Wage increase - article by DR1 poster

A good, impartial article.

As for the apparel industry, in my lifetime I've seen the bulk of U.S. apparel manufacturing base move from NYC & the northeast, to the south, to Miami & caribbean/central america, to fully offshore in the caribbean, to mexico/pakistan/india, to china. Why? Simple... cheaper wages & an unwillingness of the brands/retailers to pay anything other than the cheapest price.

"I am for an effective raise in the minimum wage in the assembly industry. It is inconceivable and impossible that a Haitian worker can live with 70 gourde today given the high cost of living in Haiti," he said.

Unfortunately you can't locally legislate 'liveable' wages in a world economy - at least not without the potential for job loss.

The CODEVI factories at the Haitian border are there because Dominican wages became too high to compete with Asia. Grupo-M knew the work would leave DR... the question was whether to wait for the fast approaching loss of all work or to somehow keep some people employed in Santiago & not completely shut down. The answer was 'near-sourcing' & the DR's job losses became Haiti's gain. In an area of Haiti that had extreme unemployment a few thousand jobs were created over the course of a couple of years- at wages low to us, but people lined up for the jobs because the alternatives were essentially non-existent. At those factories they could at least earn something. If they had better alternatives, they'd simply have not been applying for jobs.

The workers, unions, and gov't have to be very careful with their demands. The reality is the workers can end up with $0/hour because the jobs are simply gone. Apparel brands will move that production to China, Pakistan, India, Taiwan... wherever they get a lower price.

Hopefully the compromise strikes a balance between what can be paid/supported by the end client & not go over the line to the point that everyone here loses.

Reginald Boulos, president of the Chamber of Commerce and Industry, said that management was opposed to the way in which the minimum wage was being fixed for the assembly workers since production is calculated by the piece. He was quoted in the national paper as saying that "with the implementation of this law, the worker will automatically become unproductive."

Removing incentive based production could well signal the death of the apparel industry in Haiti. For a labor intensive product such as apparel, you need to reward people for being efficient and producing more. If everyone gets the same 'just for being there', they go thru the motions but don't produce nearly as much. That raises the standard minutes to produce a garment, reduces output, increases cost per unit... and *poof*... production contracts from the brands cease. Companies close, workers have no income, and all the related jobs are gone too... trucking, shipping, aduanas, etc,etc.

Companies could always put the onus on themselves to provide for production based bonuses. At $3 a day, how much is the labour cost of a garnment, 4-5 cents at a max. Maybe they could give bonuses of 25, 50, 75 and 100 cents! for reaching certain goals. Its a sad state of affairs, that business will essentially hold whole countries hostage over peanuts, but oh well, good for the Hatians, Im sure the raise is welcome by them and by dominicans, as it might slightly - oh so very slightly - provide an incentive for people to stay.

Piece work

CFA123 said:

Reginald Boulos, president of the Chamber of Commerce and Industry, said that management was opposed to the way in which the minimum wage was being fixed for the assembly workers since production is calculated by the piece. He was quoted in the national paper as saying that "with the implementation of this law, the worker will automatically become unproductive."

Removing incentive based production could well signal the death of the apparel industry in Haiti. For a labor intensive product such as apparel, you need to reward people for being efficient and producing more. If everyone gets the same 'just for being there', they go thru the motions but don't produce nearly as much. That raises the standard minutes to produce a garment, reduces output, increases cost per unit... and *poof*... production contracts from the brands cease. Companies close, workers have no income, and all the related jobs are gone too... trucking, shipping, aduanas, etc,etc.

Click to expand...

As you can perhaps see, I work with a Haitian journalist on this piece and he said that the workers are paid per diem not by the unit,

The 200 gourde wage which was passed by the Congress would have put the wage to $5.12 a day.. comparable to the wage here, isn't it? And here in the DR there is much better infrastructure, better facilities, better transport, better everything...

So really they did have a point. The whole industry would have shut down.

