Productivity, machinery and skills: clothing manufacture in Britain and Germany.

Steedman, Hilary ; Wagner, Karin

PRODUCTIVITY, MACHINERY AND SKILLS: CLOTHING MANUFACTURE IN BRITAIN AND GERMANY

1. Introduction This is the third in a series of comparisons of matched manufacturing plants in Britain and Germany which examine productivity differences between the two countries. The two previous comparisons were based on matched plants in metalworking and woodworking (kitchen furniture) and concentrated on the contribution to productivity differences of machinery and skill-training. In brief, the comparisons pointed to the over-riding role of greater skill-training in Germany in leading to a better quality product, to the selection and proper utilisation of more advanced machinery, and to fewer breakdowns in production. Though woodworking requires less precision--and might seem to require less technical skill--than metalworking, the differences mentioned were equally clear in both studies. The conclusion drawn is that, in today's world of international competition, efficient production even of technically unsophisticated products, benefits from technically advanced machinery operated by a workforce with a high level of skills. Moreover, high levels of skill were in fact a precondition for the successful selection of appropriate machinery and its efficient utilisation.

Do similar conclusions hold for yet 'simpler' industries? The manufacture of clothing seemed a suitable next step in this inquiry. The basic sewing machine is relatively cheap, has shown only modest technological advances, and basic operations can rapidly be mastered even by school leavers. Advances in communications--fast electronic transmission of information for example, of garment specifications--have also simplified and speeded production in distant countries for European markets. In contrast to furniture, clothing is relatively light and cheap to transport and store. Virtually in consequence, this industry in both Britain and Germany has been subject to severe competition from developing low-wage countries, and employment has contracted in both countries by around one third in the past decade. But it continues to be a considerable employer, of about the same size in both countries: in 1986 it employed 230,000 in Great Britain and 220,000 in Germany, of whom some 80 per cent in both countries were female. The industry accounts for as many as 11 and 8 per cent of female employees in all manufacturing in Britain and Germany.

Germany has not enjoyed the traditional pre-eminence in men's tailoring that Britain has, nor has Germany a tradition of design flair in women's clothing as have France and Italy. Wage-levels, together with greater social on-costs, are between 50 and 100 per cent higher in Germany than in Britain, and present a greater problem for Germany in competition on the world market than for Britain. The German clothing industry thus faces even more severed handicaps than the British in seeking to adapt and survive in the face of competition from producers in developing countries. Nevertheless in the past decade it has achieved outstanding success in women's outerwear.

The wider issues relating to comparative advantage and disadvantage of advanced industrialized countries in the production of clothing have been thoroughly explored and analysed in a number of recent publications. While much evidence has been accumulated on comparative disadvantage of advanced industrialised countries in clothing production, it is still far from clear that advanced industrialised countries cannot identify a profitable niche on domestic and international markets. We therefore considered that a useful aim for our own study would be to compare the strategies and performance of two advanced industrialised countries each with a declining but still sizeable clothing industry. The two countries compared share a number of the factors contributing to comparative disadvantage of advanced countries in clothing production today. Germany, however, has a more highly-skilled workforce than Britain, which previous studies have shown to be an important factor in raising productivity. The principal question addressed therefore is whether, in a low-technology, labour-intensive industry, work-force skills contribute significantly to comparative advantage.

Compared with the previous industries in this inquiry we found clothing firms were subject to much shorter planning horizons--undoubtedly because of seasonal pressures, rapid fashion changes, and the need for quick delivery. This, we believe, is the main reason why only one in three of the firms approached were able to spare time for our visits, compared with half in metal and two-thirds in woodworking; the proportions were much the same in both countries. The firms that agreed to our visits are likely to be among the more successful in the industry, and a possible bias in our findings--perhaps similar in both countries--needs to be kept in mind. Discussions were also held with machinery suppliers, training institutions, trade unions, trade associations, buyers and leading retailers and with the trade press. These amounted to some twenty interviews in each country. Within the limits of our resources our main visits were confined to ten clothing manufacturers in Germany and twelve in Britain chosen with regard to their total size of employment and their main products. In addition, in order to obtain some idea of the 'grey economy' in the clothing industry, we also visited a number of very small clothing 'workshops' in Britain, producing mostly on sub-contract; these were not however taken into account in our productivity calculations below. To assist comparatibility, we confined our visits to one section of the industry--that producing women's outerwear, (coats, raincoats, jackets, suits, blouses, skirts and dresses) which accounts for around half of all employment in clothing manufacture in both countries; and within that branch, for the same reason, we further confined ourselves as far as possible to those plants producing skirts, jackets, suits and blouses. Eight out of the ten plants visited in both Britain and Germany lay between the lower and upper quartiles (defined in terms of total employment) for women's outerwear plants in the two countries as recorded in the Censuses of Production (lower quartiles of 25 and 35 employees for Britain and Germany respectively, and upper quartiles of 280 and 200 employees; further details are in Appendix A, table A1).

The order of discussion in the remainder of this paper is as follows. The next section describes differences between the two countries in the quality of the goods produced and differences in productivity. We then, in section 3, discuss the domestic and international markets for British and German products and recent reaction to competition from low-wage countries. Section 4 describes differences between the countries in machinery and maintenance. Provision for training and the main vocational qualifications for the clothing industry in the two countries are described in section 5, together with effects--as observed on our visits--of training on productivity; the final section provides a summary, with reference to training needs for industries of this type in advanced industrial economies.

