Feb 12th 2010

What the Iconic Labor Battle at Hugo Boss Means for Our Economic Future

by Robert Creamer

Robert Creamer is a long-time political organizer and strategist and author of the recent book: "Stand Up Straight: How Progressives Can Win," available on amazon.com.
It's the red carpet season in Hollywood. That means high-end apparel companies like Hugo Boss are promoting iconic celebrities to wear their clothing line at the Oscars and other award ceremonies.But for the workers who make these suits in Cleveland, Ohio, it's a season of a different shade - that of the pink slip. And the result is an iconic labor battle that is emblematic of many of the most important issues facing our economy.

Just after Christmas, Germany-based Hugo Boss messengered pink slips to the 400 employees at its Cleveland, Ohio manufacturing facility. The employees were told that they were being laid off, and the plant was being closed.

Hugo Boss was not closing the facility because it was losing money - or, for that matter, because the company was in bad financial condition. Quite the contrary. Its annual report says that: "Despite the global economic crisis… HUGO BOSS held its ground over the course of the year. In particular, toward the end of the year some initial positive trends were visible. In the fourth quarter sales revenues were slightly above the previous year's …"

Not only is the whole company profitable, there is every indication that the Cleveland plant is profitable as well.So why is Hugo Boss shuttering its Cleveland operation and sending 400 American workers onto unemployment lines? Simple. The workers at the plant refused a company demand that their wages be cut by almost a third - from $12 per hour to $8 and change.

The company refused to discuss counter-offers, and rejected out of hand a package of incentives proposed by state and local officials to save the plant.

Now let's remember that these workers weren't making exorbitant incomes to begin with. Twelve dollars an hour is only about $25,000 a year. The average CEO of a large American corporation (making $10.5 million per year) earns that much in the first five hours of the first work day of the year. No matter, the executives at Hugo Boss think they can make more money if they move the jobs of the Cleveland workers to Turkey and China, where they can get workers to manufacture their suits for even less. If something isn't done to alter their decision, the Hugo Boss plant in Cleveland will stop making suits in April of this year.

There are four key lessons for the American economy from the Hugo Boss story:

Lesson # 1.
Every time we allow the executives of international corporations to maximize their own wealth by paying their workers less and less, we allow them to place all of us in economic jeopardy. The root of the current Great Recession was the reckless speculation of a bloated financial sector that was swimming in the money it has squeezed from ordinary Americans who actually produce things for a living. That shift of income from everyday people to corporate CEO's, insurance companies and Wall Street banks left wages stagnant for the last decade. All of the economic growth of the Bush years went to the top two percent of the population. That left consumers without expanding incomes to buy new products, forcing the economy to rely on growing consumer debt and a housing bubble to finance its relatively anemic expansion. The fruits of increased productivity must be widely shared in order to sustain long-term economic growth. A high wage economy is the foundation of a bright economic future - not a Bush era economy where income is concentrated in the hands of a few.The evidence is crystal clear.

Economist Paul Krugman has noted, at the beginning of the Great Depression, income inequality, and inequality in the control of wealth, was very high. Then came the "the great compression" between 1929 and 1947. Real wages for workers in manufacturing rose 67% while real income for the richest 1% of Americans fell 17%. This period marked the birth of the American middle class. Two major forces drove these trends - unionization of major manufacturing sectors, and the public policies of the New Deal that were sparked by the Great Depression.

The growing spending power of everyday Americans spurred the postwar boom from 1947 to 1973. Real wages rose 81% and the income of the richest 1% rose 38%. Growth was widely shared, but income inequality continued to drop. Compare that to the Republican policies of the Bush years - trade policies that allowed corporations to send manufacturing jobs abroad, and to lower wages at home; policies making it harder to organize unions; and tax cuts for the wealthy.

Of course, throughout the heyday of Reagan's "supply side revolution" and Bush's tax cuts, the Republicans and the right wing intellectual establishment have held fast to their foundational belief that these policies - and especially tax cuts for upper income Americans -- would create private sector jobs.

