In June 2011, I published an article on this blog: "What the 'China Price' Really Means". The article discussed international wage differentials, productivity and how low wages in poor countries translated into economic gains for rich countries. Using the data I had found, together with an investigative report from Die Zeit, I made a guess that the unit labour cost of a T-shirt produced in Bangladesh was some 10-15 euro cents (it sold for 4.95 euros in a German shop). That seemed reasonable, but a reader contacted me recently to point out some problems.
If the 10-15 cents labour cost estimate were true, he noted that it contradicted the other data I cited from Die Zeit, namely the 1.36 euro daily wage of one of the machine workers in the Bangladesh factory. Or else it implied that an implausibly large number of workers were employed, perhaps around 200 per machine. So, I examined the issue again, revised my guess and have reached a more damning conclusion about the rate of exploitation of workers in Bangladesh!
The usual caveats with data apply: do the figures really measure what they claim to measure? Furthermore, there are gaps in the data available, and I had to make some estimates. However, the main reason behind the much lower guess I would make now for the unit labour cost of a T-shirt produced in Bangladesh is the rise in productivity. These data come from the Bangladesh Statistics Office, and I had not seen these, and am not sure they were even published, when I wrote my blog article. They show a much larger rise than I had previously allowed for.
Another point is that I had used the results of a study by S C Zohir, published in 2000, that the unit labour cost in 1994 of a 'shirt' in Bangladesh was 11 cents (in US dollars). I did not then take into account that if the labour cost of a (full) shirt was 11 cents, then presumably a T-shirt would cost less. Assume 8 cents for a T-shirt (excluding working on the sleeves, buttons, etc, on a full shirt).
Starting from 8 US cents unit labour cost for a T-shirt in 1994, this can be translated into Bangladeshi currency (the taka) at that point. Then, the number can be inflated by the rise in wages for Bangladeshi cotton workers, but also deflated by the increase in productivity of cotton production workers. I have done this to estimate the unit labour cost in taka for the T-shirt (in 2011). In addition, the depreciation of the taka versus the euro and the dollar since 1994 also needs to be taken into account to work out what the T-shirt costs are for the buyers in rich countries.
The end result is that instead of the unit labour cost for producing a T-shirt being 10-15 euro cents, it is very likely to have been more like 2-3 cents. Even if that estimate were 20-30% too low, it would not really make any appreciable difference, given the minuscule starting point.
Going back to the original article, on the basis of 10-15 euro cents per T-shirt, I estimated that H&M's net profit per T-shirt in 2011 was 4-6 times higher than what was paid to the Bangladeshi producer. My apologies for underestimating the fruits of exploitation: the ratio is closer to 20-30 times higher.
The lesson to draw from this is that the closer you examine the economics of imperialism, the worse it gets!
Tony Norfield, 24 September 2014