2. The products, scale of production and

productivity

The value of German imports of clothing from developing countries per head of the population is 70 per cent greater than the of British imports. Combined with higher German labour costs, this greater openness to developing country imports has led german clothing manufacturers to shift to the manufacture of higher quality products. Consequently, the German clothing industry is less dependent on protection from cheaper imports than the British. Indeed, German experts have assured us that they would welcome a lessening of protective measures which would enable them to source larger quantities of garments in low-wage countries.

These facts help to explain the major contrast observed on our visits to British and German clothing plants in the type and qualify of products. The successful survival of German clothing manufacture is based not on a wider application of mass-production principles to standard varieties, but rather on producing small batches of high quality goods in great variety; British firms on the other hand, depend to a very great extent on manufacturing very long runs of standard items. In both countries there is an immense range of clothing producers with individual strengths and specializations; but the contrast just mentioned--subject to more detailed examination and qualification below--is one of the central facts that needs to concern us through most of this study.

The typical length of production run in women's outerwear in Germany was 150-300 garments; in Britain, the length of run varied greatly, but in the majority of plants visited was something like a hundred-fold greater--in the region of 15,000 garments. In Germany such long runs were virtually unheard of. As our study progressed we widened our sample in Britain to include plants making medium and higher quality garments to match those seen in Germany; four such plants were visited, and they too manufactured in batches of some 300 garments as in Germany; such plants were however not typical of British production. The very long runs in Britain were destined for large High-street chain and multiple stores which are characteristic of the British clothing market, and more important than in Germany.

The spectrum of clothing manufacturers covers an immense range--at the risk of caricaturing the gap between the countries, it is worth describing in a few words the higher quality and styling of German clothing production. Three differences may be mentioned. First, the German product (and we refer here particularly to ladies dresses, jackets and suits)--in order to provide shape--consists of more separate pieces, and has more darts and tucks, to form a 'structured' and 'tailored' garment; secondly, it is more often made of a checked or patterned material, requiring more skill in cutting and joining pieces together to ensure that the pattern aligns; thirdly more decorative stitching and other detail (for example, pockets diagonally set in) is employed to provide interest and variation. The British garment, on the other hand, is generally made of fewer constituent pieces, it is made of plain materials, and it has less decorative sticthing. Differences in quality of cloth and of trimmings were also apparent, reflecting the higher-priced market for which German garments were destined.

A high quality of workmanship is taken for granted throughout the German clothing industry; we were told that only some dozen companies in Britain today would have sufficient numbers of skilled employees to undertake comparable work.

The number of garments produced per employee in the plants we visited in the two countries varied immensely according to the type and quality of garment--from just under one garment per employee per day for top quality suits, to 14 a day for blouses produced in very long runs. Taking averages of all the plants we visited in both countries, very little difference was apparent: the British plants produced just under five garments a day per employee while the German plants produced just over five. These comparisons are however based on very different qualities of product, as explained, and also on different degrees of specialisation: in Britain most plants specialised on one product, and it was unusual to find a plant producing several different garments (skirts, dresses, blouses); while the typical German plant made a variety of garments, and often aimed at producing matching coordinates.

The remarkable point is that the higher German work-content could be incorporated in the same number of garments as produced by the British plants but by slightly smaller numbers of employees; and that it could be done while working with much shorter production runs. Not only did the German plants employ fewer machinists but the ratio both of direct and indirect workers to machinists was lower: for every one machinist in Germany there was, on average, half an additional direct or indirect worker, whereas in Britain there was an average of one additional worker for every machinist. (Direct workers other than machinists are, for example, cutters, pressers, fusers, finishers; indirect workers are those employed, on for example, administration, supervision, examining).

Comparisons based upon such a heterogeneous range of products are of very limited use in providing reliable productivity indicators. We therefore next compared average output per employee in sub-samples of plants producing more closely comparable high-quality garments in similar batch-sizes; in these plants, accounting for half our samples in each country, Germany produced roughly twice as many garments per employee as Britain. The plants omitted in this comparison were all producing women's outerwear, but of non-comparable sorts: the omitted German plants were making short runs or models of which the most successful were to be subsequently copied abroad in large scale production, while the omitted British plants were engaged in producing long runs of standard products.

It might be expected that output per machinist in the sub-samples of plants producing structured garments would vary very little from country to country since this is the most labour-intensive part of the production process and there are limits beyond which machining speeds cannot be increased. We recorded an average of 40 per cent greater output per machinist in the sub-sample of German matched plants, but the variability of our samples, particularly of the British sample, was too great to attach statistical significance to this (a more detailed analysis is presented in section 5 below.)

In this inquiry we have not visited plants in the clothing industry apart from those making women's outerwear; the impression we gained was that it was particularly in this branch of the industry that the Germans had made great strides. For the clothing industry as a whole, statistics gathered for the Censuses of Production suggest a German productivity advantage of some 20 per cent, equivalent to half that in manufacturing as a whole. The calculations for this industry based on the Census of Production are subject to serious technical reservation as explained in Appendix B.

