After two decades, Unionwear union-made hats finally figured out how to successfully compete with forced labor in China. Now we find out we may have to compete with prison labor in the USA? 

UNICOR Federal Prison Industries (“FPI”) Must Not be Allowed to Produce Baseball Caps

A decision by the FPI Board of Directors to allow FPI to produce baseball caps will destroy jobs and decimate a returning industry that is once again becoming competitive with imports.

This negative impact will far outweigh any possible benefits of FPI expanding into baseball caps.

If FPI is allowed to manufacture baseball caps, they will become a mandatory source for Federal Government work, which subsequently would no longer come up for competitive bidding. This would remove the lion’s share of work from this industry, resulting in thousands of productive employees joining the growing ranks of our country’s unemployed. And for what purpose? So prisoners can learn a trade to use upon their release? There will be no industry left to use these skills in, and the skills used to manufacture baseball caps are not transferable to the other sewing jobs, which are extremely scarce to begin with.

The domestic baseball cap industry is composed of a few dozen factories, each with 50 to 250 employees. There is not a domestic baseball cap factory out there that does not do business with the US Federal Government. This is because out of all textile products, baseball caps (because of their small size, cheap materials, and complicated construction) have the highest percentage of labor costs vis a vis materials costs.

As a result, baseball cap manufacturing has moved to where labor is the cheapest: not the USA. The factories that survive do so as suppliers to the US Federal Government and its dedication to maintaining a domestic industrial base.

Prison Manufacturing Has Advantages Over Local Manfacturing

Even if mandatory sourcing did not apply and FPI had to produce baseball caps competitively, domestic manufacturers could not compete with a factory that did not have to pay:

Naomi Klein said that climate change deniers are right about one thing: the steps we take to limit growth to mitigate the damage cause by climate change will result in economic upheaval.

Industries can take steps now to localize supply chains, or they can commit economic suicide, remain in denial, and be forced by climate, cost, or other forces to radically change their business models.

This is exactly what is happening right now in the fashion industry.

Global weirding, dressed up as “unprecedented” floods, heavy rains, and frost, have cause raw cotton prices to skyrocket, which has had a rippling effect on food and fuel costs, basically checkmating globalization. The upshot is that in America and Asia, from farming to manufacturing, economic forces have conspired to localize supply chains.

The higher price of cotton has encouraged American farmers to growing cotton on farms that had been growing food. This, in turn is pushing up food prices and causing food shortages in the poorest economies.

Your Needs: Food, Clothing, and Shelter... and 10 Pairs of Jeans?

Clothing is a necessity but fashion is a luxury, and there is only so much farmland to go around. At some point, when the world turf battle comes down to an American's tenth pair of jeans vs. an Indian's first potato, cotton is going to lose.

The end of growth is going to hit the fashion industry soon, and it's going to hit it hard. 

Newark, NJ has 300 factories with over 12,000 employees

Who knew? Most of us are working out of unmarked concrete buildings, contract manufacturing for national brands.

A group of small business owners and city analysts, meeting monthly as a “Small Business Job Creation Policy Board”, determined that bringing our factories out of the shadows and promoting them to other manufacturers, to other sectors of the economy, and to the region at large would help to bring business to the city and result in hiring.

Manufacturers are more likely to hire Newark residents than other sectors, and manufacturing is more labor intensive than other sectors, so highlighting Newark’s thriving factories and infrastructure seemed to be the easiest way to have a positive impact on job creation.

We developed the Made in Newark Campaign as a comprehensive, low cost strategy to bombard the masses with the message that manufacturing lives in Newark.

Unionwear manufactures headwear, bags (such as backpacks, garment bags, and handbags), and workwear (like safety vests and scrubs), with 120 union workers in Newark, NJ. Which means that not only are all of our products low tech and labor intensive, but in every product category we probably have the highest paid labor in the world.

We didn’t create all these jobs by ourselves.

Without public private partnership and help from unions and NGO’s we’d be crushed by sweatshops in China. Our labor was in effect subsidized through training grants, procurement policy and incentives from the city of Newark, the State of New Jersey, the NJ Department of Labor, and the US Departments of Defense, Labor, and Commerce.

Every job we have created over the last 10 years has been the result of a public/private partnership that takes into account what we call the four pillars of job creation.

The four pillars are:

For Unionwear, the tipping point was when our labor union's business agent was transferred from New Bedford, Massachusetts to Cambodia, the same week that we learned that the nonprofit organization, "K to College", was moving the production of 150,000 tote bags filled with a year's supply of school supplies from China to our union shops in New Bedford and Newark.

After decades of effort, from "Look For The Union Label" to United Students Against Sweatshops (USAS), "Labor Content" has joined "Green" as a factor in institutional purchasing, as higher eduction, nonprofits, and the public sector increasingly consider the impact of international worker rights violations behind the low prices of many imported manufactured goods.

July 2010 has been a month of firsts: For the first time, the US is pursuing a labor law violation against a free trade partner. For the first time USAS has endorsed a collegiate licensed product manufacturer, who specifically built a facility that conforms to USAS's stringent code of ethics. For the first time, a major apparel brand has agreed to take responsibility for the exploited workers of one of its overseas contractors.