Well, the great experiment in "trickle down economics" is over and the results are in. The New York Times reports that, "For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring."

These Republican economic policies didn't just produce fewer jobs than advertised. They didn't produce any private sector jobs at all. The whole experiment in handing over money to the wealthiest people in America so they could use it to benefit the rest of us was a colossal - empirically verifiable - failure.

But our economy is not doomed to have more and more low-paying jobs, greater income inequality and economic stagnation. There's a great deal that can be done to prevent corporations from lowering the incomes of American workers in the future - and to stop Hugo Boss from laying off 400 workers in Cleveland right now.

Lesson #2. America's trade policies have to change.
The international rules of the economic road must and can be changed. Fundamentally, the rules of international trade must require that wages for employees are not solely subject to market forces. Human beings are not commodities like beans and corn. Most people agree that we need child labor laws, health and safety laws, laws protecting the right to organize, and the minimum wage. That's because without them, "the market"--left to its own devices--would force companies to drive down wages, and incentivize unsafe working conditions.

The same is true of the international market place. The international rules of the economic game that are reflected in trade agreements need to be changed to recognize that human beings are the point of the economic system - not just an "economic input." Labor agreements must have labor and environmental protections - not just protections for the rights of capital and "intellectual property."

Lesson #3. Our tax and regulatory policies need to be changed to reward true economic production and discourage the reckless speculation of the financial sector.
It is the exploding financial sector that insists that a profitable company like Hugo Boss produce even more short-term profits - even though it damages the American manufacturing base.
We've seen this movie over and over again. A few months ago Simmons - a 133-year-old profitable bedding maker -- was forced to file for bankruptcy protection because it has been milked dry by a succession of buyers and Wall Street investment banks. The investment banks made millions through leveraged buyouts that made good financial sense for Wall Street, but left the manufacturing firm deeper and deeper in debt. The New York Times reports that "the financiers borrowed more and more money to pay ever-higher prices for the company, enabling each previous owner to cash out profitably."

This time, Hugo Boss is being milked by a private equity firm called Permira. The changes in financial regulation proposed by the Obama Administration would be a start in the right direction. But everything from tax policies to compensation practices need to change if we are going to re-establish the priority of productive work - including manufacturing - over the needs of the "Masters of the Universe" on Wall Street.

Lesson #4. We have to remember: it ain't over 'til it's over. It's up to all of us to use our collective political and economic power not only to make changes in our economic policies, but to stop the destruction of 400 productive jobs at Cleveland's Hugo Boss. Workers at Republic Windows and Doors in Chicago sat down on the job in order to preserve their jobs - and with the help of public officials like Congressman Luis Gutierrez and my wife, Congresswoman Jan Schakowsky - they won.

Last year workers at another apparel company, Chicago-based Hartmarx, which makes President Obama's suits, faced their own fight. Thousands of jobs were put in jeopardy when the company's bankers sought to liquidate the company entirely. The workers fought the banks again - and with the help of Illinois State Treasurer and current Senate candidate Alexi Giannoulias they won, too.

The workers in Cleveland realize they must engage in that same type of fight against the corporate greed of Hugo Boss, and they need all of our help.

We should demand that each of the glitterati that attends the Oscars publicly refuse to wear Hugo Boss clothes, so long as the company continues to put its own greed over the interests of American workers.

Each of us should foreswear Hugo Boss clothes until the workers at the Cleveland plant get back their jobs. Retailers should be asked to stop carrying Hugo Boss products.

Investors in the private pension fund
Permira should sell their holdings.

All of us should stand shoulder to shoulder with the members of Workers United, an affiliate of Service Employees International Union, and help them demonstrate to America, once again, why a strong labor movement is our country's principal defense against a low-wage economy and economic stagnation.

Robert Creamer's recent book: Stand Up Straight: How Progressives Can Win, available on Amazon.com.

