The Magazine of Corporate Responsibility

Trying to Break the Sweatshop Business Model

by Michael Connor

Sweatshop3One of the most persistent and challenging corporate responsibility issues for many global brands is how to manufacture products in contract factories in less developed countries while paying fair wages and maintaining acceptable working conditions for workers.

We recently wrote, for example, about the global giant Nike, whose three main product lines — footwear, apparel and equipment — are made in approximately 600 contract factories that employ more than 800,000 workers in 46 countries around the world.  In a corporate responsibility report published in January, Nike acknowledged that wage and working conditions issues remain problematic.

“While we can point to many examples of improvements, challenging issues remain for our company and our industry in systemically identifying and tackling how to affect long-term system-wide change,” the company said.

Now The New York Times reports in a lengthy feature story of a “high-minded experiment” at a factory in Villa Altagracia, Dominican Republic, that is a “response to appeals from myriad university officials and student activists that the garment industry stop using poverty-wage sweatshops.”

With 120 workers, the factory is owned by Knights Apparel, a privately held company based in Spartanburg, S.C., that is reportedly the leading supplier of college-logo apparel to American universities.  “Industry experts say it is a pioneer in the developing world because it pays a ‘living wage’ — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight,” according to the Times.

While that “living wage” is only $500 a month, the Times story reports on worker Santa Castillo, who says: “We never had the opportunity to make wages like this before…I feel blessed.”  Comparing this factory with others, union leader Maritza Vargas says, “the difference is heaven and earth.”

The experiment has been driven by Knights Apparel CEO Joseph Bozich, who, after being diagnosed with multiple sclerosis, decided that “I wanted to find a way to use my business to impact people that it touched on a daily basis,” according to the Times.

Another powerful factor has been Knights Apparel’s strong brand presence among college and universities, and a bet by the company that students will be willing to pay a premium for products made by workers that are treated well.

The economics of the business are illuminating.   Paying the 120 workers the “living wage” – or $500 a month – means the factory’s cost will be $4.80 a T-shirt, 80 cents or 20 percent more than if it paid minimum wage. Knights will absorb a lower-than-usual profit margin, selling the shirts for $8 wholesale, with most retailers marking them up to $18, according to the Times.

Knights Apparel developed its plan working closely with the  Worker Rights Consortium (WRC), an independent labor rights monitoring organization that works “to combat sweatshops and protect the rights of workers who sew apparel and make other products sold in the United States.”  The WRC has over 175 college and university affiliates.

Apparel makers Nike and Addias are board members of the Fair Labor Association, a collaborative effort that provides affiliated colleges and universities with information on the labor compliance programs of companies involved in the production of collegiate merchandise. The FLA says it has over 200 colleges and universities in the U.S. and Canada.

A Nike spokesman said his company would “watch with interest” the Knights initiative, according to the Times.

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1 Responses »

  1. I suspect, many of us have come to accept what mainstream economists like Paul Krugman, Jagdish Bhagwati, and Jeffrey Sachs have preached for too long. "Bad jobs at bad wages are better than no jobs at all".

    At the time of slavery, these economists would have given a similar argument for slavery being better than no jobs at all. By their logic, husbands can perpetrate violence on their wives, as long as they provide them shelter and food, especially if their wives are unskilled and cannot get a job due to market or social constraints. Just because slaves would "voluntarily" choose slavery over starvation, and oppressed wives would continue to suffer their husbands instead of ending up with prostitution, does it justify the status quo?

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