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A discussion of the reemergence of the sweat shop trend in the U.S and elsewhere.

The goal of all corporations is to increase shareholder wealth. Shareholder wealth is increased is by increasing the corporation’s profit. In a corporation involved in manufacturing, reducing the cost of the factors of production is essential for growth. One of the major components of production costs is labor. When in comes to labor costs, the corporation and the worker usually have very different goals. The corporation wants to pay the worker as little as possible, while maintaining the productivity and quality required by its customers. The worker, on the other hand, seeks to increase his or her personal wealth by demanding the highest possible wages and benefits. Because of this somewhat adversarial relationship, corporations and labor have developed strategies to strengthen their positions. One of Labor’s main defenses is to organize in unions. The existence of unions can be an effective method of gaining a position of strength, especially when dealing with power corporations. Depending on the size of the corporation, they might have the power to employ methods which are difficult for the workers to prevent or counteract. One tactic used by corporations to reduce labor costs is the utilization of “sweatshop” labor. A sweatshop is a manufacturing facility that operates below minimum standards of safety and/or wages and benefits. Sweatshops flourished in the United States in the late 1800s and early 1900s. This paper will examine the re-emergence of sweatshop manufacturing in the U.S. and abroad, and its impact on how manufacturers do business. Two U.S. corporations will be discussed in detail. And the issue of utilizing low cost labor domestically and offshore, including arguments for against this practice, will be discussed. ISSUE BACKGROUND Since, by definition, sweatshops violate the basic rights of workers, a brief discussion of the history of the labor movement is a necessary element in understanding the use of sweatshops. This section is intended to give a brief outline of some of the events leading to worker’s rights laws. The following information was excerpted from NBC News Online. June 3, 1900 Garment workers form the International Ladies’ Garment Workers’ Union to protest low pay, fifteen-hour workdays, no benefits, and unsafe working conditions. While weak at the onset, the ILGWU struggles to help all workers fight for better conditions and higher pay. 1909 November 22,1909-February 15, 1910 Organized by the ILGWU, 20,000 shirtwaist makers, mostly women and children, stage the first garment workers strike. Many picketers are beaten or fired. In the end, the garment workers win a pay raise and a work reduction to 52 hours of work per week. July – October, 1910 ILGWU organizes a second large strike which featured 50,000 cloak-makers. Taking their lead from the women, this mostly male strike won uniform wages, a shorter work week, and paid holidays. A Joint Board of Sanitary Control is set up, as well as an arbitration board. As a result of the strikes in 1909 and 1910, the ILGWU swells in membership. March 25, 1911 One of the worst fires in U.S. history breaks out at the Triangle Shirtwaist Company in Manhattan’s Lower East Side, killing 146 garment workers. The Triangle fire prompts the government to take action and establish regulatory control over the industry. Days after the tragedy, 80,000 people participate in a funeral procession up Fifth Avenue. June 25, 1938 President Franklin Roosevelt signs the Fair Labor Standards Act (FLSA) also known as the federal wage and hour law guaranteeing a minimum hourly wage of 25 cents. The law is enforced by the Department of Labor’s Wage and Hour Division and sets the federal minimum wage and overtime requirements. It also prohibits child labor and requires employers to keep adequate time and payroll records. In 1996, the FLSA covers more than 110 million workers. 1958 The largest nationwide ILGWU strike in union history occurs, with 100,000 union members walking out of factories. They win new concessions, including more holidays and higher wages. 1960s-1980s This three-decade period is marked by rapid globalization which hits the garment industry. In the 1960s, faced with increased unionization, higher wages, and better benefits in the Northeast, companies begin moving factories South. However, by the late-1970s, the South had all but caught up in terms of Union activity. In the 1980s, many manufacturers and retailers begin outsourcing their production to subcontractors in Central America and Asia. Countries such as Honduras, El Salvador, Nicaragua, Malaysia, Indonesia, and Singapore provide free-trade zones and laborers who would work, according to the National Labor Committee, for as cheap as 9 cents per hour. By the late 1980s and early 1990s, under increased competition from foreign subcontractors, sweatshops start to flourish once again in the U.S. September 9, 1994 The U.S. Department of Labor announces it will step up enforcement of the FSLA “Hot Goods” provision. The Fair Labor Standards Act’s “Hot Goods” clause allows the DOL to fine and seize the goods of those manufacturers and retailers who knowingly sell merchandise manufactured by companies violating the FLSA. While the provision had been a powerful weapon, it was rarely enforced in the past. Secretary of Labor Lynn Martin, who served under the Bush administration, was the first to warn garment manufacturers they would be held responsible under the provision. During the Clinton administration, sweatshops gained more media attention, Labor Secretary Robert Reich enforces the provision more stringently. August 2, 1995 The Department of Labor raids a factory in El Monte, California. The DOL finds 72 garment workers toiling in “virtual slavery” for negligible wages of as little as 70 cents per hour. Large U.S. retailers such as Disney, Hecht’s and Bloomingdale’s are found to have sold clothes made at El Monte. U.S. Labor Secretary Robert Reich notes that while “the El Monte operation was an extreme example of worker abuse…violations of minimum wage and overtime laws are the norm in the [garment] industry.” Since then, the DOL has filed a civil suit seeking $5 million dollars in back wages for the rescued workers. The Department of Labor is currently in discussions with several large retailers on how to resolve the back wages issues without going to court. June 30, 1995 The ILGWU becomes the Union of Needletrades, Industrial & Textile Employees (UNITE). Since its transformation, UNITE has initiated numerous campaigns to bring attention to sweatshops and garment industry working conditions. September 12, 1995 DOL Secretary Robert Reich calls a Retail Summit in New York to address the issue of sweatshops. He calls on some of the biggest manufacturers and retailers to help wipe-out sweatshops. The summit results in part in a “Statement of Principles,” which is presented by the National Retail Federation as part of their efforts to curb sweatshop labor. The document states that all of the participating retailers agree to require their suppliers to comply with all hour and wage laws that apply to them. The agreement, signed by 128 U.S. retailers, also emphasizes their promise to cooperate more closely with law enforcement. The NRF, which represents the $2.2 trillion retail industry, is the largest association of its kind. October 17, 1995 Secretary Reich hosts a meeting of manufacturers at the American Apparel Manufacturers Association. He invites retailers and manufacturers to join the government’s effort against sweatshops, and makes public a list of manufacturers who signed compliance monitoring agreements. December 15, 1995 The Gap clothing company agrees to allow an independent monitor to evaluate its factories in Central America, becoming the first U.S. apparel company to do so. February 19, 1996 Secretary Reich releases the Department of Labor’s Fair Labor Fashion Trendsetter List of manufacturers and retailers which are helping in the fight to abolish sweatshops. The 31companies on the list are praised for taking responsibility for monitoring the work practices of their contractors. April 29, 1996 The National Labor Committee, a private foundation, testifies before the Democratic Policy Committee on Child Labor and targets entertainer Kathie Lee Gifford’s clothing line. Gifford says she was unaware that her Wal-Mart clothing line is assembled by illegal child laborers. At a congressional hearing, she speaks out against the practice of using sweatshop labor. May 23, 1996 The Department of Labor launches an investigation into Seo Fashions in New York City, which had failed to pay its workers for several weeks, and was manufacturing “Kathie Lee” clothing. May 24, 1996 Frank Gifford, Kathie Lee Gifford’s husband, visits the Garment District Justice Center to hand out money to underpaid workers who had been

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