Inside Italy's Shadow Economy
BARI PROVINCE, Italy — In a second-floor apartment in the southern Italian town of Santeramo in Colle, a middle-aged woman sat in a black-padded chair this summer, hard at work at her kitchen table. She stitched carefully at a sophisticated woollen coat, the sort of style that will sell for €800 to €2,000 ($935 to $2,340) when it arrives in stores this month as part of the fall and winter collection of MaxMara, the Italian luxury fashion brand.
But the woman, who asked not to be named for fear that she could lose her livelihood, receives just €1 from the factory that employs her for each metre of fabric she completes.
“It takes me about one hour to sew one metre, so about four to five hours to complete an entire coat,” said the woman, who works without a contract, or insurance, and is paid in cash on a monthly basis. “I try to do two coats per day.”
The unregulated work she completes in her apartment is outsourced to her from a local factory that also manufactures outerwear for some of the best-known names in the luxury business, including Louis Vuitton and Fendi. The most she has ever earned, she said, was €24 for an entire coat.
Home work — working from home or a small workshop as opposed to in a factory — is a cornerstone of the fast-fashion supply chain. It is particularly prevalent in countries such as India, Bangladesh, Vietnam and China, where millions of low-paid and predominantly female home workers are some of the most unprotected in the industry, because of their irregular employment status, isolation and lack of legal recourse.
That similar conditions exist in Italy, however, and facilitate the production of some of the most expensive wardrobe items money can buy, may shock those who see the “Made in Italy” label as a byword for sophisticated craftsmanship.
Increased pressure from globalisation and growing competition at all levels of the market mean that the assumption implicit in the luxury promise — that part of the value of such a good is that it is made in the best conditions, by highly skilled workers, who are paid fairly — is at times put under threat.
The conditions may shock those who see the 'Made in Italy' label as a byword for sophisticated craftsmanship.
Though they are not exposed to what most people would consider sweatshop conditions, the homeworkers are allotted what might seem close to sweatshop wages. Italy does not have a national minimum wage, but roughly €5 to €7 per hour is considered an appropriate standard by many unions and consulting firms. In extremely rare cases, a highly skilled worker can earn as much as €8 to €10 an hour. But the homeworkers earn significantly less, regardless of whether they are involved in leatherwork, embroidery or another artisanal task.
In Ginosa, another town in Puglia, Maria Colamita, 53, said that a decade ago, when her two children were younger, she had worked from home on wedding dresses produced by local factories, embroidering gowns with pearl paillettes and appliqués for €1.50 to €2 per hour.
Each gown took 10 to 50 hours to complete, and Ms. Colamita said she worked 16 to 18 hours a day; she was paid only when a garment was complete.
“I would only take breaks to take care of my children and my family members — that was it,” she said, adding that she currently works as a cleaner and earns €7 per hour. “Now my children have grown up, I can take on a job where I can earn a real wage.”
Both women said they knew at least 15 other seamstresses in their area who produced luxury fashion garments on a piece-rate basis for local factories from their homes. All live in Puglia, the rural heel of Italy’s boot that combines whitewashed fishing villages and crystal clear waters beloved by tourists with one of the country’s biggest manufacturing hubs.
Few were willing to risk their livelihoods to tell their tales, because for them the flexibility and opportunity to care for their families while working was worth the meager pay and lack of protections.
“I know I am not paid what I deserve, but salaries are very low here in Puglia and ultimately I love what I do,” said another seamstress, from the attic workshop in her apartment. “I have done it all my life and couldn’t do anything else.”
Although she had a factory job that paid her €5 per hour, she worked an additional three hours per day off the books from home, largely on high-quality sample garments for Italian designers at roughly €50 apiece.
“We all accept that this is how it is,” the woman said from her sewing machine, surrounded by cloth rolls and tape measures.
‘Made in Italy,’ but at What Cost?
Built upon the myriad small- and medium-size export-oriented manufacturing businesses that make up the backbone of Europe’s fourth largest economy, the centuries-old foundations of the “Made in Italy” legend have shaken in recent years under the weight of bureaucracy, rising costs and soaring unemployment.
Businesses in the north, where there are generally more job opportunities and higher wages, have suffered less than those in the south, which were hit hard by the boom in cheap foreign labor that lured many companies into moving production operations abroad.
Few sectors are as reliant on the country’s manufacturing cachet as the luxury trade, long a linchpin of Italy’s economic growth. It is responsible for 5 percent of Italian gross domestic product, and an estimated 500,000 people were employed directly and indirectly by the luxury goods sector in Italy in 2017, according to data from a report from the University of Bocconi and Altagamma, an Italian luxury trade organisation.
Those numbers have been bolstered by the rosy fortunes of the global luxury market, expected by Bain & Company to grow by 6 to 8 percent, to €276 to €281 billion in 2018, driven in part by the appetite for “Made in Italy” goods from established and emerging markets.
