Wages, work force and cost of goods
The reality of the costs of goods is rarely acknowledged in the eyes of the consumer. Back in my garment center days, we made a jacket (style number 196) that was one of our best selling items. The large department stores knew what price they could sell that jacket at all day long. It was a winner. The issue was each store had to hit certain margins for them to be profitable and so did we. The department stores really did not care how we got that jacket to them at the price they needed because their job was to sell it to their customers. Our job was to make the garment so we figured out how to get less expensive fabrics, beat up our manufacturers for better labor costs down to the buttonhole.
Here is the thing, in order for those laborers to feed their families, pay for a roof over their house, have health insurance and all the other amenities needed to live, they can’t be below a certain price either. Consumers, aka Americans, can’t have their cake and eat it too. You can’t expect to buy products at extremely low prices that are Made in America and dis employers for not paying their workers enough money.
I am all for paying the workforce the right price for the work done but that first cost bleeds downhill until it gets to the consumer. That goes for restaurants that now must pay everyone in their staff $15 an hour, including the dishwashers. The long tail of that is the cost of a restaurant meal is getting more expensive. This is the same thing with making cars, manufacturing t-shirts, making furniture and more.
There was a great quote from an Omaha roofer I read this weekend when it came to his reliance on immigrant workers on temporary visas. He summed up exactly my thoughts. “In my experience, the same people who ask me why I don’t pay my employees more (I’m a farmer) are hypocrites. If you are buying goods on Amazon or at Costco, for example, you are supporting the lowest-paying employers that produced those goods. Most often those employers are not even U.S.-based. You can’t bargain-hunt for everything you buy and then turn around and bash employers for not paying their workers more. Paul Underhill, California.
Comments (Archived):
you point to the dilemma J
it has been there FOREVER
My grandfather was a union organizer in the sweatshops of the garment district so I grew up with this debate at the kitchen table.And in my world today, I see it most of course in the food business from kitchen laborers in our wellness products to dishwashers in our favorite bars.It is a broken system from start to finish and honestly, beyond the pale of my imagination to address.
The Unions are right there in the midst of this. Not sure what the answer is.
I think it’s important to delineate between unions at private companies and unions for government employees. There is a difference, because private employee unions are constrained. If a company goes out of business, so do they.
This argument, while superficially compelling, is missing the point from a broader economic perspective. It may be true for a solo roofer and for a restaurateur, but when the stated goal of a corporation is to maximize shareholder value, you legitimize the countless situations in which a company treats labor like dirt, not just to make “sufficient” margins to stay afloat, but to make sure that the CEOs earn ungodly salaries, and that early investors can see outsized returns on their investments. That’s not a consumer problem. Giving some of the value back to those who create it through their labor should be the responsibility of the companies that use that labor to generate profits. Unfettered capitalism, without some checks and balances and reasonable limits in place, is destructive, because it places no bounds on how much of the value created by labor can be shifted to the corporations and its shareholders. Why should consumers stop asking for better bargains, when corporations are clearly and systematically unwilling to do the same?
Fair point. The upper management salaries are completely out of line in many companies.
I believe Costco has a culture of paying their employees pretty well, as far as the retail sector goes and their employees have a high employee satisfaction rate. An interesting thing about Costco is all their produce and fruit are organic, but they don’t label it as such because they did a marketing survey and customers believed that “organic” meant expensive. https://www.wellandgood.com…Costco is also lending money to farmers to build their businesses. https://www.ecowatch.com/co… I think Costco is one of the more ethical retailers out there.
A company should produce where marginal revenue=marginal cost.(Iron law of economics, MR=MC) Individuals seek to maximize their profit, and companies seek to maximize theirs. Hence bargaining, shopping etc. Ironically, farmers are pretty attuned to this since they sell commodity crops which are a lot different than your blazer example.An interesting thing we found at WLV when doing research on Fin Tech was 65% of a bank’s top line revenue was eaten up by COGS. Other industries are different but it shows why companies would have a huge incentive to automate and use artificial intelligence to replace some jobs.Economically, it can be shown that in this day and age unions don’t create jobs but restrict them. Raising minimum wages hurt the people they are designed to help. It’s important for people to get that first job, which is what minimum wage can do. Most people don’t stay at that wage for very long. A lot of independent businesspeople I know are simply not hiring anymore, or laying off and doing with less in the face of higher minimum wage laws. Others are starting to implement technology from companies like UICO.com to replace workers.
The answer here is mostly to cut down on middle men.If there are fewer layers, labor benefits and consumers benefit.Unfortunately the games are more financial manipulation of cashflow than actual unit economics. Unit economics are an eyewash and there has never been any doubt that people make a margin in apparel.Its how that spread gets eaten by people in between.The counter point here is loss of jobs in the middle… Of Retailers, Manufacturers, Factories. Merchandisers, Buyers, and all those middle management jobs are being replaced by software and the internet.Fashion plays a role in determining final selling price – Not the actual cost of the goods.- Pranay