The Working Poor

by David K. Shipler

  In average times, Joe Zabounian paid himself up to twice that much, but it was not a lot for a man who had owned a business for twenty-five years. He and his wife together took $5,000 or $6,000 a month out of their small, eighth-floor sewing loft called Adrienne, where about fifteen employees (down from twenty-two in better days) used old machines to stitch the hems and seams of evening gowns and other apparel more elegant than any of them could ever afford. Joe was a sad-eyed, melancholy man wrapped in grayness—a gray crew cut, a gray-blue short-sleeved shirt, and jeans. Several decades ago he arrived from Beirut, where his family had been in the retail business. “Actually, men’s wear, not ladies’,” he explained, “so it’s something new for me. I still don’t know how to sew to this day. But I know if something is wrong, something has a problem, what needs to be done on it.”

  The people who did know how to sew, all of them women, were skilled and longtime employees who earned at least the minimum wage,

  Joe said, but usually didn’t go above $7 to $7.50 an hour. “I’ve had girls here for twenty years,” he remarked. “They average about ten years, probably.” In other words, upward mobility didn’t exist. They got no fringe benefits, and when there was not enough work, he had to call and tell them not to come in for a couple of weeks.

  Paying by the piece rather than the hour would have made his calculations easier, for he would have known precisely how much each garment would cost to assemble. But he couldn’t follow his preference because the high quality of the work he got from designers was “too intricate,” he noted. “It’s too complicated, more time consuming. You can’t really put a time on how long it should take. You estimate, more or less.” That forced him to keep as many as 60 to 70 percent of his employees on hourly wages. The others, on piecework, sometimes asked for more when the job was taking longer than expected, and occasionally Joe could raise their rate. “It depends on what I’m being paid. If my margin is very low on it, I can’t do very much, even though I try to balance it. Maybe I lose fifty cents and give them the fifty cents. That happens sometimes.” Could he have gone back to the designer and asked for more per garment? “That’s a rare happening. Basically you’re stuck with the price. Sometimes you take work just to have work for the girls. You break even, but you keep your girls busy. I’ve done that many times.”

  This niche of high-quality designer work that had to be done quickly and well was what kept Joe in business while most of the large-scale, mass-produced sewing had gone south to Mexico or west to Asia. If the stitching could be relatively shoddy and the manufacturer could wait many months for the finished goods, it was worth shipping the pieces to low-skilled operations overseas. But when the shifting taste of the fashion world had to be satisfied in weeks, manufacturers used Joe and other contractors down the street or downstairs.

  They paid a premium to do so, but not much of it filtered down to the women behind the sewing machines. That black strapless gown on the rack would ultimately sell for $200 or $300, Joe figured, and he charged just $20 to sew it together, which was about 15 to 20 percent more than it cost him to make. Labor accounted for some 70 percent of his expenses, so he couldn’t raise wages without making himself uncompetitive or cutting severely into profits. Another contractor might do the dress for $10, he said, but the quality of work would be lower.

  The sweatshops that cheated their workers were irksome to Joe because he paid his employees more and had to charge more for the finished garments. He simply could not compete in dollar terms, only in quality. “Six months, a year they open up a shop,” he said of the sweatshop owners, “they work there, then they shut it down and go somewhere else.… This corner space back here was shut down maybe three, four times within three years. They’d open up for six months, shut it down, open up for six months and shut it down. New names, new owners. People come for their payroll, the place is closed, nobody’s there, they don’t get paid.” If you’re an owner who doesn’t pay your workers for two weeks, Joe noted, “You’re talking maybe $20-, $30,000 that goes into your pocket. All that stuff happens.”

  When Joe was hiring undocumented workers, he didn’t think much of the law against hiring undocumented workers. Now that his were all documented, he thought the law protected him. But it was still absurd, he felt. “There’s a demand, absolutely,” he said, “I doubt that there’s any American that would work for $7 or $8 an hour, $6 an hour. It’s just not gonna happen. This industry would shut down.” His supposition is only half right. Half of all new workers entering the American economy are immigrants, yet many Americans in many businesses do work at such wages. Garment manufacturing is a case study in the difficulty of bringing economic justice to the rank and file in an industry squeezed by global competition. The hard rules of the marketplace will yield only to stricter government regulation and a measure of conscience.

