More Than Money
Issue #36
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Money and Work

Table of Contents

“Business Innovation: Pathway to Profits”

By Mara Peluso and Ruth Ann Harnisch

Dov Charney is the founder and senior partner of American Apparel, now the largest and most profitable T-shirt manufacturing company in the United States. He has been a passionate producer of T-shirts and related apparel for more than ten years, an obsession that can be traced back to his days of selling T-shirts on the streets of Montreal as a teenager. Charney has been featured in The New Yorker, Time, The New York Times, The Los Angeles Times, and on PBS television.

American Apparel at a Glance
American Apparel is now the largest garment factory in the United States, employing more than 1,500 people at one location.

. American Apparel is the only T-shirt company of its size that does not use subcontractors or offshore labor. It makes no sewn products outside of its downtown Los Angeles facility. (Eighty-three percent of all clothing in the United States is imported.)

. After working at American Apparel for more than six months, an experienced sewer can earn $14-$15 per hour or more. Many garment workers that sew T-shirts for other companies make as little as nine cents per hour.

. American Apparel is the only T-shirt manufacturing company of its size committed to recycling all of its scraps.

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At a time in our nation's history when there is considerable concern about sending American jobs to other countries-commonly known as "outsourcing" -Dov Charney insists he has found a way to preserve both American jobs and reasonable profit margins. At the same time, he offers affordable healthcare for his employees and their families, support for immigrants, free English and computer classes, subsidized lunches and bus passes, and a commitment to paying good wages.

How does he do it? Charney says the secret is to generate profits by moving to a new level of productivity through innovation, not exploitation. According to Charney, the average labor cost for an American-made T-shirt is 55 cents- more expensive than in other countries. To keep his T-shirts priced competitively, he must reduce other costs.

"All the components of our operation are located in a single building in Los Angeles," he explains. This allows American Apparel's designers and manufacturers to work together as they create their products, thereby streamlining the entire process. The company emphasizes teamwork and cooperative problem solving during every phase of production. "Anyone who's ever tried to run a manufacturing business with different departments in different locations knows how many problems and additional expenses occur just because of lack of communication. By putting everything under one roof, we shorten the production process and make it more efficient, which reduces our overall costs. That actually allows us to be more profitable than companies that are outsourcing labor abroad."

"At American Apparel, we think that businesses should be built according to the model proposed by philosopher Paul Hawken, who wrote: 'The ultimate purpose of business is not, or should not be, simply to make money.. The promise of business is to increase the general well-being of humankind through service, creative invention, and ethical philosophy.'"

-From American Apparel's mission statement

Contrary to the current corporate penchant for exporting jobs, Charney's approach is a win for his company, a win for his employees, and a win for his country. "The irony of paying industrial workers well and locating them within the American marketplace-as opposed to searching for the cheapest labor pool to exploit in other countries -is that paying workers more can actually be more efficient and cheaper in the long run than paying them less. We are demonstrating that social responsibility can cost less than traditional employee-payment models."

Charney is succeeding by doing things in an unconventional way, including operating with an unconventional definition of success. "I do this work because I want to improve people's lives," says Charney. "I want everybody who is touched by this business, from our suppliers to our T-shirt makers, to have a positive experience. I believe that trying to help workers have a positive experience on the job helps ensure the success of the business."

What advice does Charney have for those who want to follow his example? "Look to innovation, not to slave workers, to make your business efficient. It doesn't make sense to run after cheap labor-that takes away from creativity. It's fun to change the way things are done, to determine new ways of living, and to balance your own self-interest with the interests of the collective."

Global Philosophy and Political Mission
"We think that globalization in its current form has polarized design and manufacturing in such a way that it is grossly inefficient and actually necessitates human (and environmental) exploitation to perpetuate itself. This rift does not make economic sense. Workers cannot even afford to consume their basic necessities and corporations travel thousands of miles just to pay people less money. Once this inhumane inefficiency is understood, there will be a revolution in how business is conducted; a revolution that will be hastened when consumers sharply increase demand for products made without exploitation."

-From American Apparel's mission statement .

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