A Puzzle for Garmentos or Hey Stupid! It’s not about the cost of labor.

A worker in Bangladesh

Ø    is paid, at most $75 per month.

Ø    Is not particularly efficient, requires about 18 minutes to produce one man’s/woman’s pair of denim jeans which works out to, a per annum figure 2400 jeans.

Ø    The average FOB price of a made-in-Bangladesh jeans is $7.99.

o      Worker’s output = $19,165.35

o      Worker’s annual wage = $900

Worker produces 21.3 times his wage.

A worker in the U.S.

Ø    is paid about $7 per hours

Ø    is much more efficient than the worker in Bangladesh, requires 14 minutes which works out to a per annum figure of 3086 jeans

Ø    The average ex factory price of a made-in-U.S.A. jeans is $25 (authors estimate).

o      The worker’s output = $77,142.86

o      Worker’s annual wage = $15,120

Worker produces 5.1 times his wage.

All of which explains why denim jeans are produced in Bangladesh rather than the United States.

Now try this

A worker in China

Ø    is paid, about $316 per month.

Ø    is reasonably efficient, requires about 14 minutes to produce one man’s/woman’s pair of denim jeans which works out to, a per annum figure 2880 jeans.

Ø    The average FOB price of a made-in-China jeans is $8.79.

o      Worker’s output = $25,304.14

o      Worker’s annual wage = $3792

Worker produces 6.67 times his wage.

A worker in Mexico

Ø    is paid, about $540 per month.

Ø    Is, when well trained, extremely efficient, requires about 12 minutes to produce one man’s/woman’s pair of denim jeans which works out to, a per annum figure 3600 jeans.

Ø    The average FOB price of a made-in-Mexico jeans is $9.24.

o      Worker’s output = $33,251.76

o      Worker’s annual wage = $6480

Worker produces 5.13 times his wage.

All of which explains why denim jeans are produced in Bangladesh rather than China or Mexico

Here Comes the Kicker

U.S. Market Share

China:                        28.9%

Mexico:                      29.6%

Bangladesh:                6.4%

All of which explains . . .

You figure it out.

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