  At the upper levels of fashion, some designers such as “Nicole” allowed a sense of guilt and concern about wages and working conditions to creep into their consciousness, and they took care to check on their contractors. They could afford to do so.

  Slender and meticulously dressed, Nicole tried to look chic even in the disorder of her workshop. She had done her dark hair in careful curls, had painted her lips bright red. She had a steely mind for both business and morality. She could have had garments assembled for half the price, she estimated, by using unscrupulous sewing firms. “There are definitely a lot of shops out there that are disgusting,” she said. “You wouldn’t even want to meet the person who runs it, because they’re like a slumlord, you know? That is just so unappealing to me that I would never even go there. It’s not worth it. I think that it’s really heinous and indecent, and I think that it exists in a multitude of industries.” She observed acidly that nobody seemed to hear much about exploitation that produced radios or widgets, but when the luxury and glamour of elegant clothing were created in sweatshops, the paradox was too searing to ignore.

  Nicole tried to do right by avoiding “handmade” fabrics, which to her meant textiles produced in China or India by exploited child labor. “I don’t buy things that are touted as being handmade,” she declared, “when I know that handmade means literally on the dirt floor with a bucket of fish heads as payment.” She paid her own employees a minimum of $8, and her best sample makers got up to $13 and $14. “The stores say, ‘If you were 20 percent cheaper, we’d buy more,’ ” she noted, but “we pay a higher salary ’cause they deserve it. They do really great work. My regard or my esteem for what these women do is that it’s a craft. It’s not about getting people in to crank out the best for as little as possible. It’s really about paying them pretty much top dollar and expecting professionalism and integrity back, which is what I get every day.”

  Fine sentiments do not stand firm against the economic imperatives of running a business, however. And economic behavior is heavily psychological, as anyone who has played the stock market knows. When you have started a business from nothing, as Maria Wojciechowski had, you feel instinctively how tenuous prosperity can be, and that translates into anxiety about how much you can afford to pay your employees. Maria was tall, blond, and still willowy enough to be the model she once had been, and she was doing well now—extremely well, with profits of half a million dollars annually for a line of women’s clothes called Maria Bianca Nero, which she designed, manufactured, and sold in Bloomingdale’s, Saks, and a hundred other stores. Yet the hard beginnings still weighed on her judgments; they made her cautious about raising wages (she’d rather have given bonuses, which could be skipped in a bad year) and resistant to taking loans (she kept cash reserves to buy material and meet payrolls). Her office, which doubled as a large work area, was furnished like the apartment of a kid who just got out of college; her desk was an old door supported by two black filing cabinets. Her mindset had not caught up with her success.

  She had begun by making basic mistakes. She opened a small store, drew patterns, bought fabric, took everything to a woman who had a litt
le factory in her house, and gave her an order: ten smalls in black, three mediums. Then Maria picked up the finished dresses and sold them in her store. She had only a vague idea of what they were costing her. She paid the woman’s rent, plus $20 to $25 an hour—a fortune in the garment business. After three years she realized that a dress she was selling for $200 was probably costing $250 to make. Furthermore, burglars broke into her store twice and took most of her stock. The second time, luckily, she had the new season’s inventory in her apartment, and she decided to give up the retail operation and go wholesale instead. Working with her husband, Yannis, she contracted with a sales representative for a 10 percent commission. “We put a little line together and we gave it to her,” Maria remembered, “and she sold it, and we filled the orders little by little and just started very, very small.” They lived on a shoestring and didn’t even have medical insurance. What they did have, however, was Maria’s creative, somewhat conservative eye for dress designs that were mildly inventive but not flashy. Step-by-step, her ideas caught on.

