

Some retailers say they are already vigilant. "Retailing is a people business, and we are committed to showing our respect for all people - our associates, our customers, and the people who manufacture what we sell," says Bernard Brennan, chief executive officer of Montgomery Ward, in response to allegations about his company's connection to sweatshops in Los Angeles. "We will not tolerate any relationship with any vendor who does not share our belief in these principles."

In the last three months, Secretary Reich has launched what union officials and retailers say are some of the most aggressive efforts to halt sweatshop activity in decades. Other comparable garment-industry reforms took place after the 1911 Triangle Shirtwaist Factory fire, which killed 146 garment workers in New York City.

Primarily, Reich has turned up the heat on retailers, a sector of the industry that usually escapes responsibility for the exploitation of workers. Labor laws, drafted in 1938, still hold manufacturers, not retailers, liable for illegal labor. But Reich's decision to go public with retailer names found on receipts in sweatshops raided this summer - Macy's West, Neiman Marcus, Sears, and Montgomery Ward among others - was incentive enough to persuade many retailers to talk about their role in cleaning up the industry.

Next week, the Labor Department turns the screws a little tighter when it comes out with a list of retailers and manufacturers that have sought ways to stay clear of unlawful labor practices. The list is timed to coincide with the holiday shopping season, when retailers traditionally rack up 20 percent of yearly sales.

This list, officially dubbed the "Fair Labor Fashion Trendsetters," is also one of the only tools available to consumers who want to peer behind the industry's glitz and discover what goes into creating the mock turtlenecks, hip-hugging pants, and mini-dresses they wear.

The garment industry, though, is more complicated than Reich's list will indicate, says Allison Wolf, spokeswoman for the American Apparel Manufacturers Association, a trade group. "In theory, it's a great idea," she continues. In practice, however, it's problematic.

A list of manufacturer names is not likely to mean anything to consumers. When Hecht's or Filene's contracts with a factory to make their goods, it's the label that the consumer sees, not the manufacturer's name.

Retailers' lists are also misleading. Sears, Roebuck & Co. has more than 10,000 direct suppliers, and those factories are likely to subcontract work. If Sears, for example, makes it onto Reich's "honor roll," does that mean that none of those contractors or subcontractors has broken labor laws?

Breaking through the byzantine layers of the garment industry is not easy for consumers. The business is peopled by designers, patternmakers, models, factory owners, contractors, seamstresses, and delivery people. One silk blouse might pass through two-dozen hands in five locales on its trek from inspiration to department store floor.

Today's pressures on the garment world lengthen the route an article of clothing takes from start to finish, and in doing so leave space for more abuse than ever.

In the last decade, clothesmaking - with its heavy labor demands - has increasingly been transported to places where wages are lowest: Honduras and Hong Kong, El Salvador and Indonesia. A full 50 percent of apparel sold in the US today is imported, reports the Bureau of Labor Statistics, compared with only 30 percent imported in 1980.

"You've got New York competing against the Philippines. How are you going to survive," asks Muzaffar Chishti, director of the garment union's immigration project. "You've got to cut labor to the bone."

In the late '80s, at the same time the market was going global, department stores began squeezing manufacturers to make the same clothes more cheaply and looking for other ways to cut costs. In many cases, they cut out the middleman, or the "jobber," and instead began creating their own designs, buying fabric, and contracting with manufacturers or subcontractors to cut and sew the garments.

As retailers consolidated, manufacturers had fewer accounts. They were left begging for work, afraid to turn away any order from a retailer, regardless of how unreasonable the price they would be paid. If they refused to sell a shipment for less than it cost to make it this time, there would be no order to pick up the slack next time, explains Terry Friedman of Jump Apparel.

Manufacturers were called upon to make a greater variety of designs and make them faster, as well as cheaper, to keep up with consumers' whims. And today, when clothes fail to sell, retailers ship them back to the manufacturers, looking for credit.

With a boom in illegal immigrants, the pool of undocumented labor is huge, according to labor reports. Small contractors - 90 percent of contractors employ fewer than 50 workers - set up a low-overhead shop, put sewers to work on the most basic equipment, and close down at a moment's notice if their debts pile up or if they are in danger of investigation by authorities.

The culmination of these trends became clear last August when Thai workers in El Monte, Calif., were discovered in a sweatshop raid.

The details officials uncovered were gruesome: mostly women, imprisoned behind barbed wire since they came to the US five years ago, worked day and night and were allowed off the grounds of their compound only once a year.

A second round of raids shortly afterward quieted those who said the El Monte case was rare and extreme. Raids of three more illegal factories in the Los Angeles area uncovered 56 illegal immigrants working in primitive conditions for less than a dollar an hour. There is evidence that they too were held as slaves.

"You have to create an industry that cannot fall back on cheap labor," Mr. Herman says. "If you don't have exploitation as an option, it means that you have to be more productive.

"There is an alternative to the low road. But it's particularly difficult if the erosion of standards is allowed to continue," he says.

Many factories do turn out quality goods without breaking the law, however.

Take V.C. Sportswear, for example. A fourth-generation children's clothing manufacturer, this firm turns out thousands of tiny leggings every week. It also pays union wages - some 30 percent higher than average - offers benefits, and turns a profit.

The keys to its success are adaptability, quality, and volume, says Michael Cohen, great-grandson of the original owner and a company salesman.

"We're flexible enough that we can make whatever the hottest fashions are," says Janet Eber, V.C.'s sales manager. "We'll do anything we can do in great volume and sell to many stores."

Five days a week - and some weekends - Mr. Cohen and his pool of 50 sewers file into the third floor of a giant building on the edge of Soho in New York.

V.C. Sportswear's survival in today's market points to the one consumer quirk that has kept the US garment industry alive. Fashions go in and out of style so fast - especially in the children's and juniors' sectors - that shipping work overseas is often too slow to be practical, regardless of how cheap it might be, Herman says.

"The consumer will not be dictated to," Herman says. "That's one reason our industry remains viable - you've got to turn goods around in two weeks. You can't go to China to do that."

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