Los Angeles’ Recent Minimum Wage Hike Challenges Apparel Factories
Ever since 2016, Dov Charney has been successfully inching his way back into the Los Angeles apparel industry with a growing venture called Los Angeles Apparel, which now employs 1,500 workers at its factory.
But a July 1 hike in the Los Angeles city minimum wage from $15 an hour to $16.04 is throwing a curveball at the longtime, controversial apparel-maker, known for growing his American Apparel brand in Los Angeles and building it into the largest U.S. clothing factory before going bankrupt twice in 2015 and 2016.
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That 7 percent pay hike may not sound like much, but for Charney, it translates into an additional $60,000 a week in wages for his workforce.
“It forces the domestic manufacturer here to be more efficient,” said Charney, who is a diehard advocate for domestic clothing manufacturing even as if there are more obstacles. “It may result in a kind of Jack Welch [the former General Electric chief executive officer] reduction to get rid of the bottom 10 percent of the people who are least efficient or tighten up scheduling or bring in engineering or automation.”
He doesn’t believe the minimum wage will kill local apparel manufacturing, but it is still one more hurdle. On the bright side, he points out that his customers will now have $40 more a week to spend on his T-shirts and other clothing.
For the last three decades the Los Angeles area has been the U.S. hub of apparel manufacturing, surpassing New York City as more clothing companies switched their production in the ’90s to overseas factories. At that time, 56 percent of clothing sold in the U.S. was made domestically. That has plummeted to 3 percent, according to the American Apparel & Footwear Association.
Every year, Los Angeles loses more and more apparel factory jobs because of foreign competition, state regulations and companies moving to nearby states such as Nevada, Arizona and Texas, where wages and regulations are less stringent.
In 1998, there were 98,400 people in Los Angeles County working in apparel manufacturing. In 2012, that declined to 45,700 people and then dipped again in 2022 to 21,100, according to the California Employment Development Department.
Steve Barraza, who has been a Los Angeles clothing manufacturer for more than 30 years, has witnessed the industry’s ups and downs, but mostly downs. His 20,000-square-foot factory just south of downtown Los Angeles has seen a steady drip, drip decline in workers.
Before the Great Depression of 2008, Barraza had 200 workers making brightly colored washable silk, knit and Tencel tops for his Tianello label always popular at trade shows such as WWIN Womenswear in Nevada in Las Vegas.
He has experienced many minimum wage hikes, and every time he figures out a way to whittle down costs. The pandemic pushed him to sell his clothing online, which turned out to be a lifesaver. He rarely deals directly with retail clients anymore. Instead, 95 percent of his merchandise is sold online. And he no longer goes to trade shows, saving him about $200,000 a year.
While about half his sewing workers are paid between $18 to $20 an hour, they still expect to see a $1 an hour pay raise to keep ahead of the other minimum-wage earners on the factory floor. “Everyone wants above what they are making now,” he said. “And with increased wages, you have to pay more for worker’s compensation. It’s just more inflation.”
To recoup his added expenses, he isn’t sure whether he will raise his prices yet. “We will have to be more efficient, but we still have to maintain our margins,” he explained.
Nevertheless, Barraza is thinking of moving some of his silk blouse production to China once the COVID-19 shutdowns there are over. “It costs me $50 to sew a silk blouse here in Los Angeles. I can build that same blouse in China for $35, including shipping,” he said.
For Martin Barrack, president of Dynamic Denim, the minimum wage spike means one thing: His customers will have to pay 10 percent more for their denim pants and canvas bags that his 80 workers sew at his South Los Angeles factory. “I am going to try to push them to pay more money,” he said.
Barrack said it is increasingly difficult to keep an apparel company going in Los Angeles. He used to work with some of the best denim brands in the U.S. – Guess, J Brand, Diesel and Seven For All Mankind. But several years ago, those brands shifted most of their production to Mexico because of lower production costs.
“To stay in business, we try to do everything as close to margin as possible. We just need more people to see that ‘Made in America’ means something,” he said. “In general, we need more support for manufacturing in Los Angeles.”
At Lefty Production Co., a Los Angeles apparel production company cofounded in 2012 by Marta Miller and Emily Roiff, the minimum wage issue is minor because most of the company’s 10 sewers and 35 additional employees earn above $16.04 an hour.
But Lefty Production, which makes a number of products for 220 different labels, relies on many subcontractors, such as dye houses, sewing contractors and silk screeners, who are upping their salaries in line with the minimum wage.
“Before you would go to the silk screener, and it would cost one or two dollars a unit, and now, all of a sudden, it is $4.50 a unit. Or garment dyeing, it would cost 47 cents a unit and now it is $3 to $4 a unit. Even the cost to invoice something has gone up,” Miller said. “You can pass a few dollars on to the customers, and they understand inflation. But wow, it is hard to bury these costs.”
Minimum wage is just one element affecting the apparel manufacturing equation in Los Angeles. State regulations are often stiffer than elsewhere. That was seen by the recent passage of Senate Bill 62, which went into effect on Jan. 1.
The bill stipulates that brands or companies contracting with an apparel manufacturer are responsible for all unpaid employee wages in that facility and that factory workers can no longer be paid for every piece they sew but must receive an hourly minimum wage. Many apparel factories were paying workers for the number of items they sewed instead of a fixed hourly rate.
“SB62 is playing havoc in our industry,” said Scott Wilson, who is a partner in two L.A. factories — Jin Clothing and Vertical Apparel — with a combined 95-person workforce. “Our activewear factory just picked up some business from Beyond Yoga because two of their main factories are closing because of SB62.”
He is also seeing more factories move out of state. “In the last few years, different people in the industry have moved to Texas, and everyone said it was the best thing they did. Their savings are 30 percent and above,” he said.
Last year, two major L.A. apparel factories with hundreds of employees moved to Mesa, Ariz., said Ilse Metchek, president of the California Fashion Association, a Los Angeles organization that advocates for the local apparel industry and shares business information.
States like Arizona have fewer environmental regulations and cheaper costs. “I know a Los Angeles textile company that wanted to expand and buy the facility next door because they were so busy,” she said. “But in order to buy the facility, they would have to completely redo their existing 100,000-square-foot facility. We keep people from growing because of restrictions.”
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