  In retrospect, the basic lesson she learned seemed to be straight out of Entrepreneurship 101: “The whole key to having your own business is your overhead,” she said, and a big chunk of overhead is the cost of labor. “When we first started, we had no overhead. It was me and Yannis. We didn’t pay ourselves. We took whatever we needed to, like, eat. We didn’t have any employees, and we had very little overhead for the rent—$250 a month. So we knew that we didn’t really have to hardly sell anything and we were still going to be in business ’cause we only had these expenses every month. So that’s the key. And then as you grow, you still want to keep your overhead to a manageable level … to absorb the bad times ’cause you don’t want to have to fire everybody and start all over again. You want to be able to, like, OK, we’re not making any money, but I don’t have to let anybody go yet.”

  The same game of cutting overhead was played by every company at every step in the production and sales process, of course. The industry thus resembled the food chain, with each lower creature more helpless than the one above, and the most helpless of all on the bottom, sewing together ritzy garments for minimum wage or less.

  The carnivorous nature of the companies above and below Maria led her to price her goods defensively, with plenty of markup. Retail stores devised endless methods to avoid paying the agreed price. If they sold the garment at a discount, they cut their payment. If they didn’t sell it within a certain period, “they want this thing called markdown money,” Maria explained, “where they take a little bit more money off your check.” If apparel was defective, they claimed damages. “ ‘Well, this zipper’s been broken on twenty garments; I had to fix them and it cost me $300, so I’m gonna pay you $300 less for your line.’ They’ll nickel and dime you for everything. And then, ‘We need special items for promotion.’ ‘The store manager had a special thing,’ or ‘The person who bought the most of Bianca Nero got free gifts, so we gave away ten free gifts, so we knock another five hundred off You can go and fight them, or you can just say that’s the way it’s done.… You’re lucky if you get the money back. So you’ve got to cushion the price.”

  To figure the price she began with the cost of fabric, on which Yannis, using a computer, laid out parts of garments, fitting them together like pieces of a jigsaw puzzle to minimize waste. Then she estimated the price a sewing contractor would charge for assembling the apparel. “You go, well, I made something similar, and I paid $10, so let’s cost it at $10. Then it takes one zipper or three buttons or whatever, and you add up your little trims or whatever.”

  This “costing” did not include her rent, utilities, insurance, employees’ salaries, or other ongoing expenses, nor did it take into account the mistakes made by sewing contractors. “They cut the wrong color, they cut the wrong fabric. They sewed it wrong, you’ve got to redo it. It came in damaged. There’s a lot of waste,” she said, “so you’ve got to absorb some ofthat cost.” Her goal was to sell to the store at a price that would get her double the money she spent on a specific garment. Therefore, in the bizarre arithmetic of manufacturing, she didn’t multiply her cost by 2; she multiplied it by 2.5, hoping that the extra markup would cover her contractor’s mistakes, her sales rep’s commission, and the store’s imaginative ideas for avoiding full payment.

  “Let’s say the garment costs $15 and you charged it at $37.50,” she explained. “You’re hoping you’ll make maybe $15. You paid $15 for it, and you want to try to make another $15. So that $7.50 is your cushion. You’ve got to pay $3.75 to the rep, they get 10 percent, so that basically leaves you only $3 something for discounts and cushioning.” Then, to get the final selling price, the store multiplied Maria’s price by 2.1 or 2.2—or even 3.0 in fancy shops, so a typical dress that cost Maria $60 to make was sold to the retailer for $150 and to the customer for over $300.

  There was also the tyranny of time, which all businesses suffered. “You have to start making it four to six weeks before you actually ship it,” Maria explained, “and you don’t get paid for at least another four to ten weeks after you ship it. So there’s like a three-month period of when maybe you’ve actually paid for the stuff before you see your money. So if you have like double the amount of business next month as I had this month, I’m gonna need to fork out a double amount of money; I’m not gonna see any money back for three months. I’ve got to carry myself, pay my workers, pay my bills, have to have a surplus of money to last for those three months before I get paid back.” Many manufacturers “get factored,” she said, meaning a bank fronts the money and takes 4 to 5 percent of the profits. She had avoided that.

