The first accomplishment of California’s pioneering $15 minimum wage law is killing the revival of America’s clothing industry.
American Apparel, which provided 10 percent of all apparel manufacturing jobs in Los Angeles, has terminated 500 employees in the last two weeks. Chief Executive Paula Schneider also told the Los Angeles Times that “manufacturing of more complicated pieces, such as jeans, could soon be outsourced to a third-party company.”
The company did not tie the announcement directly to California Governor Jerry Brown signing of the nation’s first statewide $15 minimum wage on April 4. But the layoffs started shortly almost immediately after Brown’s action and were announced on April 14 as labor organizers filled Los Angeles streets with fast-food workers set to strike, supported by unionized home-care and child-care workers.
Lloyd Greif, Chief Executive of Los Angeles investment banking firm Greif & Co. told LATimes, “They’re headed out of Dodge.” He added, “They are going to outsource all garments. It’s only a matter of time.”
At the turn of the 21st Century, Los Angeles County was the “rag trade” capital of America. With 4,000 active apparel-making sites employing almost 90,000 workers, the Los Angeles area was over twice the size of the rag trade in the New York region.
Apparel-making got cut in half over the next decade, as Chinese and Asian imports coming through Los Angeles ports sky-rocketed to $46 billion. The number of local apparel-making sites fell to 2,200 and local industry jobs shriveled to 46,000.
But according to the California Fashion Association, Los Angeles apparel-making was back to growth by 2013 as a “steady inflation rate” in China, driven by higher labor costs, increasingly pushed apparel manufacturing and textile contractors to move to lower-wage countries like Vietnam, Cambodia, and Bangladesh. Coupled with high sea, land, and air shipping costs, the advantage in outsourcing apparel-making versus U.S. manufacturing became much less attractive.