The High Road from China

HondaFor Unionwear, the tipping point was when our labor union’s business agent was transferred from New Bedford, Massachusetts to Cambodia, the same week that we learned that the nonprofit organization, “K to College”, was moving the production of 150,000 tote bags filled with a year’s supply of school supplies from China to our union shops in New Bedford and Newark.

After decades of effort, from “Look For The Union Label” to United Students Against Sweatshops (USAS), “Labor Content” has joined “Green” as a factor in institutional purchasing, as higher education, nonprofits, and the public sector increasingly consider the impact of international worker rights violations behind the low prices of many imported manufactured goods.

July 2010 has been a month of firsts: For the first time, the US is pursuing a labor law violation against a free trade partner. For the first time USAS has endorsed a collegiate licensed product manufacturer, who specifically built a facility that conforms to USAS’s stringent code of ethics. For the first time, a major apparel brand has agreed to take responsibility for the exploited workers of one of its overseas contractors.

What’s behind this sea change? There is a premium institutions will pay for ethically produced merchandise—and that premium is beginning to exceed the difference in cost between ethical and sweatshop goods. Cheap labor is starting to look relatively expensive.

July 2010 also saw a critical mass of firsts on the supply side: China considering allowing the Yuan to float against the dollar, union labor striking in China, activists causing a minimum wage doubling in Bangladesh. The supply of electricity and even space on cargo ships has been drastically reduced, leading to additional spikes in pricing. Add this to the weak dollar, wage inflation in China, and rising shipping costs and headaches: The era of cheap imports may be over.

China’s economic growth is producing a feedback loop—as wages increase, so will awareness of workers rights, along with demand for raw materials, shipping, and electricity, raising those prices as well. The result is exactly what we are seeing at Unionwear— a shift to domestic production in merchandise with low labor content, expensive materials, and high shipping costs, like laptop bags.

In the meantime, domestic factories cut deep during the recession and have become lean, productive and profitable. Increases in the Federal Minimum Wage, skyrocketing health costs, and the resulting health care bill have made skilled labor relatively cheap compared to entry level workers, and have leveled the playing field between Right to Work states and heavily unionized states. The result is an experienced workforce, with more benefits than ever, employed by profitable domestic factories. The unfortunate byproduct is high unemployment among the unskilled.

High unemployment is the final piece of the puzzle. Economists, pundits, and politicians from both sides of the aisle are calling for incentives for more labor intensive work, like manufacturing. Is it a coincidence that Arizona’s anti-immigration law kicked into high gear as the first wave of unemployed from this recession ran out of jobless benefits?

I don’t believe institutions that were aware of worker rights abuses for decades suddenly became sympathetic–I just think the cost of sympathy—AKA the premium paid for a “Living Wage”– has finally moved into that place where supply meets demand. Further reductions in that premium will lead to labor content being considered in purchases by corporations, and ultimately consumers.

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