In summarising the situation in the women's outerwear section of the industry in the two countries, one may simplify by distinguishing just two types of garmet: mass-produced standardised garments, and higher quality styled garments produced in small batches. In the former there is virtually complete specialisation by country: Germany produces virtually none of this type and, if it did try to produce them at its higher wage-level, they would be uncompetitive. Britain continues to produce standardised items at higher productivity levels despite, as we shall see in the next section, competition from low-wage countries. Higher quality garments, on the other hand, continue to be produced in both countries; but Germany seems to have developed highly successful methods of production which are not apparently matched in typical plants in Britain.

3. The clothing market and specialisation

In order to arrive at a view of the longer-term prospects for the clothing industry in both Britain and Germany, and of appropriate strategies for workforce training in this industry, we need to understand (a) why British companies concentrate on producing long runs of relatively standard garments in contrast to Germany's shorter runs of money highly-styled garments; and (b) how competition from low-wage countries is likely to affect the viability of these two types of production. We therefore next consider the main differences in the structure of retailing in Britain and Germany, the growth of foreign trade, and the role of the Multi-Fibre Arrangement which controls imports from low-wage countries.

Retailing

In both Britain and Germany there has been a long-term move within retailing towards centralised buying and centralised ordering from manufacturers. The five largest enterprises (companies together with their subsidiaries) now sell 30 per cent of all clothing retailed in Britain, of which Marks and Spencer accounts for some 16 per cent. In Germany, C & A alone account for 11 per cent of all sales, and other multiple outlet companies sell a further 10 per cent of all clothing. At the other end of the size-scale, we know that a small independent retailers account for only a quarter of all clothing sales in Britain, compared to a half in Germany. The tendency towards concentration has probably gone further in Britain than in Germany, and continues to grow. Nevertheless, and even in Britain, retailing of clothes is highly competitive and the large firms are the most aggressive.

The 'multiple outlet' or 'chain stores' sell under their own brand-name on the basis of contracts with manufacturers for goods made to their (the retailers') own price and specifications; the latter include not only appearance and type of cloth, but may include detailed technicalities of stitching, reinforcement, and packaging. Multiple retailers reap economies of scale in marketing by selling the same garment from the many outlets controlled by a single retailing business. Production economies are more important: such contracts usually involve manufacturers in large-batch production, and infrequent style changes. It encourages automation; and permits the use of a labour force with only a few specialised skills. Combined with levels of wages in Britain which are low relative to other EC countries, British producers have bee able to complete so far with foreign suppliers from low-wage countries for contracts from multiple retailers. Many large and medium-sized British clothing manufacturers have abandoned, or drastically reduced, production of goods sold under the manufacturer's label, in exchange for the greater security but lower margins of contract-clothing production sold under the retailer's label.

Because of their much higher labour costs, German manufacturers have not found it possible to follow this policy; only a small part of the contract-clothing orders of the German multiples is now produced in Germany, and large-batch production for this market takes place in the Far East and other low-cost countries. The notable difference between Germany and Britain in this respect is that clothing sourced in low-wage countries for Germany tends to be produced under contract to German clothing manufacturers, and often under their technical supervision; whereas for the British market clothing sourced in low-wage countries is produced under contract to retailers.

Average unit values of production and foreign

trade

It would be an over-simplification to assume that price is the factor which determines comparative advantage in all segments of the clothing market. While clothing at the bottom end of the market is highly price-elastic, at the middle and top end of the market it is relatively price-inelastic and fashion elements arising from cooperation between skilled designers and technicians can confer advantage. Research in Germany into the clothing industry has identified 'closeness to markets' and 'market-feeling' as important advantages enjoyed by clothing industries in advanced industrial countries, meaning that these industries can identify and respond more rapidly to changing fashion trends in their own and surrounding countries than can a far-Eastern low-wage country.

Both Germany, and Britain are successful in exporting women's outerwear of higher quality (judged by average unit values) than they import. However, the Germans enjoy greater success in exporting goods of high value; for example, in 1986 the average dress exported from Germany sold (wholesale) at 23 pounds sterling and the average ladies' suit at 38 pounds sterling, compared to 9 pounds sterling and 13 pounds sterling respectively for British exports. In addition, the average unit values of British exports in 1985 were only one third higher than the corresponding imports whereas the German goods sold for over twice as much as their corresponding import item.

Higher German prices did not result in German exporters selling less: the total value of German exports of ladies outerwear was double that of British exports. German companies manufacturing ladies outerwear also succeeded in exporting a larger protortion of their home production than did the British--40 per cent of the German production was exported compared to 20 per cent for Britain.

Imports

Both the German and British clothing industries are exposed to considerable imports of clothing and textiles from non-industrialised countries; in Germany imports of clothing now (1987) constitute 60 per cent of retail sales, in Britain the figure is 36 per cent. For more than 20 years textile and clothing imports to developed countries have been controlled by a system of 'voluntary' restraints on low-wage developing countries with large textile and clothing industries the latter countries limit their exports to developed countries to quotas fixed under the so-called MultiFibre Arrangement (see note (18) for details). These quotas have grown, by negotiated agreement, by some 1-2 per cent a year; their object has thus been to slow down the impact of foreign competition on domestic producers at the cost of the domestic consumer who has been saddled with higher clothing prices. German clothing manufacturers, with their higher wage-levels and higher social on-costs, have been unable to compete with developing low-wage countries in the production of standard garments; but the German clothing industry has been able to retain--and strengthen--its position in high fashion garments produced in small batches and, as we have seen, almost a half of this production is exported.

