ALEX BLUMBERG, HOST:
PLANET MONEY listeners, my friends, this is it, the very last installment of the PLANET MONEY T-Shirt series. It has been an amazing ride, and I want to thank everybody who's been along on it with us. If you don't know what I'm talking about, you have chosen a very odd podcast to make as your very first one. Just Google PLANET MONEY and T-shirt and you'll be caught up to speed.
But today on the program, on our last installment, one of the most unexpected pleasures of transforming yourself from a small public radio reporting team into a global T-shirt manufacturer, you get to see with your very own eyes something that's largely invisible when you just buy a shirt in the store. You get to see what everything actually costs. Today on the program, we open up the books on the T-shirt project. That $25 you gave us, how much of that went to the cotton, how much of it went to the workers, how much - a surprisingly large amount - went to people that you might never have even considered?
(SOUNDBITE OF WILEY SONG, "NUMBERS IN ACTION")
BLUMBERG: All right, so we're going to start here with a number, a pretty precise number - $12.42. That is what it cost to make and get to your door the men's T-shirt. We're focusing on the men's T-shirt. The women's costs were a little harder to sort out. So we're just going to stick with the men's for this podcast. And as far as the men's goes, it cost $12.42 to make it and get it to you.
Now, you might be remembering you paid $25 for the shirts. We'll get to what happened to the rest of the money at the end of the podcast. But for most of the time, we're just going be concentrating on that $12.42. And we've broken that $12.42 into different components, how much of that $12.42 went to the printing, to knitting, to the cotton, all that stuff. And one of the more interesting things we discovered right away is that costs that I initially thought would be quite large are actually pretty small, and other costs that I didn't really think about ended up being near the top of the list. For example, the cost of just getting your money.
So remember we raised the money for the T-shirts on Kickstarter. And we had to pay a fee to Kickstarter and another fee to Amazon, who processed everyone's payments. Together, those fees ended up costing $2.25 per shirt, which is a lot. That's almost four times the cost of the cotton in the shirt, for example. And more than half of that $2.25 went to Kickstarter. They charge a 5 percent fee on every successfully-funded project. Caitlin and I got one of the founders of Kickstarter, Yancey Strickler, to come into the studio. And we asked him the question we asked everyone involved in the making of our T-shirt - why does your part cost what it does? Why do you charge 5 percent?
YANCEY STRICKLER: We came up with 5 because it was low and round. It was - that was - that was as advanced...
CAITLIN KENNEY, BYLINE: It was scientific (laughter).
STRICKLER: Yes, exactly. There was not an extensive McKenzie study or anything. It was just - five seems fair. It seemed fair to us. We were sure we could ask for more and no one would blink, but it just seemed right. It seemed fair.
BLUMBERG: Now, for everyone along the chain of making our T-shirt, there are two numbers they care most about. The first number - what do they need to charge just to stay in business, to keep the lights on, to make that good or service that they're selling? The other number - what can they charge? What are people willing to pay for their good or service?
Now, clearly, you want what you can charge to be a lot higher than what you need to charge. And Yancey says he doesn't need to charge 5 percent. He could stay in business on less, maybe 4 percent, but it is expensive being Kickstarter.
STRICKLER: Our biggest expenses - number one is salary. We pay people well because we believe that we should. Number two is taxes. Third would be web hosting costs, things like that, and fourth would be insurance - health insurance and benefits. So that's where the money goes for us. We are a sustainable business. We don't make a ton of money. It's not Bloomberg money. Mike - Michael Bloomberg, not Alex Blumberg.
BLUMBERG: I hope it's not Alex Blumberg (laughter).
STRICKLER: (Laughter) Might be a little closer to you than Michael. But yeah, so through that, we're able to be a sustainable business. We have 70 employees. We continue to grow.
BLUMBERG: And he says remember they only get paid on successfully funded projects. Most projects are not successful. And so that 5 percent covers all the costs they don't recoup on unsuccessful projects. And he told us one other thing. He said, remember your alternatives. You know, if we went to a bank for the money we needed for that $690,000, it would have cost us a lot more than 5 percent.
