What a Proposed $13.25 an Hour Minimum Wage Would Mean for LA’s Apparel Industry

Inside a boxy space crammed with lace dresses, scoop-neck T-shirts and printed skirts, the whir of sewing machines fills the air as Sam Lee sits inside his small office with a clear view of the work floor.

Lee is the owner of 641 Apparel Group, a small clothing contractor with 15 employees. He does fast-fashion business with companies such as Forever 21, Blue S and Cantata.

The no-frills ambience of his space, located in a dilapidated early-20th-century building in the heart of downtown Los Angeles, underscores the fact that this is a bare-bones operation with slim margins. When asked about Los Angeles’ minimum wage possibly rising from $9 an hour to $13.25 an hour by 2017, Lee just shook his head. “Already, $9 is too high. Thirteen dollars is impossible,” he said. “Maybe I would have to close.”

On Labor Day, Sept. 1, Los Angeles Mayor Eric Garcetti proposed raising the city’s minimum wage to $13.25 in the next 2½ years. He said he will ask the City Council to lift the prevailing $9 minimum, which went into effect on July 1, to $10.25 next year. Then the city would phase in annual raises of $1.50 over the following two years.

The proposal, backed by the Los Angeles County Federation of Labor, AFL-CIO, is one of many big cities’ efforts to give low-income workers a hand up. Seattle will raise its minimum to $15, the highest among any large U.S. city, over the next three to seven years, depending on the size of the employer. In San Francisco, voters in November will consider setting a $15 minimum by 2018.

For the continuously shrinking LA garment industry, which is the largest employer of apparel-industry workers in the United States and the last major hub of clothing factories, it would definitely have a detrimental effect, said several garment-factory owners.

“I think it is very dangerous,” said Steve Lee, president of the Korean American Manufacturing Association in Los Angeles, which has more than 1,000 members. “We are just surviving in the garment area.”

The California Fashion Association, a nonprofit trade group headed by Ilse Metchek, said in a position paper that the organization “embraces the concept of support for those at the entry level of employment, particularly for anyone who is part of the apparel industry in the Los Angeles region.”

But there is a question of the economic consequences. The CFA is proposing that to keep apparel contractors and textile companies in the city, there should be a reduction of certain business taxes relating to manufacturing; a training wage for 60 days at the current California minimum wage; and a manufacturing tax credit for the purchase or lease of new machinery related to employment.

Even with a little help, the apparel contractors who employ 28,800 people inside the city of Los Angeles are keeping a concerned eye on the proposed higher minimum wage, which could add as much as $8,840 every year to the salary of a full-time worker.

“This is very serious. There are going to be a lot of unemployed people, especially in the apparel and food industries,” said David Wung, executive vice president of JS Collections Corp., a cut-and-sew operation with about 40 employees who specialize in manufacturing premium denim.

The company has been in Los Angeles for some 20 years but would consider closing down or moving outside the city to some place such as Gardena, Vernon or Commerce.

“Ten dollars an hour is doable and survivable,” Wung said. “When you go from $8 an hour to $13 and go to your customer and say, ‘I need you to pay 50 percent more,’ they say, ‘Bye bye.’”

At Tianello, a womenswear and menswear label whose Tencel and silk tops as well as skirts and dresses are cut in a brick building located south of downtown Los Angeles, the thought of a $13.25-an-hour minimum wage has owner Steve Barraza thinking of contingency plans and ways to save money.

He calculates that the wage boost every year would add nearly $500,000 in additional costs for his 40- to 50-person operation. “That minimum wage is extremely challenging,” he said. “One thing I was thinking of doing was going to a 32-hour work week. Push harder when everyone is here.”

He also uses contractors located outside Los Angeles’ city limits and may rely more on them. And then he could move. “We are at 38th Street and Broadway, about one mile from Vernon. This will definitely push people outside the city limit,” he said.

For the biggest apparel factory in Los Angeles, the minimum-wage increase would have some effect. American Apparel,whose downtown factory is located in a whale of a building on Alameda and Seventh streets, where more than 3,800 people are employed, already pays higher wages.

While the company had no comment on the minimum-wage issue, its website notes that experienced garment workers at the company make as much as $30,000 a year with benefits, which averages out to more than $14.40 an hour.

Still, the proposed minimum wage is just one more thing that is hurting Los Angeles’ apparel industry. Rules and regulations imposed in California and various business taxes have chased away many clothing companies from manufacturing in Los Angeles.

Bryan Kang, founder and chief executive of Rhapsody Clothing Inc., which has a juniors line and contemporary women’s line created in Los Angeles, said he started shifting his apparel production away from the region about seven or eight years ago and totally stopped producing in Los Angeles about two years ago. Now he makes his clothes in China, Guatemala and Mexico.

“We don’t make in Los Angeles anymore because of the cost of production and because of AB633 [Assembly Bill 633], which holds the manufacturer responsible for the contractors paying minimum wage and overtime. I experienced that a couple of times, so I moved our production to Mexico,” he said.

He believes that Los Angeles is the last frontier for the “Made in USA” label, even though the cut-and-sew portion of the apparel industry continues to shrink. “With the wage increase, it will collapse even faster,” he said. “But once they increase the minimum wage, people will spend all of what they earn, and it will circulate and help the economy.”