Another journalist and I are fighting a bit of a battle with the Aristide'Lavalas spin machine which has most of the left progressives in the US and Canada believing that ... well.. that if only JBA returns, Haiti will become EDEN ... as if they can actually PAY $5 a day.

El_Uruguayo said:

Companies could always put the onus on themselves to provide for production based bonuses. At $3 a day, how much is the labour cost of a garnment, 4-5 cents at a max. Maybe they could give bonuses of 25, 50, 75 and 100 cents! for reaching certain goals. Its a sad state of affairs, that business will essentially hold whole countries hostage over peanuts, but oh well, good for the Hatians, Im sure the raise is welcome by them and by dominicans, as it might slightly - oh so very slightly - provide an incentive for people to stay.

Click to expand...

Let's take an example & see why it has an impact on the viability of a factory.

• take the wage extremes from the article of $1.29 & the $5.12/day that was passed
• combine with a factory of 700 people that makes 40,000 pants per week
• 700 people x $3.83/day increase = US$2681/day more in labor costs
• US$2681/day more x 250 day work year = $670,000 additional labor cost annually

A product manager sourcing their production will move production for that kind of savings on their product line, all else being close to equal in terms of delivery & quality. The factory would face the prospect of losing that production & closing if there's no one willing to pay the price.

The problem is even worse, of course, because not only has the wage not gotten better but the country conditions have gotten worse. I lived there in 79 and the wages were about $1 a day.. Now a $1 1979 is worth about what now...25cents or less? so it becomes EVEN worse..... when we think of that.. But back then at least Haiti was at least producing rice and eggplants and tomatoes and eggs...had some forest cover to stop the flooding, had MORE tourism than the DR,

NOW... well...

I do keep wanting to put the issue before the Dominicans because you know, there is no where else for those 9 million people to go...............

and just for example
you grow so many EXTRA BEANs in San Juan de Maguana that your producers were throwing them out last year
because you do not have a canning factory over there by the border
despite the fact that there are already tax incentives to build on the border
despite the fact that you have a ready export market

i guess you would not even need cans

but the US keeps pushing this clothing textile thing

and all these missionaries come down here with used clothing

the whole thing is really sorta surreal sometimes

I understand the logic. btw, I checked the article again and found an error in the exchange rate reported (70 gourd = 1.29 USD) It should show 70 gourd = 1.79 USD).

Anyhow, the increase wasnt to $5, but to $3.2, an increase of 79%, while percentage wise seems huge, but an additional $1.41 a day is not huge, I realize that if you take into account 700 workers X 1.41 is $987 a day more in labour costs, equating to $246750 increase over the year. A quarter million dollars increased expenditure for 100 employees might be a lot, but for 700? If you are talking about a per unit increase, on 40 000 pairs of pants per week, its about 17 cents per pair more.

How much cheaper can labour get? How much would it cost to set up the infrastructure, train, ect. to set up shop somewhere cheaper? I understand that for big companies, its all about the bottom line, and profits are the goal, but Im sure there business will still remain highly profitable even with a wage increase. Honduras recently had a wage increase, and textile industries are(were?) expanding there.

As I read the article... there was a wage increase demanded and approved for $5.12.... and there's now an attempt for a special allowance for certain industries to have a lower wage.

And $0.17/pair more... that'll lose a sale. Perhaps not on a single order, but if you have a pattern of being that much higher than the competition... the work is gone. We often lost business for $0.05/unit when we simply couldn't match the price without losing money ourselves.

Anyhow... I'm not really attempting a defense of the industry, just trying to show some of the realities of what happens when wages go up. It's why there's no apparel industry left in the U.S., U.K., etc... and at this point very little remaining in the DR. Labor costs.

Thankfully I've been out of the industry long enough to not be able to hazard a guess as to why Honduras may be doing well.

El_Uruguayo said:

Anyhow, the increase wasnt to $5, but to $3.2, an increase of 79%, while percentage wise seems huge, but an additional $1.41 a day is not huge, I realize that if you take into account 700 workers X 1.41 is $987 a day more in labour costs, equating to $246750 increase over the year.

Click to expand...