Browse articles by author

More Current Affairs

Nov 30th 2021
EXTRACT: "So it could well be that, despite the faster spread of the infection, its ultimate health, social and economic impact proves negligible. We simply do not know at this point. But detecting more uncertainty than before, financial markets have reacted with panic. For example, the S&P500 tumbled 2.3% on Friday November 26 only to rise 1.1% on Monday November 29. Most markets gave up between 2% and 4%, which is a pretty substantial one-day fall."
Nov 28th 2021
EXTRACT: "Momentous changes are casting a long shadow on China. The country’s political system will soon undergo a profound reform, pending final approval (a quasi-formality) at next year’s congress of the Communist Party of China (CPC). President Xi Jinping, the Party chairman and the “navigator” of the country, has decided on a new course, abandoning the principle of collective leadership. Xi is leading China away from the path taken by Deng Xiaoping after the terror of the Cultural Revolution, and back toward a system of absolute rule by one person without term limits, as under Mao Zedong."
Nov 25th 2021
EXTRACTS: "”The biggest disappointment in Glasgow was the last-minute watering down of the proposed (and widely supported) agreement to “phase out” the use of coal in energy production. With India providing political cover for China in vetoing this language, the final conference proposal was to “phase down” coal”. ---- “China accounts for more than half of the world’s coal consumption, and has the largest amount of coal-fired generating capacity under construction. Pressed about why his country would not do more in Glasgow to help save the planet, China’s chief negotiator pointed to the commitments in the Communist Party of China’s current Five-Year Plan. So, our future now depends on the CPC’s program. The tragedy for the world is that the Party cannot be phased down, much less phased out, despite the fact that it is a huge threat to the future of all of us.” ------ “To save the planet, robust democratic leadership must be phased up – not phased down, let alone phased out. Rather than merely keeping our fingers crossed and hoping for the best, we should start by calling out the appalling behavior of dictatorships such as China and Russia.”
Nov 22nd 2021
EXTRACT: "The transitory inflation debate in the United States is over. The upsurge in US inflation has turned into something far worse than the Federal Reserve expected. Perpetually optimistic financial markets are taking this largely in stride. The Fed is widely presumed to have both the wisdom and the firepower to keep underlying inflation in check. That remains to be seen."
Nov 14th 2021
EXTRACT: "S&P projects that companies are planning to install 44 gigawatts of new solar in 2022. The year 2020, despite the onset of the pandemic, saw a record-breaking 19 gigawatts of new solar capacity installed in the U.S. So given the bids out there already, it appears that in 2022 solar installers will more than double their best year ever so far. The U.S. currently has 100 gigawatts of solar electricity-generating capacity, so in just one year we are poised to add nearly 50% of our current total. A gigawatt of power can provide electricity to about 750,000 homes. So the 44 new gigawatts we’ll put in next year have a nameplate capacity that would under ideal conditions allow them to power 33 million homes." ----- "Not only is there a lot of good news on the green energy front but there is good news in the bad news for fossil fuels. S&P finds that coal plants are being retired way before the utilities had expected. Some 29 gigawatts of coal retirements are expected from 2020 through 2025. "
Nov 3rd 2021
EXTRACT: "Zemmour’s way of thinking stems from a tradition going back to the French Revolution of 1789. Catholic conservatives and right-wing intellectuals, who hated the secular republic that emerged from the revolution, have long fulminated against liberals, cosmopolitans, immigrants, and other enemies of their idea of a society based on ethnic purity, obedience to the church, and family values. They were almost invariably anti-Semitic. When Jewish army Captain Alfred Dreyfus was falsely accused of betraying his country in the notorious scandal of the 1890s, they were on the side of Dreyfus’s accusers. ---- Germany’s invasion of France in 1940 gave reactionaries of this kind the chance to form a French puppet-government in Vichy. Zemmour has had kind things to say about the Vichy regime. He also has expressed some doubt about the innocence of Dreyfus. ---- None of these views would be surprising if they came from a far-right agitator like Jean-Marie Le Pen. But Zemmour is the son of Sephardic Jewish immigrants from Algeria who lived among the Muslim Berbers."