But the alleged efforts by some luxury brands and lead suppliers to lower costs without undermining quality have taken a toll on those operating at the very bottom of the industry. Just how many are affected is difficult to quantify.
The deeper down we go in the supply chain, the greater the abuse.
According to data from Istat (the Italian National Institute of Statistics), 3.7 million workers across all sectors worked without contracts in Italy in 2015. More recently, in 2017, Istat counted 7,216 home workers, 3,647 in the manufacturing sector, operating with regular contracts.
However, there is no official data on those operating with irregular contracts, and no one has attempted to quantify the group for decades. In 1973, the economist Sebastiano Brusco estimated that Italy had one million contracted home workers in apparel production, with a roughly equal figure working without contracts. Few comprehensive efforts have been made to examine the numbers since.
This New York Times investigation collected evidence of about 60 women in the Puglia region alone working from home without a regular contract in the apparel sector. Tania Toffanin, the author of “Fabbriche Invisibili,” a book on the history of home working in Italy, estimated that currently there are 2,000 to 4,000 irregular home workers in apparel production.
“The deeper down we go in the supply chain, the greater the abuse,” said Deborah Lucchetti, of Abiti Puliti, the Italian arm of Clean Clothes Campaign, an anti-sweatshop advocacy group. According to Ms. Lucchetti, the fragmented structure of the global manufacturing sector, made up of thousands of medium to small, often family-owned, businesses, is a key reason that practices like unregulated home working can remain prevalent even in a first world nation like Italy.
Plenty of Puglian factory managers stressed they adhered to union regulations, treated workers fairly and paid them a living wage. Many factory owners added that almost all luxury names — like Gucci, owned by Kering, for example, or Louis Vuitton, owned by LVMH Moët Hennessy Louis Vuitton — regularly sent staff to check on working conditions and quality standards.
When contacted, LVMH declined to comment for this story. A spokesman for MaxMara emailed the following statement: “MaxMara considers an ethical supply chain a key component of the company’s core values reflected in our business practice.”
He added that the company was unaware of specific allegations of its suppliers using home workers, but had started an investigation this week.
According to Ms. Lucchetti, the fact that many Italian luxury brands outsource the bulk of manufacturing, rather than use their own factories, has created a status quo where exploitation can easily fester — especially for those out of union or brand sightlines. A large portion of brands hire a local supplier in a region, who will then negotiate contracts with factories in the area on their behalf.
“Brands commission first lead contractors at the head of the supply chain, which then commission to sub-suppliers, which in turn shift part of the production to smaller factories under the pressure of reduced lead time and squeezed prices,” Ms. Lucchetti said. “That makes it very hard for there to be sufficient transparency or accountability. We know home working exists. But it is so hidden that there will be brands that have no idea orders are being made by irregular workers outside the contracted factories.”
However, she also called these problems common knowledge, and said, “some brands must know they might be complicit.”
The ‘Salento Method’
Certainly that is the view of Eugenio Romano, a former union lawyer who has spent the last five years representing Carla Ventura, a bankrupt factory owner of Keope Srl (formerly CRI), suing the Italian shoe luxury behemoth Tod’s and Euroshoes, a company that Tod’s used as a lead supplier for its Puglian footwear production.
Initially, in 2011, Ms. Ventura began legal proceedings against only Euroshoes, saying that consistently late payments, shrinking fee rates for orders and outstanding bills owed to her by that company were making it impossible to maintain a profitable factory and pay her workers a fair wage. A local court ruled in her favour, and ordered Euroshoes to pay the debts, which, after appealing unsuccessfully, the company did.
Orders dried up in the wake of those legal proceedings. Eventually, in 2014, Keope went bankrupt. Now, in a second trial, which has stretched on for years without a significant ruling, Ms. Ventura has brought another action against Euroshoes, and Tod’s, which she says had direct knowledge of Euroshoes’ unlawful business practices. (Tod’s has said it played no role in nor had any knowledge of Euroshoes’ contract issues with Keope. A lawyer for Euroshoes declined to comment for this article.)
“Part of the problem down here is that employees agree to forgo their rights in order to work,” Mr. Romano said from his office in the town of Casarano, ahead of the next court hearing, scheduled for Sept. 26.
He spoke of the “Salento method,” a well-known local phrase that means, essentially: “Be flexible, use your methods, you know how to do it down here.”
As many Italian luxury brands outsource the bulk of manufacturing, rather than use their own factories, exploitation can easily fester.
The region of Salento has a high unemployment rate, which makes its work force vulnerable. And although brands would never officially suggest taking advantage of employees, some factory owners have told Mr. Romano that there is an underlying message to use a range of means, including underpaying employees and paying them to work at home.
The area has long been a hub of third-party shoemakers for luxury brands including Gucci, Prada, Salvatore Ferragamo and Tod’s. In 2008, Ms. Ventura entered into an exclusive agreement with Euroshoes to become a sub-supplier of shoe uppers destined for Tod’s.
