California’s Rising Wage and Tightening Labor Laws Prompt Clothing Manufacturers to Relocate Their Factories to Mexico

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Following the increase of minimum wage and reinforced labor laws, many clothing manufacturers are relocating to other states or even neighboring countries, placing an inevitable doubt on the fate of the city’s many sewing factories.

The change is expected to fuel the movement that started last year when many Korean-American-owned sewing factories relocated to Texas and Nevada for cheaper labor.

Mainstream clothing brand American Apparel is rumored to relocate its manufacturing factory in Downtown L.A. to Tennessee or North or South Carolina. The move would make L.A.-based sewing factories to relocate on their own, as American Apparel has been one of their biggest source of revenue for years.

As of 2015, Korean-American businesses take up almost 50 percent of the clothing manufacturers in Downtown L.A.’s garment district, according to the Korean American Apparel Manufacturers Association (KAMA). Those businesses are generating more than $10 billion every year while providing 20,000 jobs in the city.

Amid the uncertain future, Korean-American-owned clothing company E&C has recently announced its plan to relocate to Mexico. The Vernon, Calif.-based fashion brand, popularized by their production of True Religion jeans, is known to be the second largest Korean-American-owned denim manufacturers after Goose Manufacturing.

“It’s no longer easy to operate a clothing manufacturer not just in L.A. but in California,” said Moo-han Bae, the chief executive of E&C, which recently purchased a factory property in Tijuana, Mexico.

“The minimum wage is set to rise to $15 by 2020 and labor disputes occur too frequently. These factors make it difficult for us to maintain a stable operation. The minimum wage will only continue to rise across the country and I expect 90 percent of the manufacturers to relocate to Mexico.”

Aside from E&C, luxury brands AG Jeans and Goose Manufacturing have begun exploring options to relocate their factories out of the country. Uno Clothing, Inc., which suspended its once L.A.-based factory operations after a labor dispute, is now focusing on running its factory in Mexico, which has around 600 employees.

“Most clothing companies I’ve been in contact with are facing difficulties in L.A.,” said Korean Apparel Manufacturers Association vice chairman Dae-jae Kim. “The rising wage is driving up the production cost and the obligation to take responsibility of the labor laws is making the factories relocate to places out-of-state or even Mexico.”

By Moon Ho Kim