Wherever possible, German manufacturers have sought to retain quality-control over imports to the German market, and some 30 per cent of German clothing imports are produced in low-wage countries to the detailed design and under the technical supervison of German clothing manufacturers. In having garments made up outside Germany, manufacturers may take advantage of arrangements permitted under the MFA for outward processing of garments; material of EEC origin is supplied (either cut or on the roll) to manufacturers abroad and import duty is paid only on the value added to the garments in the making-up process--in 1985 outward-processed goods constituted a nominal 16 per cent of women's outerwear imports into Germany. If German manufacturers do not choose to use outward processing or if outward processing quotas are already full, material is sourced outside Germany and the garments are made up abroad--as for outward processing--to German design and patterns and under the supervision of German technicians sent out by the German manufacturer.

Outward processing and other forms of clothing production and supervised manufacturer outside Germany but under German supervision mean that the most highly-skilled German employees--designers, pattern-makers, highly skilled machinists (for models and sample runs), technical supervisors--are retained in employment in Germany despite foreign competition; and that the product precisely matches German marketing requirements. There is no significant loss of quality in garments produced abroad, since this is guaranteed by the technical supervisor employed by the German company and 'stationed' on site in the producing country with total responsibility for standards of production and delivery to time. However, machining times and reject rates fro goods made abroad will usually be higher than for goods made in Germany. This difference is more than compensated by lower labour-costs.

Most outward processing takes place in countries only 1-2 days' drive from Germany, for example in Poland and Jugoslavia. Lead times for garments produced in the Far East would, of course, be longer than for garments produced in adjacent countries (freight forwarding by sea takes six weeks from the Far East). Total production costs are significantly lower (for example, in Jugoslavia a clothing item would cost about 20 per cent less to make than in Germany). Since quality is not sacrificed by the outward processing arrangement, German companies producing in this way have been able to retain their traditional domestic market share, and increase their share of export markets while lowering the cost of production. German clothing manufacture has benefited from these arrangements which have enabled them to make use of their stocks of highly skilled supervisors and technicians in a unique way.

British clothing manufacturers have responded to competition from low-wage countries in very different ways. Many have abandoned or severely reduced production under their own label and have increasingly relied upon long-run contracts from major retailers. These contracts are normally for standard items (shirts, straight skirts, underwear); and British producers have been able to compete with low-wage countries by extensive automation. Pressure from imports of these items keeps manufacturers' margins low and makes them vulnerable to exchange-rate fluctuations and rises in British wage levels. Very few British manufacturers engage in outward processing, nor do British manufactuers engage in the import of clothing manufactured abroad; the reason given is that detailed technical control of production is difficult enough when it takes place 'under your own nose, here'; and to attempt it abroad would be foolhardly--as some have found to their cost. Imports of clothing are normally arranged by specialist wholesaling/importing companies with no manufacturing activities in Britain, or directly by large retailers. This difference in British practice is the result, we believe, of lack of a stock of technician-level skills in pattern-making and production control.

4. Machinery and production organisation

New Technology

The industrial sewing machine is a more robust and more specialized version of the domestic sewing machine, capable of higher machining speeds and usually with top and underbed feed (moving top and bottom layers of material through the machine), automatic thread-cutting and a choice of whether to stop the needle in a raised or lowered position. More recent machines have the advantage of microprocessor controls with a wider range of functions, for example, programmable seam length, stitch-counting, thread-trimming and edge-sensing facilities.

The use of more complex advanced technology by clothing manufacturers varies according to whether the garment is likely to be frequently and substantially modified in response to fashion. For almost completely standardized items of clothing produced in very long runs--for example, men's shirts, underwear and workwear, and women's lingerie--many basic sewing operations will rarely change. As a result, these manufacturers can introduce a considerable degree of automation; in the production of men's shirts or women's underwear, for example, it is cost-effective for the manufacturer to purchase special machinery. In Britain we were able to visit a plant producing men's shirts where much semi-automatic dedicated machinery was used, and where many operator's jobs consisted of no more than feeding the cut pieces into their machines where the pieces were automatically aligned and machined. In Germany production using semi-automatic machinery has disappeared. Manufacturers visited in Germany who had produced shirts using such machinery in the 1970s, had now replaced it with conventional sewing machines and were producing small batches of high-fashion men's shirts and ladies' blouses to tight delivery dates, relying on the skills of the machinist to switch rapidly from one style to another.

For manufacture verging on mass-production, a mechanical or manual overhead switch-track system may be worth installing for moving garments from one work-station to the next. Garment production on this scale benefits less from the introduction of costly computer-controlled grading (the adaptation of the dimensions of the pattern for different sizes of garment), computer-controlled lay planning or marker making (the arrangement of component pattern pieces in the most cost-effective configuration to save cloth) and computer-controlled cutting equipment, since patterns remain the same for long periods.

Producers of women's outerwear, on the other hand, are increasingly required to respond quickly to changes in fashion, and to demand for small batches; computer-controlled equipment which handles grading and lay planning is increasingly used by those manufacturers which produce a large number of styles each season. Frequent changes of fashion mean that in women's outerwear few of the major machining operations, which contribute to the style of the garments, are standardised; but some standard operations benefit from specialised equipment--for example, overlocking of seams, the sewing of buttons and buttonholes, fusing of interlinings and certain pressing operations. Even with such specialised equipment these processes cannot be automated to a very great extent since the pliant nature of the material requires that the machinist handle the material correctly for each operation (unlike steel and wood it cannot be pushed through the machine; and pulling it through can lead to stretching and distortion). By and large, for this type of manufacture the industrial sewing machine remains the basic tool, and flexibility comes from the skill and versatility of the operator, rather than from the automation of the machine.