And if they get the concession vs the existing higher increase, you're right... the manufacturers are "hoping" they'll find a way to keep production in their Haitian facilities.

They'll try to cut costs, reduce unnecessary personnel, become more efficient, and try to convince their clients to help absorb a portion of the increased cost. If that works, they'll hang on a little longer.

Apparel manufacturing is a commodity business... the lowest price wins in the long run with few exceptions.

As for the exchange rate error.. I checked the exchange rate with an online currency exchange rate the day I filed and used all the numbers that were given. Usually the numbers in Haitian articles are rounded up.

The other issue here is that under special legislation for Haiti called the HOPE act, passed by the US Congress, under which the Haitian textile industry is allowed to use textiles which are not of US origin or export, something that is supposed to give them an edge, I believe over NAFTA CAFTA. There was a great deal made of this legislation with Paul Collier (who wrote THE BOTTOM BILLION) coming out strongly in support of the assembly sector as one of the engines of growth and Secretary Clinton visiting one of the factories.

There was an error in the story, however, in that the assembly piece work exemption is probably only 24,000 of the 300,000 jobs...I did not catch that and it was corrected afterwards.

but since Sylvestre, while a full time journalist at a leading paper in Haiti, is really an apprentice by international standards,.. and since he does not speak English, and since I am not on the ground there..... we are really hobbling along here...

but there are only two English journalists who report from Haiti and one of them a lot of us would rather see go elsewhere......

Tomorrow I meet with another Haitian who is quatrolingual and also a writer and an aspiring journalist and we go over the orginal 2000 words that were submitted in French and the 900 words that I submitted so that we can write back to Haiti in French with a full journalism lesson.

I hope that soon the two of them can collaborate without me.

When my meager pay comes into my account via paypal, I go to Western Union and send over half of it to Haiti. I am sure that it amounts to about a month's wages for him. Then I have lunch on the other half. Wine, one glass. No desert.

An odd sort of volunteer effort but it is what I can do.

I was there working for a dive operator out of Ibo Beach hotel. I lived in their remote location outside of St Marc, about two hours north of Port au Prince, at a sort of day trip resort called Amani y Les Bains. It was a spectacular little place with three cabins on the hill and a little terrace and table by an incredible beach and reef that dropped off to 200 feet and ran two miles to the village-- one of the best dives in the world!

I had a path through the fire coral and two pet moray ells who would come out and hiss at me.... and the snorkelers..

We only had the most intrepid divers who came to Haiti then. My boss, Alan Baskin, was one of the most famous divers in the Caribbean.. a real pioneer, it was an honor to have been with him. Even back then, there were not a lot of fish near the coast. But the most spectacular sponges! That you could sit in....

The locals there had hardly seen a white person... there was one missionary couple. But the concept of a woman living alone was beyond them... it NEVER happens in Haiti. So they assumed that I was a Mambo... which was fine with me. No trouble then. But of course, that was the days of Duvalier, and if you were put in prison, which you were easily, you were not fed unless your family brought you food so there was little crime.

I was the only one in residence-- for about $75 a month, no electricity, intermittant running water.

The staff walked in from the village every morning with one of them carrying a large block of ice on their head.

So of course..... I always dreamed of going back

I still do

speaking of missing Haiti-- did you see the article by Amy Wilentz
Love and Haiti from Cond? Nast Traveler on Concierge.com

A Mambo is a voudo priestess a hougan is a voudo priest.

Yes, your husband would have loved diving with Alan. I am sorry that he missed it. Alan died ten years ago. He was a pioneer - first in Grenada, then in Haiti, then in Punta Cana when it was just a wilderness in 83, then in Tortola.

We had the European free dive champion come to dive with us in Haiti and watched him when he went down to 200 feet. It was incredible! And the water was so clear that we could see him from the surface.

I wonder if it still is.

Anyway, I am inspired. I will contact that tour operator in Haiti and start talking to him and see if perhaps I can start bringing tourists in from the DR. Maybe I can talk to the Haitian Embassy about getting a waiver on the visas.

Anyone game to go with me?