Retail Executives Remain Silent As Government Gains More Control Over Fashion Industry
Baseball stories, like retail interactions, can be exciting – the best ball players take to the field, make the right choices, and play with inspiration – attempting to steer their team towards a winning outcome.
As a better way to explain this scenario: “Who” was the baseball player on first base, “What” was the player on second, “I don’t know” was the player manning third base, and Tomorrow was the pitcher. Lou Costello then said: “Now I throw the ball to first base, whoever it is drops the ball, so the guy runs to second. Who picks up the ball and throws it to What. What throws it to I Don’t Know. I Don’t Know throws it back to Tomorrow – a triple play” per the famous Abbott and Costello routine.
Unfortunately for fashion retail, many industry executives have chosen baseball’s more-silent approach to the game. Recent proposed laws by state and federal legislators have quietly angered retail executives. Instead of fighting back, most of these retail fashion leaders tend to chat about being good corporate citizens or about how their respective companies are reacting to new laws (that clearly disrupt their day-to-day operations). They will even discuss future legislation that might be headed their way, signaling (to all who pay attention) a fait accompli. Perhaps they fear criticism of their “brand” because no one is really saying: “how can we stop this legislative nonsense – and how do we get the federal government off our backs?” Responsible companies already know their mission and it is deeply ingrained into their corporate culture.
On May 12th of this year, heralding from the fashion Capital of the world – New York’s Senator Kirsten Gillibrand dropped the original FABRIC Act (Fashioning Accountability and Building Real Institutional Change) with significant publicity and little congressional support. There are four sponsors of the bill (to date): three liberal Democrats – Elizabeth Warren (D-Ma), Cory Booker (D-NJ), Alex Padilla (D-Ca) and one very liberal Independent – (Bernie Sanders (I-Vt). To make the bill sound great, they loaded it with incentives to re-shore the apparel assembly business. To make the bill more terrifying, garment manufacturers must register with the federal Labor Department and the bill allows fines up to $50 million for violations associated with paying any factory less than the federal minimum wage. It also creates a new position called “Undersecretary of the Garment Industry” within the Department of Labor.
If Senator Gillibrand’s bill doesn’t get attention from the retail community – in July the U.S. House of Representatives launched their version of the FABRIC Act as put forward by Congresswoman Carolyn Maloney (D-NY), Debbie Dingell (D-Mi), and Deborah Ross (D-NC). It’s fair to say that Congresswoman Maloney has been favorable to the New York garment center in the past and is currently in a fierce battle with Congressman Jerry Nadler (D-NY) for a single re-districted congressional seat in New York. The Congresswoman may have pushed this bill to get on the good side of Senator Gillibrand, as the bill would easily garner strong support from labor unions – who do vote in primaries.
Legislation like this always sounds exciting on the surface (especially with the help of well-crafted media releases), but when industry people drill down and examine the details, it’s easy to see how these new bills could easily kill the goose that laid the golden egg. Data indicates that there are about 100,000 garment assembly jobs in the USA with most jobs in California and New York. Both states have high by minimum wage laws (around $15 an hour). Traditionally, the key to garment manufacturing is “piece rate” which allows for greater productivity (in terms of units per operator per day). With the federal bill requiring a switch to an hourly rate (from piece rate), production locations will likely be driven from states with high minimum wages to states with a lower federal minimum wage ($7.25/hour). Amazing as it may seem, under the California bill and the Gillibrand bill you can (actually) have a piece rate, if a collective bargaining agreement is in place (and that tells you a lot about the forces driving the legislation).
In addition to the federal laws, New York State miraculously came up with its own version of exercising control over the fashion industry – called the “Fashion Act” as has been proposed by State Senator Alessandra Biaggi. It is interesting that Senator Biaggi is now in a heated political race with New York’s current federal representative Sean Patrick Maloney (D-NY) for his (re-districted) seat in Congress. The Biaggi bill is particularly egregious because it looks at companies over $100 million in volume who do business in New York and asks them to map 50% of their supply chain and report a list the materials that they produce. It also mandates a listing of the median wages of the workers in their prioritized supplier list – along with a wage comparison between the local minimum wage and the living wage. To make matters even worse, any citizen can file a civil action against a person or business who is “alleged” to be in violation of this legislation – also with a hefty fine.
It has been clear since the Trump tariffs were initiated, the U.S. Government wants fashion retailers to stop buying product from China. However, per recent government data, about 37% of all apparel product still arrives from China, and it remains no easy task for retailers to quickly exit their supply chains. In August of 2019, former President Trump tweeted: “We don’t need China and, frankly would be better off without them. Our great American Companies are hereby ordered to immediately start looking for an alternative home to China, including bring your companies HOME and making your products in the USA.”
With the former President’s reference to the HOME front – there is another issue that the Feds consistently ignore (or forget) when they talk about legislating apparel wages for the private sector. By law, every garment made for the U.S. Military must be produced entirely in the United States. However, the federal government quietly maintains an independent corporation called UNICOR which is often retained by the military to make uniforms while paying their workers (prison inmates) somewhere between $.23 and $1.15 an hour. Their 2021 sales in the area (defined as clothing and textiles) was listed as $127,956,000. UNICOR is part of the Federal Bureau of Prisons which is a division of the U.S. Department of Justice. The UNICOR reality begs the question as to what’s good for the gander – should be equally good for the goose. Unless, of course, the goose is the one dictating the wage regulations.
When the Biden Team took over in 2020, the industry was hopeful that the new Administration would be reasonable about the world of fashion-trade. To date, there has been no Biden relief from the anti-trade positions and the situation has actually gotten worse. Initially, the Administration decided to “study” all the tariffs. Then, they failed to get Congress to renew the Generalized System of Preferences (GSP) program. Then, they targeted “hot spot” countries with threats of losing of trade benefits (as a tool for conflict resolution). Then, Team Biden pulled the African Growth & Opportunity Act (AGOA) from Ethiopia, and they threatened Nicaragua with a loss of the Central American Free Trade Agreement (CAFTA). There is a military takeover in Myanmar with a probable loss of GSP for them as well. The USA ports are still a mess, contract negotiations have not yet been completed, and several of the rail terminals aren’t fairing much better. Containers arriving from China are subject to seizure or being turned away in 30 days – if the importer cannot show that the goods aren’t made with forced labor by virtue of the recently passed Uyghur Forced Labor Prevention Act (UFLPA).
Apparel retailers and brands constantly work to preserve the environment, to protect domestic and international garment workers, and they remain cognizant about manufacturing in the “hot spots” around the world. The problem of the moment is that so much new legislation continues to be proposed, and it remains clear that retail executives are just getting numb to the attacks – probably feeling that everything will eventually settle down and perhaps the situation will improve.
For every inch that retail concedes to government – it creates two new inches of disruption and three inches of inflation. At this point, the entire fashion industry needs to come together and call out the powers who are trying to over-regulate it. Right now, the government is playing lawn mower to the industry’s newly seeded lawn.
The fictional anchorman Howard Beale (in the 1976 movie Network) – encouraged everyone to just stick their head out the window and yell: “I’m mad as hell, and I’m not going to take this anymore!”
Howard Beale also said: “Things have got to change. But, first you’ve gotta get mad!”