Computerised grading and lay planning equipment was found as frequently in the British companies visited as in the German companies, despite the fact that the German production was more suited to such equipment. German companies had a sufficient supply of skilled lay planners and graders, and introduced the 'new technology' only when it could be clearly shown to be cost-effective, for example, when a company produced around 2,000 different styles a year; otherwise a manual system of lay planning has been retained (preferable when checked material--much favoured by German designers--is being used), or a specialised company providing a computerised grading and lay planning service is used. The British companies all mentioned lack of skills and the need to obtain more accurate results as the main reasons for installing such equipment.

Both German and British manufacturers of women's outerwear had reservations about investing in dedicated machinery--for example, for setting-in pockets or sewing on shoulder-pads--since these could not deal with a sufficient variety of garment styles. Such machines were to be found only infrequently in both countries. Computer-controlled garment-movement systems--as distinct from mechanically-controlled conveyor systems--were not found in any of the plants visited either in Britain or in Germany (though used in the USA, the US manufacturer of the leading system had not, at the time of our visits, installed this system in any European plant manufacturing ladies outerwear).

Our overall impression was that there was no marked difference between the two countries in investment in and utilisation of new technology; but there were notable differences in the age of machinery and its national origins.

Age of machinery

On average, about three-quarters of all machinery used in the British firms we visited was more than five years old. As mentioned above, recent investment had been principally in the grading and cutting areas (introduced to meet retailers' demands for greater reliability in sizing), but the renewal of the stock of sewing and pressing equipment had not been given priority. In Germany, about three-quarters of all machinery in the plants visited was less than five years old (in two of the plants, 90 per cent of all machinery had been renewed within the last two years). The view of machinery suppliers was that higher German wage-levels ensured a more rapid pay-off for German manufacturers who invest in new machinery. The saving would be not only in labour costs of machinists, but also of maintenance mechanics because maintenance requirements for new machinery would be lower than for old machinery.

National origin of machinery

Despite a long tradition of clothing production in Britain, it was already clear in a survey published 30 years ago that machinery in the British clothing industry was predominantly of foreign origin. As far as we could see, the position has not changed.

Virtually none of the sewing machines and other mechanical and electronic equipment used in the clothing plants we visited (in either Britain or Germany) was of British origin. Sewing, pressing and bagging equipment seen in Britain was almost exclusively of Japanese, German or Italian origin. German producers visited relied heavily upon one major German manufacturer (Pfaff) of sewing equipment. Computer-controlled grading and cutting equipment was of French or American origin. The only British-made sewing machine--the Singer, a firm which employed 23,000 at its peak and had a strong position in the British market for over fifty years--ceased production in 1979.

Thus the British clothing industry faces the same absence of machinery of British origin as noted in our previous study of furniture manufacturing. The failure of British machinery manufacturers to develop modern machinery was 'explained' in that study by the historical fact that the present-day raw material--chipboard--originated and was first widely-used outside Britain. The same reason cannot be adduced to explain the absence of clothing machinery made in Britain; yet the same domination by foreign machinery suppliers can be observed in clothing as in the production of fitted furniture. This surely is evidence again of a fundamental deficiency of engineering skills in Britain.

Maintenance

This deficiency was evidence also in the maintenance of machinery: a striking difference between the British and German clothing plants visited related to the amount of machine down-time observed in the two countries. In Britain, one or more of the more complex and major pieces of equipment--computerised marker-cutting, bagging equipment, fusing machinery--were not functioning correctly, or at all, in half of all plants visited. This is similar to the proportions observed in our samples of metal-working and furniture plants. None of the German plants visited had breakdowns of this sort, and all major machines were fully functioning.

The reason for a greater rate of breakdown in Britain cannot in any obvious way be attributed to the fact that British machinery was older since, more often than not, the problems observed in Britain arose on recently acquired machines. More significant, we believe, was the difference in the training of mechanics (considered in the next section).

Work scheduling and the organization of production

Computers were widely used in all but very small companies in both Britain and Germany to plan production and to monitor quantities of garments produced. The difference between the two countries lay in the extent to which estimates of machining times, reject rates and absenteeism--upon which production schedules were based--were realistic and could be adhered to.

In Germany, delivery dates were given great importance and were 'invariably' met (according to the companies' own accounts); this was the result of accurate estimates for machining times nbased on garment engineering techniques whereby every sewing operation is broken down into as many as 20 pretimed movements), greater reliability of machinists (very low reject rates even for new styles), and the responsibility carried by supervisors for ensuring that daily production targets are met.

In Britain production deadlines caused major headaches. Great variability in the skills of machinists made production planning more unreliable because, as one experienced manager of a high-quality company put it, 'You never know how the work-force is going to cope with a new style'. Supervisors' time was largely taken up with quality control and with teaching (and re-teaching) new operations. The garment engineering techniques widely used in German plants were hardly seen in Britain. Not surprisingly, German companies have acquired a formidable reputation for keeping to promised delivery times and is widely mentioned as an explanation of the German success in penetrating the upper end of the women's outerwear market in Britain.

