"Los Angeles, home to denim labels lie True Religion, Lucky Brand, Hudson and 7 For All Mankind, was once a Mecca for jeans makers in the US. But recent rise in California and Los Angeles’ minimum wage, a move by blue-jeans owners to strengthen profit margins, is having a devastating impact on Los Angeles denim factories. Earlier this month, United Denim informed state employment officials that it planned to lay off 164 of its approximately 200 employees by the end of the year. As per experts, by 2021, the minimum wage will be at $15 an hour."

Los Angeles, home to denim labels lie True Religion, Lucky Brand, Hudson and 7 For All Mankind, was once a Mecca for jeans makers in the US. But recent rise in California and Los Angeles’ minimum wage, a move by blue-jeans owners to strengthen profit margins, is having a devastating impact on Los Angeles denim factories. Earlier this month, United Denim informed state employment officials that it planned to lay off 164 of its approximately 200 employees by the end of the year. As per experts, by 2021, the minimum wage will be at $15 an hour.

Mateo Juarez, owner, United Demin Inc, opines if you make blue jeans in China, including the fabric washes, it is $6. If you do the same jeans in Mexico, you can make it for $10, which includes dropping if off in Los Angeles. And if you do it in the US, you are looking at $40 to $50. That’s a big difference. If 100,000 jeans are manufactured in Mexico, it will cost $1 million. Make those jeans in Los Angeles, the price skyrockets to $4 million. The difference is astronomical and only economically practical if blue jeans are selling for $100 to $200. These days, new leaders in the executive offices are less concerned about that ‘Made in USA’ label and more concerned about return on investments. They are reducing costs by heading to Mexico, Vietnam and India, where labour costs and regulations aren’t as stiff as they are in the US. Ilse Metchek, President, California Fashion Association feels almost all denim in LA is going out the door. It’s because of minimum wage as denim is very labour-intensive.

Finding alternatives

Around five years ago, Atomic Denim employed 1,000 workers in its two Los Angeles factories making blue jeans for True Religion. Today, there is only one factory with 70 to 100 workers who fluctuate with season in their production for Hudson, Tom Ford and Diesel. Last year, to meet lower price demand, Atomic Denim opened a Tijuana, Mexico, factory where the salary for 70 workers is about half of what they are in Los Angeles. Claudia Bae Kye, VP, E&C Fashion, the parent company of Atomic Denim and Pacific Concept Laundry, said large volumes are missing in Los Angeles unlike before. The market is different.

Similarly, three months ago, Steve Rhee took over the 100,000 sq. ft. factory with 600 sewing machines from his parents. Now called Factory One Studio, Rhee has only 75 workers that where he used to employ hundreds earlier. The factory’s biggest clients used to be True Religion and Lucky Brand. One year ago, the factory was rolling out nearly 3,000 pairs of blue jeans a day. Now, the company is making about 1,500 pairs of blue jeans for Diesel, J Brand and Fear of God. Many companies are only interested in making 100 to 200 units at a time. These days, every company is shifting to Mexico. It is hard to find consistent work in Los Angeles.

Last year, True Religion’s business shrunk and blue jeans made up only 20 per cent of production for labels such as Current/Elliott, Joie, Kate Spade and Theory. About 80 per cent of production became army uniforms and the rest was denim. The employee workforce dropped to 100. Also, military-uniform makers only wanted to pay the federal minimum wage of $7.25 an hour rather than the higher Los Angeles minimum wage. All these together are forcing companies to move away from LA and find another suitable haven.