We would have had to pay all the money back, for one thing, and plus some interest rate that probably would have been higher than 5 percent. And a bank would not have told us precisely how many customers we had, precisely where they lived. A bank wouldn't have helped us spread the word about our project. So, in other words, he said 5 percent for all that, that's a deal.
All right, so Kickstarter and Amazon - that's $2.25 out of the $12.42. Other large expenses - fullfilment, paying the warehouse company to hold onto the shirts and make sure they get sent to the right people, that was $1.79 per shirt. Printing costs - 90 cents per shirt. There was other stuff - the cost of design, tariffs. That brings us to a grand total of $5.39, and we haven't even gotten to anything that I probably would have started with. For example, our T-shirts are 100 percent cotton. Cotton has to be a huge part of the overall cost, right? Well, before I answer that question, I have to tell you for cotton and a lot of other stuff in here, we couldn't get precise numbers. The way we did it - we paid $5.10 per shirt to Jockey and then Jockey paid their suppliers to make the shirts. Their suppliers paid other suppliers, and those suppliers bought the cotton. No one shares their precise figures with you.
So where exactly that $5.10 we paid to Jockey, where exactly that went, we don't know. But Robert Smith and Jess Jiang were on Team Cotton for this project, and they interviewed a ton of people who know a lot about this stuff. And they came into the studio to give their best guess.
So out of that $12.42 per shirt that we spent, how much of that did we spend on cotton?
ROBERT SMITH, BYLINE: The raw material cotton - Jess, give it to him.
JESS JIANG, BYLINE: All right, we have it here.
BLUMBERG: All right, I got it right here in my hand, 25 50, 60 cents. Sixty cents per shirt on the cotton.
SMITH: Is what it will cost you to buy enough cotton to make a T-shirt, yes.
BLUMBERG: Sixty cents for the cotton. And it just goes to show you, cotton is a commodity. Bowen Flowers, the cotton farmer we profiled in our series, he is in no position to do what Yancey Strickler says he does. Yancey, remember, says, I could probably charge 4 percent and survive but I'm going to hold tight here at 5 percent. Bowen Flowers could not get away with that. He has to sell at what the world wants to pay, otherwise the world will buy from somewhere else.
So continuing our tally, we are at $5.39. We'll add the 60 cents for the cotton, then another 40 cents for the estimated cost of spinning that cotton into yarn. That brings us to $6.39. Next up - shipping, getting the finished shirts from the factories where they were made in Bangladesh all the way back to the United States, more than 10,000 miles of travel, several weeks at sea. Dave Kestenbaum came up with an estimate for that cost.
David Kestenbaum is about to come into - I see him walking down the hall right now. Oh, here he is. OK. Hey. What do you got for us? Shipping, how much does it cost?
DAVID KESTENBAUM, BYLINE: Here you go. Those are 10 pennies.
BLUMBERG: That's right, 10 cents, the single smallest component in our overall cost breakdown - shipping. All right, so we've got the cost of the cotton, got the cost of the yarn, we've got the cost of the shipping. Now we're going to get into another component of our T-shirt's cost that was smaller, frankly, than I think we thought, the cost of the labor, the actual salaries of the people who are making our shirts. To talk about that, we have Zoe Chace and Caitlin Kenney in the studio. Hey, guys.
KENNEY: Hey, Alex.
ZOE CHACE, BYLINE: Hi.
BLUMBERG: You guys went to Bangladesh. You spent a couple weeks there. You interviewed workers who worked on our T-shirt. And this was your big question, how much of what we're paying for our T-shirts is going to you guys?
KENNEY: That's right. We went to Bangladesh to see the factory where our T-shirts were made, and we met these two sisters who we spent a lot of time profiling - Shumi and Minu, who have an amazing story that we've already told you. And the question on our minds was, OK, you know, we're spending this money - all you PLANET MONEY listeners out there are spending this money on this T-shirt - how much of that actually makes its way to Shumi and Minu?
BLUMBERG: And to figure that out, you talked to the managers of the factory there. They said that when you take how much they get per shirt from Jockey and you back out the other costs - the cost of the fabric, which includes the cost of the cotton and the spinning - you're left with 50 cents. Fifty cents per shirt, that is where the workers who made the shirt live.