According to Ms. Ventura’s lawsuit, she then became subject to consistently late payments, as well as an unexplained reduction in prices per unit from €13.48 to €10.73 per shoe upper from 2009 to 2012.
While many local factories cut corners, including having employees work from home, Ms. Ventura said she still paid full salaries and provided national insurance. Because the contract required exclusivity, other potential manufacturing deals with rival brands including Armani and Gucci, which could have balanced the books, could not be made.
Production costs were no longer covered, and promises of an increased number of orders from Tod’s via Euroshoes never came, according to the legal papers filed in Ms. Ventura’s case.
In 2012, orders from Tod’s via Euroshoes stopped completely, one year after Ms. Ventura first took Euroshoes to court for her unpaid bills. Ms. Ventura said that eventually put Keope on the road to bankruptcy, according to legal documents. Ms. Ventura was declared insolvent in 2014.
When asked for comment, a Tod’s spokeswoman said in a statement:
“Keope filed a lawsuit against one of our suppliers, Euroshoes, and Tod’s, to recover damages related to the alleged actions or omissions of Euroshoes. Tod’s has nothing to do with the facts alleged in the case and never had a direct commercial relationship with Keope. Keope is a subcontractor of Euroshoes, and Tod’s is completely extraneous to their relationship.”
The statement also said that Tod’s had paid Euroshoes for all the amounts billed in a timely and regular manner, and was not responsible if Euroshoes failed to pay a subcontractor. Tod’s said it insisted all suppliers perform their services in line with the law, and that the same standard be applied to subcontractors.
“Tod’s reserves the right to defend its reputation against the libellous attempt of Keope to involve it in issues that do not concern Tod’s,” the spokeswoman said.
Indeed, a report by Abiti Puliti that included an investigation by Il Tacco D’Italia, a local newspaper, into Ms. Ventura’s case found that other companies in the region sewing uppers by hand had women do the work irregularly from their homes. That pay would be €70 to €90 cents a pair, meaning that in 12 hours a worker would earn €7 to €9.
Home working textile jobs that are labour intensive or require skilled handiwork are not new to Italy. But many industry observers believe that the lack of a government-set national minimum wage has made it easier for many home workers to still be paid a pittance.
Wages are generally negotiated for workers by union representatives, which vary by sector and by union. According to the Studio Rota Porta, an Italian labour consultancy, the minimum wage in the textile industry should be roughly €7.08 per hour, lower than those for other sectors including food (€8.70), construction (€8) and finance (€11.51).
But workers who aren’t members of unions operate outside the system and are vulnerable to exploitation, a source of frustration for many union representatives.
“We do know about seamstresses working without contracts from home in Puglia, especially those that specialise in sewing appliqué, but none of them want to approach us to talk about their conditions, and the subcontracting keeps them largely invisible,” said Pietro Fiorella, a representative of the CGIL, or Italian General Confederation of Labour, the country’s largest national union.
Many of them are retired, Mr. Fiorella said, or want the flexibility of part-time work to care for family members or want to supplement their income, and are fearful of losing the additional money. While unemployment rates in Puglia recently dropped to 19.5 percent in the first quarter of 2018 from nearly 21.5 percent in the same period a year ago, jobs remain difficult to come by.
A fellow union representative, Giordano Fumarola, pointed to another reason that garment and textile wages in this stretch of southern Italy have stayed so low for so long: the offshoring of production to Asia and Eastern Europe over the last two decades, which intensified local competition for fewer orders and forced factory owners to drive down prices.
In recent years, some luxury companies have started to bring production back to Puglia, Mr. Fumarola said. But he believed that power is still firmly in the hands of the brands, not suppliers already operating on wafer-thin margins. The temptation for factory owners to then use sub-suppliers or home workers, or save money by defrauding their workers or the government, was hard to resist.
Add to that a longstanding antipathy for regulation, high instances of irregular unemployment and fragmented systems of employment protection, and the fact that nonstandard employment has been significantly liberalised by successive labour market reforms since the mid-1990s, and the result is further isolation for those working on the margins.
A national election in March swept a new populist government to power in Italy, placing power in the hands of two parties — the Five Star Movement and the League — and a proposed “dignity decree” aims to limit the prevalence of short-term job contracts and of firms shifting jobs abroad while simplifying some fiscal rules. For now, however, legislation around a minimum wage does not appear to be on the agenda.
Indeed, for women like the unnamed seamstress in Santeramo in Colle, working away on yet another coat at her kitchen table, reform of any sort feels a long way off.
Not that she really minded. She would be devastated to lose this additional income, she said, and the work allowed her to spend time with her children.
“What do you want me to say?” she said with a sigh, closing her eyes and raising the palms of her hands. “It is what it is. This is Italy.”
Courtesy : New York Times (Business of Fashion)