5. Training for the clothing industry

Germany: apprentice training

All training for the clothing industry in Germany follows the regulations and syllabus laid down nationally for clothing apprentices. This training is divided into three one-year stages which are normally followed between the ages of 15 and 18. At the end of each stage a practical and a written examination (externally marked) must be passed before the apprentice can move to the next stage. About two-thirds of trainees follow a two-year course, and the remaining third completes a thirdy year.

The British City and Guilds Clothing Craft examinations (course 460), Parts I, II and III, correspond closely to the three German stages in level of practical skills required; the British written tests at Parts I and II tackle a wider number of topics (pattern-making, cutting) than the German tests for machinists (Bekleidungsnaher), but there are other specialised courses in Germany for cutters and finishers. In 1986, some 6,000 trainees passed clothing examinations at Stage I in Germany, eleven times as many as in Britain; at Stages II and III the Germans are ahead by a factor of thirteen (5,000 passes at Stage II in 1986 in Germany compared to 400 at City and Guilds Part II in Britain; 1,600 passed in Germany 1986 at Stage III compared to 120 in Britain at City and Guilds Part III level).

The sample of German plants we visited were training on average nearly three times as many young people as in the British sample (including YTS trainees in the British total). All the German trainees were following two or three-year apprenticeship courses and spent the whole of their two-year training period in a separate apprentice section; most were employed at a wage (trainee allowance) which is about one third of the adult rate (a small number were supported financially by the local Labour Office, Arbeitsamt). A small proportion (9 per cent) of all those in first-year apprentice training for clothing in Germany were previously unemployed ('unplaceable' on a training scheme, usually because of low school attainments). These trainees were nevertheless expected to follow the same syllabus and take the same examinations as 'regular" apprentices. Such pupils often experience difficulties (1/20 failed the first year examinations), but the staff 'just keep on teaching them until they get it right'. Few of these pupils proceed beyond the two-year course. One German employer with whom we spoke took 'Abitur', 'regular' and 'unplaceable' trainees in equal proportions and found that the 'brighter ones helped the slower ones along'. It is instructive to compare this approach with that adopted in Britain in clothing and other occupations where YTS 'trainees' are regarded as of low capabilities, and not expected (nor encouraged) to reach standards aimed at by 'real apprentices'. The Clothing Industry Training Board (CAPITB) estimate that only 10 per cent of their current 8,000 YTS trainees are 'capable of higher development', that is, could follow a City and Guilds college-based course. About 14 per cent of the German trainees in the third year of training were A-level (Abitur) entrants whose aim was to obtain an apprenticeship training as the first requirement on the road towards a management career in the industry.

Britain: the Youth Training Scheme

All the young trainees in British companies visited had been recruited through the Youth Training Scheme (YTS) which since 1986, offers two years of training to 16 year-old entrants and one year to 17 year-old entrants. Some 5,000 new recruits entered the clothing industry via the YTS scheme in 1986--which is not far short of the number qualifying in Germany at the end of their first year. Most of the companies we visited would have taken on more YTS trainees if they had been available; in most areas of the country, numbers of young people opting for the YTS scheme in the clothing industry are insufficient to meet the demand by employers who are therefore allocated a 'ration' by the local careers office in order to share young trainees out fairly. The net financial benefits to employers from the YTS wage-subsidy of 27.50 pounds sterling per week in the first year appear to have been positive (no YTS trainees in their second year were observed in our sample).

The formal training programme set out by the Clothing Industry Training Board for YTS trainees is purely advisory and trainees are not at present assessed against its objectives. Length and type of off-the-job training may therefore vary from company to company.

Most larger companies train inexperienced machinists for six weeks away from the main production line in a separate department. In the case of YTS trainees, this six weeks of off-the-job training counts towards the total period of 13 weeks of off-the-job training required by MSC in the first year of YTS as a condition for its wage-subsidy. Practice in many larger companies is to bring YTS trainees onto the shop-floor after six weeks training and to give them 'employed' trainee status, that is pay the rate for their age (about 60 per cent of adult gross pay, and about twice the YTS allowance of 27.50 pounds sterling per week). In companies producing for the higher end of the quality-range, YTS trainees were kept in full-time training for 3-9 months, and paid the YTS allowance plus a small additional allowance. In these companies, shortages of skilled machinists, and the need to use the skills of YTS trainees, were the main reasons given for not providing a longer period of off-the-job training. In very small companies with one or two trainees, the young person was trained by moving from one machine to another. An important ancillary benefit claimed by employers to whom we spoke has been a reduction in labour-turnover among YTS trainees in comparison with young people recruited through previous channels.

Benefits to the young people concerned have so far been less than might have been hoped by those familiar with German and other Continental countries' systems of training. For some, YTS in practice has meant no more than an afternoon a week spent writing up the 'trainee's log book', and an occasional two-day course on computer-literacy or life-skills; others, in companies with well-organised training departments, have benefited from well-structured training provision. Only 5 per cent of YTS trainees in the firms we visited were enrolled on City and Guilds 460 Clothing Craft Courses; other firms complained that there were no suitable courses available in nearby colleges.

