Every week, The Interline analyses one or more vital talking points from across the landscape of fashion technology news. This analysis is also delivered to Interline Insiders by email.

Relaxing COVID restrictions could have an even more pronounced effect on manufacturing than it does on consumption – and fashion should be capable of quantifying it.

Sustainability is dominating the news again. But rather than focusing on the environmental impact of fashion, or on the effect of sustainability initiatives on consumer behaviour, the latest stories zero in on the processes of production – from Tier 1 manufacturing and down.

The highest-profile headline is a regional one: Californian legislators are making headway with the “Garment Worker Protection Act,” which is specifically calibrated to address the problem of wage theft in the Los Angeles garment manufacturing sector, at Tier 1.

Wage theft is, of course, a polite way of saying “endemic underpayment and labour exploitation”. California’s state-level minimum wage is set at $14 per hour, and is due to increase to $15 by next January. And the justification for the new legislation that’s working its way through the machinery of regional government is that the minimum wage is being charged by factory owners to commissioning brands, but then the manufacturer is passing only a portion of that labour rate on to its actual workers, who are making $5 per hour or less.

The major source of this discrepancy is operators who are paid at piece rate, which is to say that their compensation is tied to their productivity. This shares the burden of throughput amongst the workers, rather than framing it as an operational variable to be balanced against quality, price, and other variables. The new Act aims to eliminate piece rate payment entirely, and to force California’s garment manufacturers to move to a purely salary-based system.

This is, in many ways, a recognition of the imbalance between garment creation and garment production, as well as being an acknowledgement that garment manufacturing is, during this fraught time of pandemic reopening, a high-risk activity. But, crucially, it’s also an indication of the fact that garment production is in incredibly high demand (especially domestically, given the sheer cost of international logistics, with containerised freight now accounting for more than half of products’ retail value) at the same time as facing uniquely acute pressures of its own.

And both of these are difficult to manage because they have historically been poorly-measured.

Take demand as an example. All of us are familiar with recent stories of businesses that have been forced to close temporarily, or to scale back capacity, because a significant portion of their staff are isolating as a result of COVID outbreaks. Here in the UK, several major auto-makers are wrestling with production throughput at a time when hundreds of workers are being asked to stay at home to minimise the spread of the virus. And this is by no means an automotive-only problem: outbreaks in Vietnam are already halting production, and it’s only a matter of time until factories are forced to strip back capacity or close for ten-to-fourteen days at a time, depending on the prevailing COVID mitigation policies in place in their region.

These closures will eventually affect product availability at the point of consumption, as they already have been doing for simple consumables. Prior to that point, though, the task of picking up the slack will fall to other suppliers, as brands that are agile enough redistribute their orders.

But in the current context, those secondary suppliers may find themselves struggling to deliver the capacity asked of them – especially if they are in the US, where the Garment Worker Protection Act is being positioned, and where peaks and troughs in job openings and quit rates now characterise the labour market. In a job landscape where ongoing incentives and support schemes are giving workers the overdue luxury of selecting who they want to work for, manufacturers that pay under the minimum wage will soon struggle to attract operators. And while some commentators see this as an opportunity for AI to take over undesirable jobs, skilled sewing operations do not yet seem ready for automation at the level that would be required.

This will, naturally, have the effect of raising the prices that brands pay to their producers and will, in turn, raise the question of whether those price hikes are passed on to the consumer.

More importantly, though, it will add a new edge to the increasingly sharp question of what the future of apparel manufacturing looks like when accountability and transparency become public sustainability commitments, binding legal strictures, and brand-critical metrics for measuring efficiency. And the answer is that it’s highly unlikely to look the way it does today.

Revisiting California’s SB 62 (to give it its official designation), we see that it includes punitive action in a unique way: any manufacturer found to be paying a piece rate will be fined $200 for every employee being paid in that manner. This sounds minimal, but could quickly mount if piece rate is the factory’s standard method of structuring its compensation. Interestingly, that $200 would be paid directly to the employee, making this provision effectively a state-mandated wage redistribution, and rapidly eroding the factory’s (likely dishonest) margin calculations.

But SB 62 is by no means the only legislation intended to punish supply chain malpractice. The UK’s Modern Slavery Act, originally introduced in 2015, was targeted for tightening in late 2020, including provision for monetary fines and also criminal charges (and jail time) for cases of wilful negligence.

And it’s the Modern Slavery Act (MSA) that sets out a template for how regional legislation could evolve into international regulations. The MSA, as revised, has three additional requirements for supply chain disclosure: the publication and verification of information pertaining to every country of origin that could be considered a “sourcing input” to a product; the requirement for “credible external inspections”; and reporting on the use of overseas agents who act on behalf of governments.

These are sweeping requirements, and ones that, for many large brands and retailers, should span the globe – meaning that today’s domestic legislation could quickly become tomorrow’s worldwide requirement. And while SB 62 is targeted at producers themselves, with brands only being held to account in the court of public opinion, the MSA and other legislation like it places the onus firmly on the brand selling the finished product.

This, critically, is where the crux of the problem lies in the way the fashion industry thinks about production labour. As the recently-published 2021 Fashion Transparency Index demonstrates, the wages paid to manufacturing operators is still something that brands keep close to their chests:

  • Only 1% of brands disclose whether they pay a living wage throughout their supply chains.
  • Only 4% have a roadmap to move from current supply chain practices to an approach that offers equitable compensation.
  • Only 11% publish the names of their raw material suppliers – something that would not be required by SB 62, but that could conceivably be covered as a “sourcing input” by the MSA.

Given how widespread it seems that wage theft is in the USA, where (at least in theory) brands should be able to obtain accurate wage information, it will be unsurprising if the root cause of much of this lack of disclosure is a lack of data. Many, many brands simply will not know if the people sewing their clothes are being paid a living wage, because the information they hold about their suppliers (even those at Tiers 1 and 2) is not detailed enough, or up to date enough, to make that determination.

This is an area where technology will have a tangible role to play very soon, and The Interline will be detailing what that role looks like over the coming months.

But until then, as many countries approach the vaccination threshold that (wisely or unwisely) allows them to reopen industries more fully, the balance of compensation and risk that constitutes fashion manufacturing labour is one that the industry will need to address. Otherwise it will be the manufacturers and the brands that partner with them who face the consequences.

And the best from The Interline this week:

Yesterday saw the publication of our second exclusive from footwear industry insider Ross Authers, which tackled some of the creative tensions that originate from the use of digital twins to stand in for physical samples.

Next week The Interline will publish a new whitepaper, a recap of our latest workshop (Rebuilding Retail) and a new and exclusive video interview with a leading figure in the digitisation of sourcing and manufacturing.

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