The Australian clothing industry: competition,productivity and scale

There has been substantial change in the Australian clothing industry over the last 20 years. Forms of restructuring in the industry include both the re‐emergence of outworking and subcontracting, and locational changes (decline in inner metropolitan areas, perhaps offset by outworking, but relative growth in other regions). The total turnover has slightly increased whereas employment has declined sharply. The changes in employment and output have led to major growth in labour productivity and in capital intensity. Yet labour productivity growth may not be the outcome of significant technical change: productivity growth is sometimes the result of plant closure; the formal social relations of outworking may permit plants to capture some of the profits produced by subcontractors. In any event, there is no evidence of improvements in total factor productivity in the clothing industry. Despite popular conceptions, the clothing industry has been able to achieve high rates of profit. Thus, the prices charged by the clothing industry have exceeded those needed to earn an average rate of return. But that rate of profit produces only small quantities of profit in its typical small plants. The general problem of the clothing industry is the very small scale of the most plants, resulting in lack of income for enterprises and of funds for new investment. The issue, then, is more complex than simply costs and international competition: it is more a question of investment dynamics and scale.