New vocational qualifications

MSC policy since 1986 has required all YTS trainees to be given the opportunity to work for a recognised vocational qualification; this has led the industry's statutory training board to develop new qualifications called 'Clothing Skills Awards'. These conform to the National Council for Vocational Qualifications (NCVQ) insistence on 'employer-led competence'. For these awards trainees are assessed in the workplace on whether they can perform a specified range of basic sewing operations to a required standard. For each operation successfully performed they receive a credit which counts toward a vocational qualification. The assessment is carried out by the trainee's supervisor. No wider understanding or technical knowledge is required. As the CAPITB 'information for trainees' states, 'To get a qualification you do not have to sit exams or do any written tests'.

It is a remarkable testimony to the modesty of Britain's ambitions to improve training that around two-thirds of the practical skills that YTS trainees are expected to take two years to master, must be mastered by the German trainees within the first two months of their training course; the remaining third of the skills required for the 'Clothing Skills Awards' would be acquired by the German trainees by the end of their first six months of training. It is of only limited comfort to learn that the very simple operations which are required for the Clothing Skills Awards constitute a range of competences far wider than that which would normally be acquired by a

British machinist in the course of (non YTS) training. The 'advance' represented by the Clothing Skills Awards highlights the sad gap between the skills of the average British machinist--often capable of only one set of sewing operations--and the German machinist who must learn to make several complete garments during the training period.

The agreement reached in this industry on ways of assessing and grading an operator's basic skills represents a step forward and, subject perhaps to better arrangements for ensuring reliable assessment, can provide a useful measure of the level of a machinist's competence. To call such assessment and grading a 'vocational qualification', with all that this term has previously implied in this country and continues to imply on the Continent--that is the broadening and deepening of specific technical knowledge and understanding--appears to us fundamentally mistaken; such low standards may even discourage others--with higher ambitions--from seeking to obtain any vocational qualifications at all in this industry.

The optimal use of the initial training period

On past trends there is every likelihood that some of those at present employed in the clothing industry will eventually need to seek work in a different occupational sector. Training which helps to raise general educational standards, and enables trainees to acquired broad technical knowledge and understanding, would provide the base for a more flexible and better informed vocational development; and it would ease the transition--should it be necessary--to other forms of skilled employment. In short: in an industry with contracting employment opportunities the limited years which a young person has available for training must be fully used to acquired broad competences, and it is a grave error of social policy for young people to be channelled towards training in an unduly narrow range of practical operations.

The German clothing industry benefits to an important degree from the statutory requriement that young people continue in vocational education for at least one day a week until they reach the age of 18. This requirement combines with strong cultural and social pressures on young people in Germany to acquire skilled status (Fachmann = craftsman having a 'trade') through an initial period of serious training; various restrictions on the employment of young people under the age of 18 ensure that those young people who do not continue in full-time education after 15 or 16 have virtually no choice but to undertake a course of training before entering full-time employment. German trainees, once they have embarked on a two or three-year training course with an employer, are therefore unlikely to be tempted away by another employer in this or in a different occupational sector offering higher wages until they have completed their training period and achieved skilled-worker certification. The two or three-year training period that this arrangement ensures, allows trainees to benefit from the development of their general education and general technical knowledge, as well as acquiring a considerable degree of mastery of their specific occupation. This lengthy and thorough training period ensures that, at later stages, German manufacturers need spend only minimal amounts of time retraining adult employees (at full adult wages) and that German machinists are able to assume responsibilities (for example for quality control) which in Britain must be undertaken by a separate category of supervisory employee.

As mentioned above (page 47), German trainees in the clothing industry are paid about one third of the adult wage; in Britain most trainees in this industry have 'employed YTS' status and receive approximately half the adult rate. Once the YTS wage subsidy is discounted, however, the net cost of the YTS trainee to the employer amounts to a similar proportion of the adult wage (one third) as in Germany.

Why does the British employer not take advantage of the two-year YTS wage subsidy to train recruits to the same level as German trainees, and thus minimise the long and costly retraining of adult workers on full adult pay that is the inevitable sequel to short initial training periods? The reasons lie partly in the low expectations of the majority of manufacturers--as exemplified in the Clothing Skills Awards (p.48)--and partly in the short-sightedness ('imperfect telescopic faculty') of young people working in an unrestricted labour market. YTS trainees and other new recruits frequently leave for jobs with other companies at higher (piece) rates of pay. This puts pressure on employers of YTS trainees (in order to retain them) to maximise their pay by allowing them to specialise on one operation where they can earn high rates of pay through piece work--clearly incompatible with broad and thorough training. The consequence is that the training period is not utilised to the full long-term advantage of either trainee or employer, and subsequent costly retraining of adult employees becomes inevitable. Retraining of adult employees to cope with new styles is not only costly in terms of lost production and supervisory cost but, according to British firms visited, was a contributory cause of labour turnover; machinists with a limited range of skills find that their earnings decrease when they are moved from a familiar operation where they have built up high speeds (over very long runs of garments) and received high piece-rate payments; confronted with a new operation which must be learnt from the beginning (with a consequent fall in earnings) many are discouraged and leave for work in another company within the clothing industry or in another occupation. The costs and difficulties arising from extensive retraining of adult workers underline the need to find ways of making the very best use of the initial training period and of the financial help at present available to companies.