KENNEY: You know, there's some other things in there. There's overhead, there's profit for Clifton, but mainly it's just the people. And the thing that was so amazing about the part of the story that Zoe and I reported on is there were so many people involved. You know, there were hundreds of women in this factory and men, you know, on every single floor, 32 people working on one shirt. There's just a lot of people involved. So when you think about all those people just crammed into 50 cents, it feels kind of crazy.
CHACE: That's just basically another way of saying Bangladesh has the lowest-paid workers in the world for this kind of work.
BLUMBERG: Right, which is why labor is such a small part of our shirt and which is why people make shirts in Bangladesh. Now this fact, though, that people in Bangladesh earn basically the lowest wage in the world for doing this kind of work, that fact is not lost on the people of Bangladesh who are doing the work.
KENNEY: Yeah, in fact, when we were there, it was really dominating the conversation. I mean, lots of what you hear in the U.S. is about safety conditions, a lot of...
BLUMBERG: Because of the factory collapse at Rana Plaza.
KENNEY: Yeah, certainly. But when you ask workers, you know, what's the foremost thing on your mind, a lot of them talk about wages, talk about needing to make more money.
BLUMBERG: And in fact, all this year, there have been stories about strikes and big huge protests. And very recently, a group of workers burned down the factory where they were working as a form of protest. Nobody was injured. They burned it down when nobody was in there as a form of protest.
KENNEY: Yeah, they're really upset. And they realize, you know, now is sort of their moment. In the wake of this terrible tragedy that happened earlier this year, the world is paying attention. You know, there's been lots of work to change the laws there, to make more unions and make unions more powerful. And so there's been this huge push to increase the minimum wage. And in fact, just a couple months after we got back, they came out - the government wage board came out with this new number and said we're going to basically almost double the minimum wage. When we were there, it was $39 a month.
Now, the workers at our factory made a little more than that. But for the whole country, the national minimum wage for garment work was $39. And just as of December 1, it's going up to $68 a month.
BLUMBERG: Right. The workers who worked at our factory, they made $80 a month. So this is a minimum wage - not everybody in the country makes this wage.
CHACE: Right, but the whole pay scale is going to rise. So we think that the wages of the sisters that we profiled - we think that they're going to go up and that the wages of all the workers who work in the garment industry are going to go up. We just don't know what that's going to mean though for the companies that are making the garments in Bangladesh.
BLUMBERG: OK, so there was this big, huge push for basically a year or two - right? - where people were fighting about what the minimum wage should be, had workers on the one side, management on the other, and they finally came to this agreement to raise the wage. You had talked to both sides. What did they tell you about how it felt?
KENNEY: Both sides were unhappy with this number. From the workers' point of view, it was a lot less than they wanted. The government's union leaders had gotten together and they had come up with this figure of about $104 a month. And the way they actually did this was pretty impressive.
You know, I went through the numbers with one of the union representatives, and they basically broke down, OK, here's how much the average worker spends on rent. Here's how much they spend on getting to work. Here's how much food they need to meet this minimum amount of calories they have to have to live.
BLUMBERG: Right, and that minimum amount of calories, that was part of, like, their breakdown where they were actually showing how they came up with this 104 number.
BLUMBERG: They were like, this much to get the minimum calorie requirement.
KENNEY: Right. This much for rice, you need this much for daube (ph), this much for these other ingredients that they basically need to live on.
CHACE: And they didn't even include, like, the phone for the workers in that. I mean, it was really the most basic necessities is what they were looking at.
KENNEY: And that's basically, you know, putting aside the fact that, as we've talked about before, a lot of these workers in Bangladesh - not only are they supporting themselves, but they're supporting big, large family networks. But this is, like, if they took one person, the bare minimum they said they needed to live on was 104. But they didn't get that. They got $68 a month. Surgel Islam Ronie (ph) was on the government's wage board and he represented the workers.
SURGEL ISLAM RONIE: (Through interpreter) We are not really happy about it. We'll be fine with it. But this rise, maybe the situation will improve a little bit but not much. It won't be a really meaningful improvement.
