California’s Workers’-Rights Push Threatens What’s Left of ‘Made in the USA’ Fashion

Date: Thursday, January 5, 2023
Source: Bloomberg

Los Angeles has long been the country’s premier hub for garment manufacturing, churning out T-shirts, swimwear and dresses for fashion brands around the world. But a combination of new labor legislation and rising costs is threatening the future of “Made in the USA” clothing.

California’s Garment Worker Protection Act is a year-old law that takes aim at the industry practice of paying workers a piece rate, rather than an hourly wage, which often results in them earning less than the minimum wage. It also renders fashion brands liable for labor abuses across their supply chains. Similar bills are under consideration in New York state and in the US Congress.

Fashion’s race to produce clothes faster and cheaper means brands are ultrasensitive to costs, making overseas manufacturing all the more attractive when expenses rise even incrementally. Companies interviewed for this story said manufacturing in Los Angeles has become more costly as a result of the state act, cutting into margins and forcing some to raise prices, which puts them at risk of losing customers. Those that can’t make the math work are seeking out new locales, accelerating an exodus that’s hollowing out the city’s once-vibrant Fashion District.

“If you’re making a commitment to fair labor, there will be a higher cost, period,” says Kathleen Talbot, chief sustainability officer of Reformation, a women’s fashion brand that produces about 30% of its clothing in Los Angeles and has no plans to move for the moment.

Reformation, which charges $100 to $400 for dresses, bills itself as a company that “pioneers sustainable practices, focusing on people and progress each step of the way.” Says Talbot: “You need to either find a way to build that into your business model or into your margin. And then in some cases, you will need to translate that to the customer.”

Textile mills and apparel manufacturing combined employ 23,800 people in Los Angeles County, according to data from California’s Employment Development Department. Matthew DeCarolis, an employee-rights attorney at Bet Tzedek, a nonprofit law firm that handles wage claims, says the California law represents a major advance for those workers, some of whom have been in the industry for decades and are for the first time getting fair pay and overtime. The law is so new that many claims are still being investigated, he says, with payouts expected as the year progresses.

California’s Garment Worker Protection Act extends the liability for unpaid wages or compensation all the way up to the brand level, including companies that aren’t based in the state. If a Los Angeles zipper maker, for example, is found to be avoiding overtime pay rules, a fashion label selling a pair of pants with that company’s zippers could be liable for paying out wages owed to the supplier’s workers.

Supporters say this shifts responsibility to the companies that are profiting from underpaid labor. Critics argue that it puts too much pressure on brands and simply leads them to move production elsewhere.

“You don’t want to be a small brand that finds out you’re liable for wage claims because the dye house you found to dye your fabric didn’t follow all the rules and you had no way of knowing,” says Marta Miller, co-founder of Lefty Production Co., a Los Angeles-based clothing and accessories manufacturer that’s worked with more than 150 brands, including Urban Outfitters Inc. and Walmart Inc. “Brands are pulling out of domestic manufacturing. They’re just not going to take the risk.

After the legislation went into effect last January, Miller hired an auditor to ensure that her subcontractors are following the new laws, and in some cases had to find new partners. Most have increased prices to keep up with the rising cost of compliance, she says. That’s on top of the broader economic strains of rising rents, higher prices for raw materials and labor shortages.

Miller began shifting some production out of Los Angeles even before the advent of the law and in 2021 acquired a fashion development company in Austin, where she moved with her family. She’s now sending more work overseas to help clients contain costs.

The garment industry’s Southern California roots go back many decades, thanks to the presence of a skilled labor force of pattern-makers, designers and sewers as well as proximity to the largest ports in the nation. Today, Los Angeles County is home to more than 25% of all apparel manufacturing businesses in the US, the largest share in the country, according to data from the Bureau of Labor Statistics.

US apparel manufacturing has been shrinking for decades largely because of globalization. In Los Angeles County, employment has declined by 77% since 2000.

Still, the impact of the Garment Worker Protection Act was evident immediately in Los Angeles’s Fashion District, according to real estate owners and developers in the area. Several producers have departed and spaces are getting harder to fill, especially because many of the buildings are zoned specifically for manufacturing, says one property manager whose family has owned buildings used for garment production for six decades.

Apparel makers that depart typically go abroad. “Other parts of the world definitely have a competitive advantage in labor costs,” says Ezra Pugh, an adjunct instructor of economics at California’s Glendale Community College who once worked in the industry. Pugh named China and Bangladesh as preferred destinations. “Those workers are at least as productive, probably more productive, than domestic workers. It just makes financial sense to go to these other countries.”

The California legislation also discourages new business from coming in, says Ilse Metchek, president of the California Fashion Association, an industry advocacy group based in Los Angeles. When brands research the garment business laws in the state, “it’s no question, they’ll decide against moving here,” she says.

California’s law has inspired similar bills—the Fashion Act in New York state and the Fashioning Accountability and Building Real Institutional Change Act at the federal level—that seek to hold brands liable for wage theft. The national bill, known as the Fabric Act, was introduced in May and awaits a vote in the Senate Finance Committee. Although it may pass the Democratic-controlled Senate, its fate in the House of Representatives, which now has a Republican majority, is more uncertain.

Industry groups including the American Apparel and Footwear Association, which counts Gap Inc. and Target Corp. among its members, and the Council of Fashion Designers of America, which represents more than 450 designers, have come out against aspects of the joint liability provisions in the Fabric Act. But the bill has been endorsed by almost 200 organizations, unions and labels including Reformation, Everlane, Mara Hoffman and Doen.

The legislation has fueled a debate over whether it’s governments or brands that should be responsible for auditing contractors’ labor practices. “Making us and every fashion brand and retailer the police of other companies’ practices and wage records isn’t appropriate,” Lefty’s Miller says. “We’re customers, not government regulators.”

Government agencies including California’s Labor Commissioner’s Office are short-staffed and struggle to enforce labor laws across industries. The state has partnered with labor advocates, including the Los Angeles-based Garment Worker Center, to help educate companies and employees about how to comply with the provisions of the act.

“Every time there’s an attempt to do something to enforce those labor laws, they find another loophole or another way of bypassing the spirit of the law,” says California State Senator María Elena Durazo, the lead author of the legislation. “We really have to focus our resources, energy, innovation, outreach. It has to be constant.”

One thing that may help keep US apparel makers from migrating abroad is growing consumer demand for so-called ethical fashion. Also, keeping some manufacturing at home guards against production being shut down or delayed when other countries are confronting geopolitical conflict, climate events or disease outbreaks—all of which have contributed to supply chain crunches in recent years.

“We saw the importance of domestic manufacturing during the pandemic when our industry pumped out face masks and hospital gowns when they were in short supply,” Miller says. “Now we’re seeing the production base shrink instead of grow.”


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