Oct 27th 2021
EXTRACT: "performed strongly in last month’s parliamentary and regional elections. Officially, Communist Party candidates took 18.9% of the popular vote for the State Duma (parliament), compared to nearly 49.8% for the Kremlin’s United Russia party. But the Communists refused to recognize the results, insisting that the vote was rigged. And, indeed, some experts estimate that they should have gotten around 30% of the vote, with United Russia taking about 35%."
Oct 22nd 2021
EXTRACT: "Powell was charismatic in the true sense of the term. Nowadays, this description is too often used to indicate an ability to attract supporters or generate celebrity interest. Internet lists of those who are regarded as charismatic include characters as varied as Adolf Hitler, Bono, Donald Trump, George Clooney, and Rihanna. But the ancient Greeks and Saint Paul used “charisma” to describe values-based leadership infused with a charm capable of inspiring devotion. The Greeks believed that this quality was a gift of grace, while Christian theology regarded it as a power given by the Holy Spirit."
Oct 17th 2021
EXTRACTS: "But property-sector woes are not the only economic danger China faces in 2021-22. The Chinese government’s mounting crackdown on the country’s burgeoning tech sector may pose an even greater threat." ---- "According to a recent study by McKinsey & Company, the share of Chinese urban employment supported by private enterprises more than quadrupled between 1995 and 2018, from just 18% to 87%. The share of exports generated by the private sector more than doubled over the same period, from 34% to 88%. And private-sector fixed-asset investment jumped from 42% to 65% of the total. The message in the data is clear: clamping down on the private sector and threatening innovators is not the way to ensure sustained rapid growth. Chinese entrepreneurs can read the writing on the wall. They understand that their political and regulatory room to maneuver is shrinking, and that the balance has shifted in favor of state-owned firms and public officials. And they understand that this uneasy atmosphere is likely to persist."
Oct 16th 2021
EXTRACT: "We designed a programme that incorporated data from over 300 million buildings and analysed 130 million km² of land – almost the entire land surface area of the planet. This estimated how much energy could be produced from the 0.2 million km² of rooftops present on that land, an area roughly the same size as the UK."
Oct 6th 2021
EXTRACT: "Britain in the 1950s was wedded to the US, acting as a partner rather than leading the charge. Now, while the UK continues to support the US, the influence it has seems negligible. While it may bring comfort to the UK to feel it is a partner to a superpower, being its stooge or subordinate is an unpleasant place to be, no matter how much you tell yourself it values your opinion."
Oct 6th 2021
EXTRACT: "That was then. Now, the Chinese government has doubled down, with President Xi Jinping throwing the full force of his power into a “common prosperity” campaign aimed at addressing inequalities of income and wealth. Moreover, the regulatory net has been broadened, not just to ban cryptocurrencies, but also to become an instrument of social engineering, with the government adding e-cigarettes, business drinking, and celebrity fan culture to its ever-lengthening list of bad social habits. All this only compounds the concerns I raised two months ago. The new dual thrust of Chinese policy – redistribution plus re-regulation – strikes at the heart of the market-based “reform and opening up” that have underpinned China’s growth miracle since the days of Deng Xiaoping in the 1980s. It will subdue the entrepreneurial activity that has been so important in powering China’s dynamic private sector, with lasting consequences for the next, innovations-driven, phase of Chinese economic development. Without animal spirits, the case for indigenous innovation is in tatters."
Oct 5th 2021
EXTRACT: "Wartime nostalgia plays an important part in Britain’s instinctive fondness for the special relationship. Like former Prime Minister Tony Blair in the run-up to the invasion of Iraq in 2003, some British politicians might believe that the United Kingdom is the only European country with serious armed forces and the political will to use them. Prime Minister Boris Johnson, like Blair before him, seems to fancy himself a modern-day Churchill. Unfortunately (or not), Britain’s military power is insignificant compared to what Churchill could command in 1944. Wartime nostalgia has drawn Britain into several foolish American wars, which other European countries were wise to avoid."
