Can Charging Premium Prices to Support Livable Wages Be Good For Business?

Joseph Bozich, CEO of Knights Apparel, a leading supplier of college and university custom apparel, is betting that it can. According to last Sunday's New York Times, Knights has established "a high-minded experiment" at one of their factories in the Dominican Republic where they are paying "three times the average pay of the country's apparel workers ... the amount of money needed to adequately feed and shelter a family."

Bozich's strategy, if it works from a market share and revenue perspective, could be seminal in revamping the sweatshop practices that dominate the global apparel industry. His motivation for the "experiment" was driven by two factors. The first was intensely personal: "... a decade ago, when Joe Bozich was attending his son's high school basketball game. His vision suddenly became blurred, and he could hardly make out his son on the court. A day later, he couldn't read ... [upon diagnosis he was told] The good news is you don't have a brain tumor, but the bad news is you have multiple sclerosis ... Fortunately, [Bozich relates] we had the resources for medical help, and I thought of all the families that didn't." The second was market driven: "... a response to appeals from myriad university officials and student activists that the garment industry stop using poverty-wage sweatshops."

The strategy upgrade also includes "a $500,000 renovation of the factory ... call[ing] for bright lighting, five sewing lines and pricey ergonomic chairs, which many seamstresses thought were for the managers." And while "Mr. Bozich says the factory's cost will be $4.80 a T-shirt, 80 cents or 20 percent more than if it paid minimum wage [and] Knights will absorb a lower-than-usual profit margin ... without asking retailers to pay more at wholesale", the key to the model's success will ultimately fall upon the end buyers.

At a time when consumers are at their peak of cost consciousness, an industry consultant, quoted in The Times, says "There are consumers who really care and will buy this apparel at a premium price ... and then there are those who say they care, but then just want value." Bozich's response: "We're hoping to prove that doing good can be good business, that they're not mutually exclusive..."

Knights Apparel's initiative is noble to be sure, but timing -- if not everything -- is equally important. With stubbornly weak job growth and ever increasing college tuition, a positive outcome for the "experiment" is dubious through no fault of its own.

William Busch

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