California minimum wage hike hits L.A. apparel industry: 'The exodus has begun'
Los Angeles was once the epicenter of apparel manufacturing, attracting buyers from across the world to its clothing factories, sample rooms and design studios.
But over the years, cheap overseas labor lured many apparel makers to outsource to foreign competitors in far-flung places such as China and Vietnam.
Now, Los Angeles firms are facing another big hurdle — California’s minimum wage hitting $15 an hour by 2022 — which could spur more garment makers to exit the state.
Last week American Apparel, the biggest clothing maker in Los Angeles, said it might outsource the making of some garments to another manufacturer in the U.S., and wiped out about 500 local jobs. The company still employs about 4,000 workers in Southern California.
“The exodus has begun,” said Sung Won Sohn, an economist at Cal State Channel Islands and a former director at Forever 21. “The garment industry is gradually shrinking and that trend will likely continue.”
In the last decade, local apparel manufacturing has already thinned significantly. Last year, Los Angeles County was home to 2,128 garment makers, down 33% from 2005, according to Bureau of Labor Statistics data. During that period, employment also plunged by a third, to 40,500 workers. Wages, meanwhile, jumped 17% adjusting for inflation, to $698 per week — although that can include pay for top executives, as well as bonuses, tips and paid vacation time.
Many apparel companies say Los Angeles is a difficult place to do business. Commercial real estate is expensive and limited, the cost of raw materials continues to rise and it can be difficult to find skilled workers who can afford to live in the city. They expect things will become even more challenging after the minimum-wage hike further raises their expenses.
Felix Seo has been making clothes for wholesale in downtown for 30 years. His company, Joompy, used to count giant retailers like Forever 21 among its clients. But as prices have gone up in recent years, he said, those fast-fashion peddlers are no longer giving him orders.
“I used to pay $5 to get this sewn, and now it costs $6.50,” Seo said, holding up a patterned dress. “But my customer doesn’t want to pay that, so I can’t sell it anymore.”
To survive, Seo, 59, said Joompy may have to start importing goods instead of producing them locally. “It will be impossible to make clothes in Los Angeles,” he said.
The minimum wage is accelerating changes in the L.A. apparel industry that began decades ago, industry experts said.
In the 1990s, as borders opened up, foreign competitors began snatching up business from Southland garment factories.
Eventually, many big brands opted to leave the region in favor of cheaper locales. Guess Jeans, which epitomized a sexy California look, moved production to Mexico and South America. Just a few years ago, premium denim maker Hudson Jeans began shifting manufacturing to Mexico.
Jeff Mirvis, owner of MGT Industries in Los Angeles, said outsourcing was necessary to keep up with low-cost rivals. MGT, which makes apparel sold to retailers, moved its production to Mexico in the 1990s, China in the early 2000s and Southeast Asia a few years later. Its designs and samples are still made in Los Angeles, Mirvis said.
“Manufacturers really have no choice,” said Mirvis, whose father started the company in 1988. “With the rise of Forever 21 and stores like that, price points have gone down and down and down.”