City Journal

Roger Waldinger
Immigrants Rescue the Rag Trade
The garment industry's flight from New York is being reversed by another exodus—from the Third World to Chinatown
Winter 1991

Roger Waldinger is an associate professor of sociology at the City College and Graduate School—CUNY. He is the author of Through the Eye of the Needle: Immigration and Enterprise in New York’s Garment Trades (New York University Press).

In the popular imagination, garment-making is a quaint relic of New York City’s manufacturing past, fast fading into history. The reality is a pleasant surprise. The health of the industry is a vibrant indicator of the city’s strengths—and a potential source of economic vitality into the 21st century, if the city plays its cards right.

New York no longer dominates garment-making the way it once did. The city started ceding market share in the 1930s, losing out first to southern and rural states, and then to foreign competitors. Since 1984, more than half of all garments sold in the United States have been made abroad.

What is intriguing is where the city has lost its hold—and where it still reigns supreme. The city does poorly in standardized garments. This market is increasingly dominated by very large apparel firms outside of New York. The large firms have been aided by the extraordinary expansion of the very largest retail chain stores, which dislike uncertainty and prefer to buy from a time-tested reliable major supplier.

Large firms often plan their production cycles with lead times of anywhere from three to 12 months. They are very sensitive to wage levels, where New York scores poorly. U.S. wages are almost four times the level of Hong Kong’s, the single largest apparel exporter; and wages in Hong Kong are more than twice the average for 20 leading exporting countries. (Productivity is much higher in the high-wage countries, but not enough to outweigh the cost factor.) Large makers of standardized goods are thus content to make their products half a continent or half a world away from Seventh Avenue.

By contrast, New York has kept a thriving business in high-fashion lines: The city is still the design center of the nation, and being within schmoozing distance of Seventh Avenue is still an advantage for high-fashion manufacturers. Also, federal import quotas are particularly tough on fashion items. In most of the key exporting countries, goods must be ordered a year in advance to ensure that they will make the quota. Thus of the 100,000 New Yorkers still employed in the manufacture of apparel (another 52,000 work in apparel wholesaling), some 60 percent work on women’s outerwear, the most fashion-driven segment of the industry.

New York’s garment industry is a world of small firms. Small versatile firms cope better with changes in fashion and other last-minute shifts in the market. Clustered together in several parts of the city, where the designers and wholesalers are nearby, the New York garment industry floats in a rich sea of information, a powerful competitive advantage.

There are signs that the market for mass-produced clothing has at last reached its limits, and that the growth is going to come in more fashion-sensitive goods, New York’s strong suit. The aging of the baby boomers and the proliferation of two-earner families have shifted America’s buying habits upscale.

As retailers depend more on local sources to cope with late-breaking fashion and market trends, the momentum moves to the industry’s spot market—sensitive to fashion changes and set up for small runs. That is just what New York’s small, embattled, but flexible producers offer, which is why producers in New York’s fashion-sensitive lines have held their own since the mid-1970s.

Still, New York’s spot market could not have hung on nearly so well if its own labor costs had not become more competitive. Part of the reason New York has become more competitive is that growing wage costs have overtaken some of our chief competitors: Just as rising wage costs forced Japan to cede its clothing industry to Hong Kong in the 1960s, so too are rising wage costs a damper on Hong Kong’s competitive edge today. But the real key to New York’s revived garment industry is the arrival of the immigrants.

New York’s garment industry was plagued by recurrent labor shortages after World War II. As competition intensified, relative wages fell and seasonal swings in employment got worse. The workers on whom the industry had always depended, European immigrants and their children, started leaving in droves. When the bottom fell out of the market in the 1970s, the shortage of experienced workers worsened. As the owner of one large factory in Brooklyn put it, “You can’t find people: Nobody wants to work as a lay-up girl, or stand with scissors and cut threads.”

But just as the exodus of old-line workers threatened to destroy the rag trade, another exodus from Latin America and Asia revived it. Among the new immigrants there were once again people eager to cut threads or stand over a steaming pressing machine. Thanks to the liberalization of the nation’s immigration laws in 1965, New York again became an immigrant’s mecca. By the 1970s, roughly 80,000 immigrants were moving to New York every year; in the 1980s, the flow ratcheted up to 90,000 per annum.

Many moved right into the needle trades, despite the difficult conditions and low pay. As one Latin American immigrant told me, “I am a poor person and I can accommodate myself with anything, no?” Informal immigrant networks helped newcomers find jobs where other immigrants were already employed: Three-quarters of a group of Hispanic immigrants I interviewed found their first job through relatives or friends. By 1980, newcomers from the Third World made up almost half of New York’s needle-trades proletariat. Without them the needle trades would be nearly gone from New York.

From immigrant ranks came the new garment capitalists as well. For most of the industry’s history in New York, owners and managers had been recruited largely from the ranks of Jewish and Italian sewing-machine operators, cutters, salesmen, and patternmakers eager to move ahead. Many Jewish and Italian-owned garment factories still exist, but hardly any of these are new start-ups. Ethnic succession has created a space for new immigrant owners.

