The interesting thing about this case is that it doesn't deny market forces. In fact, the company is welcoming the market by betting consumers, company employees, and retailers will appreciate its paying livable wages, and will in turn pay more for the apparel. (note: Even though the company says that increased labor costs will not be passed onto the retailer or consumer, I'm assuming that in time these costs will be passed on).
Although the manufacturer is only paying livable wages in one factory, it's an experiment that I hope will give evidence that making ethical decisions (such as paying a livable wage) does not always lead to smaller profits. In order for this experiment to take place, the CEO of the manufacturing company had to make a bold decision that bucks the conventional wisdom of lower costs => higher profits. Refreshing, isn't it?
I too read this article with some interest, but it seems to me the story loses sight of the bigger picture. Look at this other story the NYT published earlier in the week about China, detailing how competition for workers is driving up wages:
ReplyDeletehttp://www.nytimes.com/2010/07/13/world/asia/13factory.html
China's workers are better off not through the kindness of their employers, but the demands of the market. The Dominican Republic would be much better served by having huge numbers of firms competing for its citizens labor rather than depending on their generosity. Thus, to really promote a higher standard of living and higher wages the question that should really be asked is why more companies aren't streaming to DR to take advantage of the cheap labor pool. Answering that question, and attracting more investment to the country, is the real solution to helping the average Dominican.
I agree with this, and it's pretty well accepted by economists of all types that the only way to raise all ships is to lower trade barriers, quotas, etc. (right?).
ReplyDeleteThe only thing I'd add is that the apparel manufacturer is still answering market demands in his own way. Knights Apparel could, arguably, see a money making opportunity by recognizing all of the (currently unmet needs of) consumers who are willing to pay a premium for "fair labor" goods. I see this as a completely legitimate, market-based way of making money and doing good at the same time.
Here's a blog post about a SF diamond "for-good" company:
ReplyDeletehttp://andrewsullivan.theatlantic.com/the_daily_dish/2010/09/diamonds-contd.html
I haven't verified any of that information. It just reminded me of what you wrote here.