Day: May 9, 2015

[Updated data is available: U.S. Continues to Lose Apparel Manufacturing Jobs in 2016]

It may disappoint those who are hoping a return of apparel “Made in USA”, but according to the latest statistics from the Bureau of Labor Statistics, the U.S. apparel manufacturing sector (NAICS 315) lost another 4.2% jobs from April 2014 to April 2015. From January 2008 to April 2015, about 86,800 jobs (or 39%) in the U.S. apparel manufacturing sector had disappeared.

From the academic perspective, a sizable return of apparel manufacturing job in the United States seems to be extremely unlikely given the nature of the U.S. and global economy in the 21^st century.

First, it is all about comparative advantage suggested by classic trade theories. The World Bank data show that from 1980 to 2010, the U.S. GDP increased by 424% (note: world GDP increased by 484% over the same period) whereas the total U.S. population was only 23% higher in 2010 than in 1980 (note: world population increased by 65.21% over the same period). This suggests that the United States actually is becoming more capital & technology abundant with less comparative advantage in manufacturing labor intensive apparel. A sizable return of apparel manufacturing in the United States might only happen in the following two occasions: 1) apparel manufacturing can be automated like textile manufacturing; 2) substantial amount of foreign workers were allowed to work in the United States. Unfortunately, neither of the two occasions seem likely to happen at least in the near future.

Second, it is about US apparel company’s business model in the 21^st century. The suggested dominant types of apparel companies in the United States today are “branded manufacturers” and “marketers” whose business models heavily rely on global sourcing and non-manufacturing activities such as branding, marketing and design (Gereffi, 1999). If you carefully read US apparel companies’ annual reports, seldom you’ll see a company still regards “manufacturing” as a key competitive advantage or an area of strategic importance to invest in the future.

Additionally, according to data from the U.S. Bureau of Economic Analysis (BEA), the percentage of compensation of employees in the apparel industry’s total value added has been gradually declining since 2008. Similar trend is also observed in the U.S. economy and the U.S. manufacturing sector as a whole. Does the result imply that labor input is becoming less important to the output of the U.S. apparel industry? Or does the result suggest that U.S. apparel companies are more willing to invest on buying machines than hiring more people? Maybe it is the time that we shall pay more attention to the labor-capital substitution trend in the U.S. apparel industry.