Small business offers the surest path to advancement for those with language difficulties, the wrong education, few ties to the establishment, and little capital. In the rag trade the pathway to ownership still can be negotiated by the worker starting from the factory floor. Garment-making requires relatively little expertise. Most work is done under contract. On the one side is the manufacturer or jobber, responsible for designing and marketing the merchandise. On the other side is the contractor, who produces goods to the specifications set by the manufacturer. The manufacturer purchases the raw materials and handles the complex interactions among designers, merchandisers, and suppliers. A new contractor thus need not be a business sophisticate: Even English is not always required. Usually, there are better-settled intermediaries or brokers who can connect the immigrant contractor with the manufacturer in the garment center. In any case, communication is usually stripped down to its essentials. As one manufacturer told me, “If they don’t understand, you simply sit down and show them.”

To get started, the immigrant entrepreneur needs only the skills that one can pick up as a worker in a shop—today’s typical immigrant garment capitalist is a former presser or sewing-machine operator—and access to a reliable source of family or ethnic labor. Though the garment shop is usually too big to staff with family labor, “Relatives are a must,” as one contractor who came over from Hong Kong in 1981 told me. “Whatever it is,” a labor shortage, production problems that crop up because equipment is antiquated, or meeting a rush, “relatives help more than others.” As for capital, a chattel mortgage secured from an equipment supplier with a few thousand dollars deposit is enough to start up the average-sized garment firm.

Immigrant garment capitalists are particularly quick to exploit fashion changes: However uncertain these trends may be, they offer a chance to build up business. Most of these new immigrant entities fail; on average, the immigrants’ failure rate is higher than that of their older ethnic competitors. But newcomers are less deterred by this high mortality rate, and their ranks have swelled.

Many immigrant groups share the credit for reviving New York’s rag trade. There are over 250 Korean garment shops, mainly concentrated in the garment center and in Queens, and scores of Hispanic shops scattered throughout Washington Heights, Corona, Sunset Park, and the side streets of the garment center.

Chinatown, however, is the heart of New York’s immigrant garment industry. Though as late as the 1960s there was essentially no immigrant industry in the area, today Chinatown’s 460-odd garment factories keep over 20,000 Chinese workers employed.

Between 1965 and 1967, Chinese immigration to the United States jumped from just under 5,000 to 25,000; it has since moved up sharply, with almost 40,000 Chinese newcomers arriving in 1988. This influx has largely converged on New York. As many overseas Chinese move to New York each year as to San Francisco, Los Angeles, Oakland, Honolulu, and Seattle combined, making New York’s Chinese community the largest in the country.

Economic changes led many of these newcomers into the garment industry. The old Chinese ethnic economy was rooted in restaurants, laundries, and the tourist trade. But laundries were a dying business by the time the latest immigrant wave arrived. There are only so many tourists to be attracted to Chinatown; and setting up a restaurant requires considerable skills and capital compared to a garment shop. Local real estate conditions were another incentive. The old loft buildings bordering on Chinatown had long been occupied by the machinery and printing trades. But as New York’s manufacturing sector crumbled in the late 1960s and early 1970s, these loft spaces emptied out, rents tumbled, and immigrant entrepreneurs moved in.

Once in place, the industry quickly acquired a dynamic of its own. The demand for labor diverted a disproportionate share of Chinese immigrants to Chinatown. In 1980, for example, just under half of the roughly 20,000 Chinese members of Local 23-25 of the International Ladies Garment Workers Union lived in Chinatown, compared to a quarter for the city’s Chinese population as a whole. In Chinatown, immigrant garment workers could walk to work, or easily find a new job through the grapevine when they were laid off. Employers also found that clustering in Chinatown made it easier to recruit workers. Teenagers, mothers, and older workers, who might not have commuted long distances to work, were readily available for work in a local factory.

The concentration of factories was convenient for manufacturers. Chinatown was close enough to the garment district to take advantage of the schmooze factor. Shops could be visited daily; shipments could be sent frequently, even in small quantities; and a manufacturer’s production supervisor could rotate from one factory to another.

For all these reasons Chinatown’s garment industry boomed while the rest of New York’s manufacturing economy declined. Recent developments, however, augur tougher times ahead. Cheap space was a key to the garment industry’s growth; when residential and commercial renters began to vie for that space, the immigrant industrialists could not possibly compete. Loft dwellers, pushed away from Soho and Noho by escalating costs, were drawn toward Chinatown by its many smaller lofts, and began outbidding industrial tenants. By 1981, according to the Chinatown Garment Industry Study, 21 percent of loft space in the Chinatown area was occupied for residential purposes. After 1978, the real estate boom steadily shrunk the supply of cheap factory space. Values appreciated rapidly, with the average consideration per square foot tripling from $8.34 in 1978 to $25.70 in 1981, and then doubling to $56.44 by 1985.