  Sometimes the three or four contractors Maria routinely used complained that they hadn’t made anything on a job because it had taken longer than expected, and sometimes she paid them more than the agreed rate. But since costs were critical, and since her own employees’ salaries were part of that constant overhead that she had to watch, she deemed it imprudent to raise wages above the going rates in the industry, even if her sympathy often pulled at her to do so. “I always want to give them more,” she said, “but then I think: I’ve got two kids. What if things don’t go well? I’ve given away all my money. You see how they live. They’re taking the bus, don’t have a car. It’s an awkward thing. We’re doing well; we’ve only been doing really well for two years. You just got to go slowly. What if you start paying someone, say $20 an hour, and your business starts going bad? I mean, I have to like cut down their salary?” she asked. “Or I have to now fire you because you’re getting this great big salary but people aren’t buying my product?” High wages would have increased her risk.

  “I think the first person we hired was a sample maker,” Maria said. That was in 1993, for $12 an hour, a bit high at the time. “She’s still making the same amount of money,” but with bonuses on top. “Sometimes we give like $800, $1,000,” twice a year, in June and December. That way, lean times would mean bonus cuts, not necessarily wage cuts or layoffs.

  Winston Churchill once remarked that democracy was the worst system ever devised, except for all the others that had been tried from time to time. The same could be said about capitalist free enterprise: It’s the worst—except for all the others. It has a ruthlessness about it, a cold competitive spirit that promotes the survival of the fittest and the suffering of the weak. But it also opens opportunity unparalleled by communism, socialism, or any other variant so far attempted. The sense of injustice that it fosters derives from its lack of egalitarianism—that exalted ideal that other systems also fail to practice. The American ideal embraces an equality of opportunity for every person but not an equality of result. In fact, free enterprise thrives on difference—the difference between the owner and the worker, the educated and the less educated, the skilled and the less skilled, the adventurous and the timid, and ultimately the rich and the poor. That differentiation, particularly the freedom to hire labor at relatively low cost, has fueled the entrepreneurial risk-taking so essenti
al to a robust, decentralized economy. It is a highly regulated economy, woven with legal and contractual restrictions on abuse. But those regulations, aimed at protecting health, environment, and employees’ well-being, are kept in check by constant debate across the American political spectrum; they have not been allowed to suffocate private business, which needs space to maneuver, invent, and grow.

  Like most employers, Maria saw no alternative to the discrepancy among various grades of workers, and she was devoted to preserving the differences. “You certainly don’t want to pay someone who is doing shipping or a tedious manual job a huge salary,” she declared. “It’s almost not fair. Someone who went to college, studied, tried to make something of their lives, those people should be rewarded and they should be making the better salaries. The person that dropped out of high school … I mean, that doesn’t make sense ’cause then, in fact, no one’s gonna go to college. That’s like the way it works. If you go to school and get a good education you’re gonna get a better paying job.”

  The head of a temp agency in Kansas City shivered at the notion of paying the people she placed more than $6 to $7 an hour. “You’d fall out of whack,” she said, and falling out of whack was a disturbing idea. “You’re offsetting the entire pay scale. They’re making three, four, five dollars more an hour than they maybe should be. A clerical person that I would typically pay seven, if I paid them ten, now I have to pay my accountants thirteen, fifteen, seventeen dollars an hour. Now you’re pulling up the whole pay scale.”

  The words “should be” were significant. Another Kansas City employer, Paul Lillig, used the same phrase to lament the rise in the hourly rate— from $6 to $9—being earned by the few workers who could operate an inserter machine for handling mail. “Pretty soon we’ve got these people who are being paid more than they really should be paid,” he declared. Other employers echoed the conviction that there was a “right” wage for a job, and that if they raised their manual laborers’ pay, they would have to do the same for their foremen, accountants, and executives to maintain a substantial distance between salaries. In other words, the national ethic is ambivalent, decrying the disparity on the one hand (as some CEOs get five hundred times their workers’ lowest wage) and, on the other, embracing the differences as virtuous. It is somehow morally wrong not to pay an accountant more than a secretary.