Knowing what things truly cost can help us live like we are already retired.
In this episode you’ll learn:
- What are the three things that make up the cost of a thing.
- What are negative externalities.
- The difference between something that is used versus used up.
- How to live like you’re already retired.
Earnest Elmo Calkin quote: “Consumption engineering must see to it that we use up the kind of goods we now merely use. Consumption engineering does not stop until we can consume all that we can make.”
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Why Clothes Are So Cheap
On April 24, 2013, an eight-story building located on the outskirts of Dhaka, Bangladesh collapsed, killing 1,100 people and leaving 800 children orphaned.
The building, known as Rana Plaza, housed clothing factories where workers—mostly women—sewed clothes for brands such as J.C. Penney in the U.S. and Joe Fresh in Canada.
Several days before the collapse, workers pointed out to their employers visible cracks in the building. The workers said they were told to go inside and work anyway.
At the time, minimum wage for factory workers in Bangladesh was $37 month or approximately $1.25 a day according to the Los Angeles Times.
A standard shift in the five factories at Rana Plaza was 13 to 14.5 hours. Workers got two days off per month. Depending on the worker’s skill level, the hourly wage was between 12 and 24 cents per hour, according to the Institute for Global Labour and Human Rights.
Bangladesh has four million factory workers, most of which are women sewing clothes to be exported to the developed world.
40% of people in Bangladesh live on less than $1.25 a day, spending 60% of that income on food according to the International Food Policy Research Institute.
Using an iPhone app called Wish you can order a dress shirt for $6 and have it sent to you directly from Bangladesh or another developing country. Shipping is $2. A men’s sport coat is $12 and a women’s sweater is $7.
This is the state of the global garment industry. Consumers can buy clothes for less than $15 made by women working long hours for pennies, often in unsafe conditions.
Not Sewing Fast Enough?
Benjamin Powell, Director of the Free Market Institute at Texas Tech University wrote in the Huffington Post, “It is unfortunate that more than 1,100 Bangladeshi people died in a factory collapse a year ago. It would be even more unfortunate if emotionally-charged activism in the wake of that tragedy led to regulations that destroy the jobs that are helping millions of others escape extreme poverty.”
He argues that garment factory jobs are a step up for these women, and that higher pay and enforcing existing safety standards will cause clothing companies to shift their manufacturing to places where costs are lower, or they will replace manual labor with machines.
He says the reason these women are paid so little and must endure unsafe working conditions is because they are not sufficiently productive.
If these women would just sew faster then they could make more money. And since so much of their compensation goes toward buying food, these women prefer to get most of their worker benefits in the form of pay instead of safety.
Not The Poorest Country
Surprisingly, Bangladesh is only the 48th poorest country in the world as measured by its economic output per person.
If clothing manufacturers want to shift their production to places where they can pay even lower wages then there are plenty of other places to go.
Bangladesh is about to find out. The country recently raised their minimum wage for factory workers to $68 a month.
For capitalism to function properly does it really require workers in developing countries to work ridiculously long hours in unsafe conditions for meager pay?
What if consumers choose to pay a little more and buy clothes from companies that provide transparency regarding the pay and working conditions of their workers?
My daughter has bought t-shirts from Krochet Kids, a not-for-profit that sells clothes made by women in Peru and Uganda.
Krochet Kids not only provides women a consistent income to help lift them and their families out of extreme poverty, but the not-for-profit also provides education and mentoring to put their employees on a sustainable path where they don’t need outside aid.
The children of the women who participate in the Krochet Kids programs are eight times more likely to attend high school compared to non-participants. Education is a key step for a nation to increase their overall labor productivity.
Krochet Kids t-shirts cost $20 to $30. T-shirts on the Wish app cost $6 to $12.
Is it not worth paying an extra $8 for the transparency of knowing where your clothing is made, how it benefits the worker and that the working conditions are safe?
Doing The Right Thing
There is no predetermined course capitalism has to take. Companies can and will change their behavior if their customers demand it.
If consumers only care about getting the cheapest price, then there will be a race to the bottom as retailers and brands demand greater and greater price concessions from their manufacturers, forcing those manufacturers to cut corners including on worker safety.
If money is tight, rather than buy the cheapest clothes they can find, consumers could buy fewer, higher quality clothes that last longer. They could even buy those higher quality clothes used.
Seth Godin wrote, “I worry that we absolve ourselves of responsibility when we talk about business ethics and corporate social responsibility. Corporations are collections of people, and we ought to insist that those people (that would be us) do the right thing. Business is too powerful for us to leave our humanity at the door of the office. It’s not business, it’s personal.”