Sep 24th 2021
EXTRACTS: "We have found that 47 million American adults – nearly 1 in 5 – agree with the statement that “the 2020 election was stolen from Donald Trump and Joe Biden is an illegitimate president.” Of those, 21 million also agree that “use of force is justified to restore Donald J. Trump to the presidency.” Our survey found that many of these 21 million people with insurrectionist sentiments have the capacity for violent mobilization. At least 7 million of them already own a gun, and at least 3 million have served in the U.S. military and so have lethal skills. Of those 21 million, 6 million said they supported right-wing militias and extremist groups, and 1 million said they are themselves or personally know a member of such a group, including the Oath Keepers and Proud Boys." ----- "..... the Jan. 6 insurrection represents a far more mainstream movement than earlier instances of right-wing extremism across the country. Those events, mostly limited to white supremacist and militia groups, saw more than 100 individuals arrested from 2015 to 2020. But just 14% of those arrested for their actions on Jan. 6 are members of those groups. More than half are business owners or middle-aged white-collar professionals, and only 7% are unemployed."
Sep 11th 2021
EXTRACT: "That long path, though, has from the start had within it one fundamental flaw. If we are to make sense of wider global trends in insecurity, we have to recognise that in all the analysis around the 9/11 anniversary there lies the belief that the main security concern must be with an extreme version of Islam. It may seem a reasonable mistake, given the impact of the wars, but it still misses the point. The war on terror is better seen as one part of a global trend which goes well beyond a single religious tradition – a slow but steady move towards revolts from the margins."
Sep 11th 2021
EXTRACTS: "Is it not extraordinary that in a country that claims to be as enlightened and advanced as ours, the combined wealth of three individuals – Amazon founder Jeff Bezos, Microsoft founder Bill Gates, and investor Warren Buffett – exceeds the total wealth of the bottom half of Americans? One has to return to the days of the pharaohs of Egypt to find a parallel to the extreme wealth inequality that we see in in America today." ...... "The top tax rate remained above 90 percent through the 1950s and did not dip below 70 percent until 1981. At no point during the decades that saw America’s greatest economic growth did the tax on the wealthy drop below 70 percent. Today it is somewhere around 37 percent. President Biden’s American Families Plan would increase the top tax rate to 39.6 percent – a fairly modest alteration, albeit in the right direction. It is true that there was a time when the top marginal tax was even lower than it is today: in the years leading up to the Great Depression it hovered around 25 percent."
Sep 7th 2021
EXTRACT: "But Biden can’t be blamed for the rise of the Taliban, or the fragile state of a country that has seen far too many wars and invasions. The US should not have been there in the first place, but that is a lesson that great powers never seem to learn."
Sep 4th 2021
EXTRACT: "The world is only starting to grapple with how profound the artificial-intelligence revolution will be. AI technologies will create waves of progress in critical infrastructure, commerce, transportation, health, education, financial markets, food production, and environmental sustainability. Successful adoption of AI will drive economies, reshape societies, and determine which countries set the rules for the coming century." ----- "AI will reorganize the world and change the course of human history. The democratic world must lead that process."
Sep 1st 2021
EXTRACT: "Although the Fed is considering tapering its quantitative easing (QE), it will likely remain dovish and behind the curve overall. Like most central banks, it has been lured into a “debt trap” by the surge in private and public liabilities (as a share of GDP) in recent years. Even if inflation stays higher than targeted, exiting QE too soon could cause bond, credit, and stock markets to crash. That would subject the economy to a hard landing, potentially forcing the Fed to reverse itself and resume QE." ---- "After all, that is what happened between the fourth quarter of 2018 and the first quarter of 2019, following the Fed’s previous attempt to raise rates and roll back QE."
Sep 1st 2021
EXTRACT: "Today’s economic challenges are certainly solvable, and there is no reason why inflation should have to spike."