Eric Dirnbach, Workers United
The New York Department of Labor has conducted two high profile investigations of New York City sweatshops over the past year which uncovered serious minimum wage and hour violations. In July 2008, the state announced that a contractor that had operated under the names Jin Shun and Venture 47 had underpaid over 100 workers by more than $5 million over the past few years. Earlier this year, the state revealed that another contractor, Technical Garment USA, underpaid 16 workers by over $500,000. In both cases the contractors were found to be using two sets of time cards and had required their workers to work up to 80 hours per week, with no payment for overtime work.One of the owners of Technical Garments was also recently sentenced to five months in prison for payroll tax violations.
Low wage workers are particularly vulnerable to the practice of wage theft, where they are systematically paid less than the minimum wage or not properly paid for overtime work. Kim Bobo, in her excellent book Wage Theft in America, gives an analysis of the myriad ways workers are cheated out of their wages and the inadequate enforcement of labor laws. Millions of workers are not paid their proper wages, and billions of dollars are stolen from them by their employers every year. Bobo describes this systematic wage theft as the “crime wave no one talks about".
An impressive new report sheds more light on this crisis. Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities, conducted by a coalition of labor research groups, has documented widespread wage and hour violations in a number of low wage industries in New York City, Los Angeles and Chicago. Based on a 2008 survey of 4,387 low-wage workers, the report finds that “many employment and labor laws are regularly and systematically violated, impacting a significant part of the low-wage labor force in the nation’s largest cities.” Some of the major findings include:
- 26% of surveyed workers were paid less than the legally required minimum wage in the previous work week, with 60% of those workers underpaid by more than $1 per hour.
- Over a quarter of the workers worked more than 40 hours during the previous week, with 76% of those workers not paid the legally required overtime rate, and the average of those workers working 11 hours of overtime.
- The average worker lost $2,634 out of total earnings of $17,616, or 15% of their earnings, and an estimated over 1.1 million workers in these cities had at least one pay-based violation with a total wage loss of more than $56 million per week.
Particularly interesting, for those who have been engaged in anti-sweatshop work in the apparel industry, is that the “apparel and textile manufacturing” sector was one of the worst violators of wage and hour laws. The report found that almost 43% of surveyed apparel and textile workers were paid less than the minimum wage, the highest of all sectors that were studied. Looking at occupations, “sewing and garment workers” had the third highest rate of wage violations, also with about 43%. The apparel and textile sector had a rate of overtime violations of 71%, and the sewing and garment occupation had a similar overtime violation rate of 70%.
These are astonishingly high rates of violations. The report explains some of the factors that contribute these numbers. Workers were much more likely to be underpaid if they were compensated by some method other than the standard hourly rate, rising from a 15% wage violation rate for hourly workers to 46% for non-hourly, and 61% overtime violation rate for hourly workers to 92% for non-hourly. Apparel is notorious for operating on the piece rate system, where workers are paid according to the number of garments they work on, and this allows for the easy manipulation and abuse of pay rates and overtime hours.
The wage and hour violation rate also increases wherever there are female and immigrant workers. The wage violation rate for male workers was 20% and for female 30%, and the overtime violation rate was 75% and 79% respectively. The wage violation rate among U.S.-born workers was 16%, rising to 31% for foreign-born workers, and the overtime violation rate was 68% and 80% respectively. The U.S. apparel industry has for over 100 years primarily employed female immigrant workers, from the Jewish and Italian workers at the beginning of the 20th century, to the Asian and Latino immigrants today. Employers in this industry have often felt that they can take advantage of female workers, and immigrants often do not have a full understanding of their labor rights and also have less power to complain about violations.
If piece rates and an immigrant workforce partly explain how employers are able to cheat workers, this doesn’t explain why they do so. Of course some employers are simply dishonest and look for ways to exploit and steal from their workers. But the apparel industry, like many others, also suffers from intense competition that drives down labor standards. The garment shops in the U.S. feel this pressure very acutely since they have been competing for many years with overseas apparel sweatshops that have labor costs that are a fraction of U.S. levels. The U.S. apparel industry has been undergoing a long and steady decline for the past several decades, employing over one million workers in the 1970’s, and less than 200,000 today. In the 1960’s, less than 5% of apparel bought in the U.S. was imported and today it’s over 90%.
This globalization of apparel production has spread the work to dozens of developing countries, with the largest share now located in China. And these contractors are under relentless pressure to cut costs and deliver lower prices to their buyers, the major apparel and retail corporations like Nike and Wal-Mart that own the brands that are familiar to customers. In the context of this brutal global competition, it is not surprising that many of the apparel contractors that remain in the U.S. have resorted to cheating their workers in order to stay in business.
If this kind of widespread wage theft can occur in the U.S. with a relatively well developed labor law enforcement system (though with many problems as shown by Bobo), what about the situation in developing countries where the enforcement system is likely to be even worse? Overall data on unpaid wages for the global apparel industry is not easily available, but many factory investigations from a number of countries have shown that this kind of wage theft is unfortunately common, and a major reason why the global apparel industry is considered a sweatshop industry. Several years ago, an investigation of factories in China by Business Week found that wage and hour violations with false recordkeeping were routine in a number of industries including apparel. According to their article Secrets, Lies, and Sweatshops, “American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics. But factory managers in China complain in interviews that U.S. price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism.”
Furthermore, a new report this year by China Labor Bulletin, Going it Alone: The Workers’ Movement in China (2007-2008), reviewed the tremendous labor unrest occurring throughout China and concluded in an analysis of 100 case studies that “more than a third of the cases…related to clear violations of legal rights, such as the non-payment of wages, overtime or social insurance contributions, or the failure to pay the compensation prescribed by law after the termination of employment contracts.” This kind of wage theft in China is one of the main reasons why the country is such an attractive environment for international business. In fact, when China implemented a progressive new labor law last year, in recognition of the widespread labor problems, multinational U.S. corporations lobbied against it and threatened to take their business out of the country.
This global wage theft is a main characteristic of the hyper-competitive “sweatshop globalization” that has developed in recent years. Workers in nearly all countries clearly need much better labor law enforcement, and they also need strong labor movements to raise labor standards and hold employers accountable. Of course, in many countries the minimum wage is not even sufficient to raise workers out of poverty. So to be systematically paid even less than that represents a vast and illegal transfer of wealth from Global South workers to largely Global North owners and investors, and it must be said, to consumers. This issue of wage theft and inadequate minimum wages should be important to all of us as buyers of apparel and other consumer goods, especially those products that come from overseas, since we benefit from the low wages that result in prices that are lower than they should be. Global North consumers should consider how we can work in solidarity with workers to ensure that they are able to earn a decent living making the stuff we buy.
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