Wages and Employment in the U.S. Apparel Industry

BRUCE C. BROWN (*) This article uses individual-level data from the U.S. Census, Public Use Microdata Sample (PUMS), to examine wages and employment in the U.S. apparel industry. Total employment in this sector has been falling since 1970, and its overall average wage is the lowest of 25 industry aggregates. But disaggregation by gender, education, and nativity reveals that groups of highly educated male native workers earn higher average wages in apparel than in other industries. Moreover, after adjusting for observed individual differences in human capital (in addition to the three characteristics used to form worker subsets), highly educated male natives earn positive wage premiums in this sector. In contrast, most categories of immigrants and female natives earn relatively low average wages and experience negative wage premiums in apparel. This variation in the adjusted industry wage premiums across worker groups may be related to apparel's relative exposure to imports and immigrant workers. (JEL J31, L67, F02) I. INTRODUCTION Perhaps no sector has been more affected by international economic integration than the U.S. apparel industry. Imports have risen from 5% of domestic consumption in 1970, to 25% in 1988, to over 50% by 1997. (1) And while U.S. apparel firms increased foreign investment, the proportion of immigrant workers in this sector rose from levels that were already relatively high. In 1979 19.4% of all apparel workers were immigrants, and by 1989 this measure had increased to 27.2%. (2) For reasons likely related to these trends, the overall average wage in the apparel sector is lower than in other industries. In addition, both relative and absolute employment in this industry have fallen steadily since 1970. A disaggregated analysis of the data reveals, however, that some types of workers earn higher average wages in apparel than in other industries. Specifically, the group of highly educated male native workers earn more on average in apparel than in other sectors of the U.S. economy. The fact that some groups of workers can earn relatively high wages in an industry in which the overall average wage is low and total employment is plummeting seems economically interesting. Quantifying, explaining, and addressing the implications of the differing effect of employment in apparel across types of workers is the primary objective of this article. The next section considers the U.S. apparel industry within the context of greater overall globalization. Section III uses Population Census data to examine changes in employment from 1979 and 1989, and variation in wages across different industrial sectors in 1989. Section IV presents three possible theoretical explanations for observed employment and wage data. Section V concludes and addresses potential policy implications of this analysis. II. THE U.S. APPAREL INDUSTRY AND GLOBALIZATION A number of economists have examined the effects of increasing international integration, or globalization. In particular, the notion that a connection may exist between this trend and wage inequality has received considerable attention. Surveys of the literature by Rodrick (1997) and Slaughter (1998) report that, despite a significant amount of research in this area, the magnitude and nature of the link between globalization and labor market outcomes remains unclear. This article seeks to contribute to our understanding of the potential effects of greater international economic integration by focusing upon the U.S. sector probably most affected by globalization, the apparel industry. (3) Much of the economic research on the apparel industry concerns protection and its effects. Cline (1987), McKenzie and Smith (1987), Trela and Whalley (1990), Scott and Lee (1995), and Finger and Harrison (1996) all compare the costs of protection to the benefits of increased trade. These benefits are typically described as resulting from either movement of resources out of apparel and into more productive industries, or transformation of the industry into one that is leaner, more efficient, and competitive, and in which the U. …