CHACE: But $68 a month, the factory owners do not consider that a win. They are really, really nervous about the new wage also, like this woman, Rubana Huq that we talked to who runs a bunch of garment factories. They make, like, sweaters and blazers and stuff like that.
RUBANA HUQ: It's going to be good for the workers. It's going to be a little tough for the owners, but I think we shall survive.
CHACE: Rubana's thing is that Bangladesh's big competitive advantage is that it's the cheapest place in the world to make clothes pretty much. Yeah, they're getting good at some other stuff, but this is still their big selling point to the retailers that they are contracting with that they get their business from.
BLUMBERG: And that has been a very compelling selling point. I mean, like...
BLUMBERG: ...There's been, like, in the last decade, tons of manufacturers that have moved to Bangladesh. Two million more people have come to work in the garment industry in Bangladesh over the last decade.
CHACE: Right. And her biggest fear is that her customers are going to see a jump like this, you know, almost a doubling, and just move their production to somewhere else in Asia. There's a lot of other places in Asia that you can go. And recently, even when I talked to her just a couple weeks ago, she said she had this customer say to her, you know, you are getting as expensive as Cambodia right now.
HUQ: You know, you're as expensive as Cambodia right now so I might as well get it from there.
CHACE: And this guy just took a bunch of sweaters and moved them over to Cambodia, and that is her big fear actually happening.
KENNEY: And what's kind of amazing about this fear is that it's not just the factory owners. I mean, the people who represent the workers, like Surgel and the workers themselves, this is their fear also that, you know, the Western brands will leave and that they'll take the jobs with them.
BLUMBERG: And there's a reason to fear. I mean, that happens. That happened in Colombia. Remember that was another place that our T-shirts were made. We did a big podcast about how the economy was doing well there, wages were rising. But because of the rising wages in Colombia, they were basically pricing themselves out of this part of the global apparel trade, right? They were no longer cheap enough for companies to make T-shirts there. And Jockey actually pulled out during the course of our reporting. We were sort of the last T-shirt order in Colombia.
CHACE: Right, and we knew that the wages were going to rise in Bangladesh so we went to Jockey with that question. You know, if the wages jump a lot in Bangladesh, are you going to pull out of there?
BLUMBERG: And their reply was, well, it depends. But the world does seem to have changed. For the last several decades, apparel prices have been going down as the apparel companies have constantly found cheaper and cheaper places to make our clothes. Korea got expensive, the world moved to China. China got expensive, the world moved to Bangladesh. But Marion Smith, a vice president at Jockey, says that whole trend for the last several decades, that might be coming to an end.
MARION SMITH: It's like Bangladesh is going to go up and there's - who's cheaper than Bangladesh?
CHACE: So you think we've sort of hit absolute zero here (laughter). We've chased the cost down as far as it goes and it's going to start rising?
SMITH: Yeah, as a global economy. Yes.
CHACE: So our clothes are going to get more expensive. Our T-shirts are going to get more expensive.
SMITH: That would be my prediction.
CHACE: But because labor's part in that equation is so small, a rise in T-shirt prices, if we do have a rise in T-shirt prices, it might just be by a few cents.
BLUMBERG: But that could still be a big jump for workers who are making the T-shirts.
KENNEY: So, Alex, the part of this T-shirt money that goes to Shumi and Minu, our sisters and all the other workers that made our T-shirt in Bangladesh, it is somewhere in this 50 cents.
BLUMBERG: And I should say that just very recently, just in the last day or two, the global apparel company H&M announced that it was considering raising retail prices to its customers. And that was widely perceived as an admission that what Marion Smith said is probably going to happen is going to happen. H&M is huge. They employ 850,000 people in Bangladesh alone, and they are basically saying, yeah, clothing prices are going to rise. Get ready, everyone.