In Chinatown, as in the rest of the city, the dizzying spiral of real estate speculation ended with the stock market crash. Chinatown’s space problems continue, however, because only part of the past increase in values was caused by residential developers. Chinatown’s success as the commercial and service emporium for the metropolitan area’s burgeoning Chinese population has accelerated conversions of loft buildings to commercial purposes. Commercial rents in Chinatown are the second highest in Manhattan.

Under such pressure, vacancy rates for industrial spaces have plummeted; there is virtually no available space left in Chinatown. Long-term leases of more than three years are no longer to be had, and a growing proportion of Chinatown’s garment factories operate on a month-to-month lease. For many factories, the real estate squeeze spells not relocation but extinction. A study conducted by the Garment Industry Development Corporation found that two-thirds of the 36 garment factories located in six Chinatown loft buildings chose not to stay in business when they were forced to move.

In recent years, the city has tried to preserve space for this unique immigrant industry, with only modest success. The City Planning Commission took the first steps in 1982 and 1983, rezoning a mixed-use manufacturing area (where conversion to residential uses was permitted) to a manufacturing zone in which residential conversions were prohibited. Later, a special district was set up in a commercially zoned area, prohibiting conversion from manufacturing to residential uses. These zoning changes have apparently succeeded in warding off further residential infiltration, but they offer no protection against commercial incursion.

In another effort, the city, the ILGWU, and two employers’ associations joined forces to establish a new entity, the Garment Industry Development Corporation (GIDC), to organize consortia of Chinatown contractors to buy lofts in which they can permanently house their factories. But factory owners find it hard to raise the needed funds. The city’s Financial Services Corporation (FSC) may help only after initial private financing has been raised, and the garment contracting shop is too uncertain an enterprise to raise a large first mortgage from a bank. Consequently the GIDC can claim only one real estate success: In February 1987 five Chinatown contractors purchased lofts in a newly formed industrial condominium on Broadway, just north of Canal Street.

Having met with disappointment on the real estate front, the GIDC is now turning its attention to the more promising, sorely needed task of upgrading the skills of workers and entrepreneurs alike. The goal is to help the city’s apparel makers make more of the tremendous advantage of being in New York.

Though the city’s garment industry on the whole is oriented toward high-fashion lines, the immigrant sector—the industry’s future—is not nearly as proficient in that portion of that market as it should be. Nor have the immigrants mastered the new technologies and production methods that would enhance the city’s quick turnaround edge. The immigrants are still relying too heavily on hard work, long hours, and low pay, to the detriment of skill, efficiency, and innovation.

To preserve New York’s niche, the immigrant entrepreneurs need a more skilled labor force that can compete not just with low-cost labor but with new, more productive, flexible, and intensely managed production technologies. Such technologies foster the quick response to market changes on which New York’s industry depends. If GIDC can help provide better-trained workers, Chinatown contractors can move up in the product stream. With more skills, Chinese workers might also be able to connect with the remaining European-American contractors and manufacturers who still specialize in high-quality lines and are desperately seeking skilled help.

Better workers are only one link in the chain. Just as importantly, the manufacturers—that vital link between designers, suppliers, and retailers on one side and the immigrant producers on the other—are suffering from a shortage of new blood. To strengthen the link between the immigrant production community and the design shops, the immigrant community itself must move into manufacturing in a sophisticated way.

The city needs a strategy aimed at fully mobilizing immigrant talent, propelling immigrants from simple contracting to the more complex, and financially lucrative, activities of a manufacturer. Schools like the High School of Fashion Industries or the Fashion Institute of Technology, for example, already enroll a substantial immigrant or second-generation student body. But these schools mainly prepare students for marketing and merchandising, not production. A manufacturing-oriented curriculum could increase the potential supply of trained, immigrant entrepreneurs, and the schools could also develop a much more effective extension program, linking the school and the industry, just as agricultural schools have done for years.

A second step would be to put in place an infrastructure to help “new blood” manufacturers compete with larger competitors and importers. An apparel service center would be a key element in this strategy. Here, firms could hook into technical assistance, such as computer-aided design and manufacturing on a time-share basis. Linking such a service center to an industrial incubator, a physical facility offering cheap space to new firms only, would mitigate the real estate pressures that have jacked up the industry’s space costs. Linked to such an incubator the service center could also provide centralized bookkeeping and payroll services. Neither the incubator nor the service center need be in Chinatown, nor in Manhattan. If, despite Chinatown’s tremendous “clustering” advantages, the real estate furies are driving manufacturers to Brooklyn, or Queens, the city’s best course would be to make the long march as easy as possible by providing a safe haven at the end.

Of course, recreating an enclave of innovative entrepreneurs is no easy task-as state and local governments intent on building copycat versions of Silicon Valley have found out to their dismay. Still, New York’s critical mass of designers, entrepreneurs, and skilled workers suggests that the necessary ingredients are already in place. If the industry learned how to use this talent better, it might find the market niche in which it could thrive. That would certainly be an improvement on the present strategy—of just trying to hang on.

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