U.S. Apparel Companies Hide Starvation Wages Behind Local Minimum Wage Hoax

U.S. apparel companies attempt to justify the starvation wages they pay around the world by stating that they adhere to all locally established minimum and prevailing wage rates. 

Columbia University graduate students have documented that the “legal” minimum wage in El Salvador was arbitrarily set. In an in-depth case study of El Salvador, they show that the legal minimum wage provides less than one-third of the basic living costs for the averaged-sized family of 4.3 people. 

  • Salvadoran law stipulates that the minimum wage is to be established and adjusted for inflation based on market cost for a basket of five necessities: food, housing, health care, education and clothing.  However, the Salvadoran government uses only the food basket to set the minimum wage, ignoring all other family needs.
  • The minimum wage in El Salvador, of $4.79 day, or 60 cents an hour, meets solely the daily food costs for a family, based on a 2,200 calorie diet.  (This diet falls short of the U.S. Department of Agriculture nutrition standards, lacking in dairy, fruit, and vegetables.)
  • In fact, El Salvador’s definition of “extreme poverty” is 42 colones a day, or $4.79. which is exactly the “legal” minimum wage.
  • “Relative poverty” is crudely defined by the Salvadoran government by simply doubling the $4.79 daily wage to $9.59, or $1.20 an hour.
A living wage for El Salvador’s garment workers, supporting 4.3 people, would be between $1.73 to $2.14 an hour, according to the Columbia University study. 

The average apparel wage in the U.S. is $8.43 an hour.  This would mean that the living wage in El Salvador would still amount to only one-quarter of the U.S. wage, maintaining El Salvador’s low wage competitive advantage. 

Government Standards:  El Salvador 

Extreme poverty/ "Legal" Minimum Wage:                         $143.84 month 
                                                                                                 $33.19   week 
                                                                                                 $4.79     day 
                                                                                                 $  .60     hour 

"Relative Poverty"/ Double the Minimum Wage:               $287.67   month 
                                                                                                 $  66.39   week 
                                                                                                 $    4.79   day 
                                                                                                 $      .60   hour 

Living Wage Estimates 

Columbia University:  Lowest Minimum Living Wage Estimate:    $ 421.00    month 
                                                                                                              $ 97.16     week 
                                                                                                              $ 13.91     day 
                                                                                                              $   1.73     hour 
Salvadorian Workers' Estimate of a Sustainable Wage:                  $ 456.62    month 
                                                                                                              $ 105.37    week 
                                                                                                              $   15.05    day 
                                                                                                              $     1.88    hour 

Columbia University Living Wage Estimate:                                     $ 520.09   month 
                                                                                                               $ 120.02   week 
                                                                                                               $   17.15   day 
                                                                                                               $     2.14   hour 

What would happen to the price of a garment if U.S. apparel companies paid a living wage- $2.14 an hour in El Salvador?  Very little. 
  • At the 60 cents an hour wage, the direct labor cost to sew an Anvil T-shirt carrying the Yale University logo is just 3 cents.  The wage paid to the Salvadoran women amounts to just 2/10th of one percent of the $14.99 retail price.  If the living wage was paid, there would now be 11cents of direct labor cost to sew the T-shirt, which means that the wages would still remain insignificant, amounting to only 7/10 of one percent of the retail price.  Payment of a living wage would add just 8 cents to the cost of the T-shirt, or one half of one percent of the sales price.  (There is approximately $1.44 in total material costs in a basic T-shirt.  What happens to all of the rest of the money?)
  • At the current 60 cents an hour “legal” minimum wage there is just 74 cents of direct labor cost to sew a $198 Liz Claiborne jacket.  Payment of a living wage would raise the labor cost in such a jacket to $2.64, which is still only a little over one percent of the retail price.  Paying a living wage would add $1.90 to the $198 jacket; a mere one percent increase.
  • There is 20 cents of direct labor cost to sew a $75 NIKE shirt in El Salvador. If Nike and its contractor paid a living wage of $2.64 an hour, there would be just 71 cents of labor to sew the shirt, or less than 1% of the retail price.  This would add 51 cents to the cost of a $75 shirt.
U.S. consumers have repeatedly responded that they would pay 5-to-10 percent more if they could be assured that the product they were purchasing was made under humane conditions. If a living wage was instituted in El Salvador, and even if the additional cost was passed on to the consumer, the price increase would come to less than one percent of the price of a garment. 

What would a living wage provide for a 4.3 member family in El Salvador? Would it be extravagant? 

       Food:    $6.17 daily food costs, or 48 cents per person per meal: 

       Housing:    $79.91 a month for two small rooms: 

       Water and Energy Costs:    $23.63 a month, or 78 cents a day: 

       Local Transportation:    $2.22 a day: 

       Child Care:    $1.13 a day: 

       Education:    $1.68 a week, or 24 cents a day: 

       Health Care:    $23.50 a month: 

       Toilet Articles/Hygiene:    56 cents cents a day 

       Clothing:    $7.14 each person per month 

       Savings:   $13.04 a week 

For comparison: 
  • The U.S. the legal minimum wage meets 58 percent of the cost of living.
  • For a family of four people, the U.S. government defines the poverty rate at $16,655 annual income, or $7.12 an hour.
  • There are 34.5 million people in the U.S. living below the poverty line, or 12.7% of the population. 18.9% of all children live in poverty.

U.S. government agencies establish 125 percent of the poverty level as the qualification for federal subsidies, such as food stamps. 
  • A family of four would qualify for food stamps if their annual income was lower than $20,818.74, or $8.90 an hour.
    A 73 percent increase would be needed to make the “legal” minimum wage a subsistence level wage for a family of four.