What's behind this sea change? There is a premium institutions will pay for ethically produced merchandise—and that premium is beginning to exceed the difference in cost between ethical and sweatshop goods. Cheap labor is starting to look relatively expensive.

July 2010 also saw a critical mass of firsts on the supply side: China considering allowing the Yuan to float against the dollar, union labor striking in China, activists causing a minimum wage doubling in Bangladesh. The supply of electricity and even space on cargo ships has been drastically reduced, leading to additional spikes in pricing. Add this to the weak dollar, wage inflation in China, and rising shipping costs and headaches: The era of cheap imports may be over.

Will the health care bill help or hurt small business owners? That mainly depends on one factor: whether or not they already offer health insurance.

If you own a small business that presently offers health care, the health care bill will obviously help your profitability. A central feature of all the proposals is the creation of a national risk pool, which would eliminate the penalty small businesses face because of their tiny risk pools. This would enable small businesses to compete for labor with larger businesses, and it may even bring rates down.

Macroeconomics dictates what will happen next: the marketplace will reward employers who have already been offering health insurance. Your competitors who do not presently offer health insurance will see their costs increase at the same time yours decreases. They will respond by providing the absolute bare minimum necessary to comply with the health law, then raising prices while yours remain constant. This will result in greater market share for you, which will result in your needing to hire more employees, with benefits that exceed the bare minimum.

US Small Businesses will not become less competitive, because we already can't compete with countries that have lower labor costs. An 8% increase in labor costs will not make us less likely to take business away from a factory in China where workers earn $40 per month. US Small Businesses compete with each other--and if they all have to offer health insurance nothing will change except that their workers, and our economy, will be healthier. A recent government imposition of health regulation that was bitterly fought by small business may provide a glimpse into the future: when New York City banned smoking in bars and restaurants, their owners predicted the end of Manhattan nightlife. Guess what--people adjusted. Quickly. Given no choice, people gave up smoking inside but not drinking. The model has proliferated nationwide.

If you don't offer health care to your employees, that means one of three things:

The executive branch has always had the power to redefine words to serve their interests.  Reagan's USDA reclassified "ketchup" as a vegetable so school lunches could meet both budgetary and nutritional requirements.  George W.'s DOJ redefined "torture" so as not to violate international agreements, and Bill Clinton himself took a stab at redefining the meaning of "is" with reference to another sort of violation. 

Now Obama's Department of Homeland Security has redefined the word "domestic" to include products made in Mexico and Canada in order to reconcile the "Buy American" provisions of the Stimulus Package with NAFTA.  

So the Kissell Amendment, which was intended to give USA manufacturers an edge, has actually handed the edge to Mexico, which is now allowed to bid on "domestic" contracts but is exempt from any of the Workers Rights provisions of the Federal Acquisition Regulations regarding workplace safety, overtime, child labor, and other abuses. There is just one problem: the Kissell Amendment does not use the word “domestic".  It specifically requires that TSA Uniforms be produced "in the United States".

In 1992, Ross Perot foretold of NAFTA causing a grand migration of jobs to Mexico to emit a "giant sucking sound." I started Unionwear the month Perot made that famous prediction and spent the next few years second guessing my career choice.

Q. So why don't I ever see apparel labelled "Made in Mexico?"

Step 1: The law of supply and demand met the law of unintended consequences

Legend has it that immediately after the passage of NAFTA, US agribusinesses began flooding the Mexican market with cheap corn and other farm products. This drove Mexican farmers out of business, and North in search of factory jobs faster than American maquiladoras could be deployed along the US-Mexico border. The supply of cheap labor outpaced the demand for it, and real wages began shrinking. Desperate, Mexicans began illegally crossing the border where they were able to find work building and maintaining the houses built during the real estate bubble and filling entry level positions in the burgeoning service economy.

Step 2: Natural selection meets adverse selection

Free trade is defined as the ability for a buyer and seller to conduct business without government interference.    So when the government is the buyer why can't it freely choose who to buy from without incumbent sellers claiming interference with free trade?

I have a solution to this loophole-infected quagmire: Scrap protectionist language and simply require sellers to the US, state and local governments to comply with US labor law regardless of where the goods are made. 

A recent NY Times Editorial about the "Buy American" bill is a perfect example of how easily the razzle of "Free Trade" can dazzle the journalistic integrity of our last great voice of skepticism.

Looking for some good economic news? Look no further than US Manufacturing.  China's advantages in manufacturing have all but eroded  according to Business Week.    The US Trade Deficit sank to a ten year low.  And all sorts of indeces are pointing to an impending expansion in domestic manufacturing ahead of the rest of the economy.  This is such positive news I'm hesitant to even mention it.  At this point my grandma would chide me for begging the evil eye to come and knock my optimism down a peg, and attempt to ward it off with a medieval Yiddish spell ("kinna hurra").  What's happening and why?

Legislation Levels the Playing Field