Question

Consider about the working conditions and regulatory environment in clothing factories in Bangladesh, in which many economists warn about quick fixes for wages and the imposition of U.S. safety standards on foreign factories. They offer the following figures to illustrate that the issue of labor conditions in other countries is complex. In Bangladesh, clothing factories get about $6.75 per shirt. These are the factory costs:

1. $4.75 for the fabric and thread
2. $1.00 for the shirt's labels
3. $0.38 wage costs for each shirt (workers earn $70 to $80 a month)
4. $0.15 per shirt for laundering

Hence, That leaves $0.47 per shirt for facilities, shipment, marketing, and perhaps the interest on loans. Furthermore, the cost of living in Bangladesh is $40 per month for rent, and food per adult is $13 per month. Milk for a child is $5 per month. Those who work in the factories are generally the main wage earners in their families because no other jobs pay as well.

Base of the case above, answer the following questions:

1. Given this analysis, where do you see some fixes for the safety and wage issues?
2. What needs to be done besides instituting codes of ethics and factory and labor standards?
3. Assume that you are a manager for a clothing firm in the United States and you are being sent to Bangladesh to select a new manufacturer for your clothing lines. Discuss some of the issues that will affect your decisions about choosing a new facility to work with.

Answer 1

The first factor that could improve the working conditions in these factories is the price these factories get from their US customers. The current $6.75 per shirt leaves only $0.47 per shirt for facilities, shipment, marketing, interest on loans, etc. If the $6.75 can be increased it would probably allow the factory owners in Bangladesh to spend some money on improving the working conditions for the workers. If the US customers push to improve standards in the Bangladeshi factories without helping to increase their financial means, it may mean a cut down in the rate / hour they (the factories) pay their workers, worsening their condition.

If I were to look for new suppliers from Bangladesh, I would like to understand the inclination of the factory owners to improve the working conditions (and possibly the wages) of their workers if they are able to get a higher price for the shirts they would supply to the customers in the US. Unless this inclination is shown, it is hard to believe that the working conditions in these factories would improve despite all the steps the US customers may take, including giving better prices, imposing higher standards, etc.