All right, so that's 50 cents. Fifty cents we're going to add to our previous total of $6.39 plus 10 cents for shipping, plus another 50 cents for knitting and dyeing. That brings us to a grand total of $7.49. Another big cost was to Jockey. So remember I said we paid $5.10 per shirt to Jockey. And they wouldn't tell us how much of that went to cotton and spinning and how much of it went to the factories. But our best guess is that roughly $2 out of that $5.10 went to all the stuff that we've talked about, the cotton and the spinning and the labor. The rest they spent on their own costs, salaries for the people who came up with the pattern for our T-shirts, for example, or the designers who came up with the colors for our T-shirts, the textile experts who came up with the fabric for our T-shirts, the people who sourced the factories that made our clothes. Anything beyond that that might have been left over, I guess just went to their profits.
So when you add up everything we've covered so far - what we paid to Jockey plus what we paid for the cotton plus the Kickstarter fees and the printing costs, you arrive at $10.16. And that is still a long way from the $12.42 I promised at the beginning. That's because I've saved the biggest single component cost of our T-shirts to the very end. Robert Smith and I illustrated that cost.
SMITH: All right, you ready to go?
BLUMBERG: Let's go. You got the shirt?
SMITH: We got the shirt. Let's do it.
BLUMBERG: All right. Let's get out of the street. So, Robert, you and I are doing the last and most expensive part of the entire T-shirt production.
SMITH: The delivery of the T-shirt, the last mile, as we call it.
BLUMBERG: The last mile, yep.
SMITH: Now, most of our T-shirts are delivered sort of the old-fashioned way by the U.S. Postal Service. But since our studios are here in Manhattan, we're going to deliver one of the very last T-shirts in person, and we're going to do it in a way that the U.S. Postal Service, I don't know, maybe they wish they had this technology. We're going to take the subway.
BLUMBERG: Right, 80 blocks uptown to a listener who works at Columbia University at 122nd Street.
SMITH: Grab the express train.
BLUMBERG: So on average, this final mile, the cost of shipping and handling, getting the shirts from where they are stored here in the United States to their homes, to the people who bought them, that costs $2.26.
(SOUNDBITE OF ELEVATOR)
BLUMBERG: Hi, I'm looking for Ryan Haga - Ray Hagen, sorry. Hi, Ryan Hagen?
RYAN HAGEN: Hi, how are you?
BLUMBERG: Good. How are you?
BLUMBERG: We have a delivery for you.
HAGEN: Oh, this is awesome.
BLUMBERG: There you go.
HAGEN: Cool. Thank you so much. I've been expecting this.
BLUMBERG: Yes, I'm sure you have.
HAGEN: Thanks very much. I appreciate it.
BLUMBERG: It's been a long wait, huh?
HAGEN: It's been longer than I can even remember.
BLUMBERG: Longer than we can even remember, too, Ryan. Thanks to all of you guys who have been sticking with us through this entire project. And there it is, $12.42. Now, you all are saying, I paid $25 for my shirt. Where did the rest of the money go? Well, we spent the rest of the money bringing you these stories. You know, sending reporters around the world, hiring translators and fixers. We spent a big chunk of the money also building that big website. If you haven't checked it out, you definitely should. I'm really excited about it. We hired photographers, video crews, web developers, rented all sorts of equipment, and what we came up with, I think, is really amazing. All the money that was left over after that is going to public radio member stations.
(SOUNDBITE OF SONG, "NUMBERS IN ACTION")
WILEY: (Rapping) I want to see numbers in action. I want to see numbers in action. I want to see...
BLUMBERG: As always, we welcome your thoughts, questions, comments - firstname.lastname@example.org. You can check out that site I talked about - planetmoney.com/shirt. I'm Alex Blumberg. Thanks for listening.
(SOUNDBITE OF SONG, "NUMBERS IN ACTION")
WILEY: (Rapping) Dollars, I want to see pounds. Dollars, I want to see pounds. I want to see dollars, I want to see pounds. Full circle like a merry-go-round. I want to see dollars, I want to see pounds. I want to see dollars, I want to see pounds. I want to see dollars, I want to see pounds. Full circle like a merry-go-round. I'm never putting an act on. Been doing this thing since Shaq at Saxon. And I'm still a fan of Michael Jackson, but now I want to see numbers in action. I want to see numbers in action. I want to see numbers in action.
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