May 16, 2013
In the aftermath of the horrific factory fire in Bangladesh leading to over 1100 deaths, there have been renewed demands for serious safety standards at the clothing factories there. These demands have been met by the standard response from industry spokespeople that higher costs will simply cost jobs since firms will relocate to lower cost countries.
Adam Davidson has a piece in the NYT magazine this weekend that makes the simple point: there are no more Bangladeshes. The threat of relocation was a realistic concern when companies could move to the south of the United States, to Latin America, to China, or Vietnam, but this threat no longer exists. All of these regions/countries have seen sufficient rise in living standards and wages that they do not provide credible alternatives to companies seeking to escape higher labor costs in Bangladesh. There are no obvious locations where companies can now look to relocate to escape higher costs in Bangladesh.
This means that if companies have to pay a few pennies more per t-shirt to provide safe working conditions in Bangladesh they will just have to live with the higher cost. That means slightly lower profit for the manufacturer and an almost invisible price increase for t-shirt buyers in rich countries.
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