The true cost of fair fashion? You’ll never believe how little.

bangladeshi garment workers feel good wardrobeHave you ever wondered how much clothes prices would go up if everyone was fairly paid? So have we, and because no one ever told us, we decided to make the calculation ourselves.  We’re  not garment manufacturing professionals – in fact we lack any business education whatsoever – so the numbers might be a little off on some points! If that’s the case, we’re sincerely sorry. All the more reason for you to comment and correct us… please do so if you can! We’re about to produce a virtual T-shirt… ready, steady, sew!

Made in Bangladesh

We picked Bangladesh as the country of production and Bo Weevil’s organic cotton as our ethical choice of material, but we’re open to alternative sources of ethical materials if you can suggest any. The factory overhead and profit calculations are loosely based on David Birnbaum’s book Birnbaum’s guide to Winning the Great Garment War. We estimated that a worker’s wages make up 15% of what the factory asks the buyer for the T-shirt.

stardard t-shirt feel good wardrobe

Exhibit A – Standard T-shirt, 15.25 e

Let’s assume that standard cotton jersey costs 50% of the price of organic cotton, 140 euro per roll. Otherwise everything about the material is the same (the jersey is ferried from Turkey to Bangladesh, even if it would be available closer – this is just to make my calculations identical). The factory worker is paid 4600 taka per month, which is in fact not that bad a wage in the Bangladesh garment industry. This means the worker’s contribution costs a whopping 0.05 euro per T-shirt.

20′ container holds 147 rolls of jersey.
147 rolls = 20580 e
+ Freight 5000 e + insurance 0.5% (102.9 e) of cargo value = 5102.9 e
25682
+ Bangladesh tax 25% of CIF (Cost, Insurance and Freight) = 6420.725 e
(20580 e + 5102.9 e + 6420.725 e) = 32103.625 e

One roll of jersey makes 146 T-shirts, so we’re making a total of 21462 T-shirts.
32103.625 e divided by 21462 gives us a material cost of 1.50 euro per shirt.

1.5 e material + 0.05 e wage + factory overhead and profit 0.33 e = 1.88 e
+ Agent’s commission 10% = 2,068 e
+ Freight to Finland 1 e = 3,068 e
Duty 0%
The price is doubled when the retail branch buys the shirt from the parent company = 6.14 e (planning & design costs, advertising, marketing, etc. and profit) and again when it arrives at the store (rent, electricity, shop assistants’ wages, etc. & profit) = 12.28 e
+ VAT 24% = consumer price 15.25 e

fair fashion feel good wardrobeExhibit B – Fair and organic T-shirt, 26.35 e

The material is GOTS certified cotton jersey from Bo Weevil, a 73 meter roll of which costs 280 euros. The rolls will be imported from Turkey to Bangladesh. We’ll need 0.5 m for each T-shirt. We estimate the manufacturing process, from laying the material to packing the finished product, to take 15 minutes. A good monthly wage in Bangladesh would be 160 dollars / 12000 taka / 145 euro, for 9 hour days on 25 working days per month.  (We’ve been told this wage level is unrealistic, but for the sake of argument please accept it). So the factory worker’s wages amount to 0.16 euro per T-shirt.

20′ container holds 147 rolls of organic cotton jersey.
147 rolls = 41160 euros
+ Freight 5000 euros + insurance 0.5% (205 e) of cargo value = 5205.8 e
= 46356.8 e
+ Bangladesh tax 25% of CIF= 11591.45 e
(41160 e + 5205.8 e + 11591.45 e) = 57957.25 e

One roll makes 146 T-shirts, making up a total of 21462 T-shirts. 57957.25 e divided by 21462 = material cost of 2.7 euro per shirt.

2.7 e material + 0.16 e wage + factory overhead and profit 1.06 e = 3.92 e
+ Agent’s commission 10% = 4.312 e
+ Freight to Finland 1 e = 5.4312 e
Duty 0%
The price is doubled when the retail branch buys the shirt from the parent company = 10.624 e and again when it arrives at the store = 21.25 e
+ VAT 24% = consumer price 26.35 e

Exhibit C – Fair wage, standard material T-shirt, 19.85 e

Now we’ll only raise the wage of the factory worker but use standard material (which is again transported from Turkey to Bangladesh).

20′ container holds 147 rolls of jersey.
147 rolls = 20580 euros
+ Freight 5000 euros + insurance 0.5% (102.9 e) of cargo value = 5102.9 e
= 25682 e
+ Bangladesh tax 25% of CIF= 6420.725 e
(20580 e + 5102.9 e + 6420.725 e) = 32103.625 e

One roll makes 146 T-shirts, making up a total of 21462 T-shirts. 32103.625 e divided by 21462 = material cost of 1.50 euro per shirt.

1.5 e material + 0.16 e wage + factory overhead and profit 1.06 e = 2.72 e
+ Agent’s commission 10% = 3 e
+ Freight to Finland 1 e (with insurance and handling) = 4 e
Duty 0%
The price is doubled when the retail branch buys the shirt from the parent company = 8 e and again when it arrives at the store = 16 e
+ VAT 24% = consumer price 19.85 e

ILO garment workers feel good wardrobe

Just 10 euro makes it fair

So, if the factory worker’s wages were raised from 4600 to 12000 taka per month (comparing exhibit A to exhibit C), the price would up by about 30 percent. Add to that expensive organic material (as in Exhibit B), the price would increase by another 40%. Even that, though, doesn’t make the T-shirt unbearably expensive (unless you go clothes shopping every week). I’ve seen plenty of T-shirts that cost around 26 euros, without any guarantee of fair wages or organic, fairly produced material.

If we found cotton jersey produced in a Bangladeshi factory that pays fair wages, we could avoid freight and duty. Assuming the organic material still cost 280 euro per roll and the basic material 140 euro per roll, the final cost of an ethical T-shirt would be 22,15 e (compared to 12.3 e for an unethical one). Would you be happy to pay an extra 10 euro or so? Or to turn the question around, how critical is it to save 10 euros on a T-shirt?

There are even projects to by-pass the escalation of prices which avoid the annoyance of paying “extra” to for example the transport insurance company, who most likely are not suffering from pay so low it threatens basic human rights. But more on that later!

An impossible industry

Another thing these calculations made me wonder is how on earth it’s possible to sell t-shirts for 4.95 e including VAT? We couldn’t arrive at that price except by cutting the cost of material to near zero and expecting factories to work for free. Alternatively the companies would have to make a loss, and that sounds as probable as water running uphill. There is clearly black magic to fast fashion sourcing that we’re yet to master!

Would you be happy to pay an extra 10 euro or so for an ethically and ecologically sound T-shirt? Please tell us in your comments. As we said before, we’d love to hear any input you have on our calculations, too, or if you’ve worked out the secrets of that mysterious black magic.

Image credit: Wikimedia Commons, People Tree, ILO

  • Sa vlog

    nice