Effects of training of machinists on productivity

Clothing production has been classified by economists as an industry with low skill-intensity. However, the measures of skill-intensity used in much of the economic literature are derived from measures of the percentage of the work-force classified as professional and higher technical workers and takes no account of the skills of the bulk of the work-force. We observed important differences in machinists' skills in the two countries which help to explain how the German machinists could match British productivity levels while producing higher quality and working on a wider variety of styles.

In the German firms we visited, some 80 per cent of all machinists had completed a full two-year apprenticeship; it is astonishing that not a single British firm was able to point to a single machinist with a similar (City and Guilds Part II) training. In the course of their two or three-year training the German machinists had mastered the whole range of operations required for garment making; consequently, when a new style was to be made they needed only a short time (an average of two days) to reach 100 per cent speeds. Their training had also enabled them to work directly from technical sketches when tackling a new operation, although they might ask the supervisor's advice on difficult points from time to time. British companies must normally try to remedy skill-deficiencies by on-the-job training of machinists, and each new operation may cost the employer a week or more of the employee's production and the part of the supervisor's time spent on training. Only a small minority of machinists in the British plants visited had mastered more than a few basic operations during their shorter training; not surprisingly, much longer periods (several weeks on average) were required to reach 100 per cent production levels on a new style. Only a few highly experienced model-makers could work directly from technical sketches; but for the overwhelming majority, supervisors needed to demonstrate new operations to machinists, and to provide continuous assistance until the operation was mastered.

Supervisors and passers

One our visits to British plants there was often someone--usually the supervisor--teaching a new operation or engaged in unpicking faulty work. We never saw any unpicking of faulty work on our German visits (this is not to say that it never occurred, but probably much less frequently). Consequently the number of controllers or supervisors required in Germany is less than in Britain. In the German firms we visited, the number of quality-control ('passers') to check machinists' work was less than a third of that in Britain (one 'passer' for 23 machinists compared with one for 7). There was also a difference in the number of supervisors--one for two dozen machinists in Germany compared with one for a dozen in Britain. Taking supervisors and passers together, there was one for each twelve machinists in Germany, and one for each five machinists in Britain.

These differences are not of over-riding magnitude, but they clearly indicate the greater reliability of the work of the trained German operative, noticed also in the industries we have previously examined. 'Right first time' production depends on the extent to which operators can themselves--without help--recognise quality problems. The more thorough training of the German operatives enables quality problems to be identified and eliminated before they start to affect output in a serious way. A detailed recent British case study of production of ladies' blouses concluded that lost production resulting from failure to identify a problem early in production increased direct labour costs by 25 per cent.

All the German supervisors in our sample had completed a three-year apprenticeship and an additional course in work-study. Those with Meister qualifications were not normally found at this level but at the next level up (technician) engaged in work planning or production management. Nine out of ten of the British supervisors had no formal vocational qualifications whatsoever: as usual in British industry, experience was a sufficient criterion. The British supervisor's main responsibility was to ensure a continuous flow of work for a line of operatives, to correct sewing faults and to teach new operations. The German supervisor must not only ensure a continuous flow of work, but also has responsibility for cost control and production organization; the supervisor must ensure that her line produces to pre-determined cost limits for each style of garment and that delivery dates are met. The supervisor works from a technical sketch and breaks the style down into different sewing operations before assigning one or more operations to each machinist. She then monitors the performance of the line using work-study methods and makes changes where necessary to balance production. Training of machinists and supervisors to higher levels of competence reduces the number of staff needed at intermediate levels concerned specifically with quality control, work study and production organization; it helps to explain the smaller numbers of indirect workers found in the German plants.

Technicians and technical qualifications of

management

Clothing technicians are employed by German firms for making ('engineering') production patterns to minimise cloth wastage, for simplifying sewing operations without loss of styling features, and for planning the sequencing of production. One manager reckoned to save 12 per cent of his total production cost by skilful planning by technicians. In most German firms the sequence of garment production was planned by technicians at the beginning of the season in order to minimise sudden style changes, and thus enable machinists to maintain a good rate of production. These skills of pre-production planning are complementary to the skills of the machinists and supervisors described above; they reduce the number of machining operations required to produce a garment and contribute to machinists' productivity; taken together, they help to account for the productivity gap between Britain and Germany in output per machinist. Though German companies employ fewer indirect staff than the British, a higher percentage are technically qualified to a level equivalent to BTEC Higher Diploma or to degree level.

Total numbers in Britain obtaining advanced qualifications in clothing technology are small in relation to the size of the industry. In 1986, 100 obtained a BTEC Higher National award and around 150 obtained degree or degree-equivalent qualifications from universities and polytechnics and other institutions of higher education. This compares with 850 a year at similar levels in Germany. There are signs that the need for skills at this level is now more widely recognised both by retailers and manufacturers in Britain. Virtually all students in the last year of a British polytechnic degree course in clothing technology, which we visited, had one or more job-offers three months before graduating.

In all the German plants visited, the owner or plant manager had completed a three-year clothing apprenticeship; in addition, over two-thirds had followed a two or three year full-time course in clothing technology (at a level corresponding to our HND/BSc). It was exceptional to find British managers with a similar level of specialist training; most had no technical qualification specifically relating to the clothing industry.

Clothing mechanics

In the German clothing firms we visited all the mechanics who were servicing sewing and allied machinery had passed engineering apprenticeship examinations, whereas in the British firms visited none had done so. German firms regularly included the maintenance engineer in pre-production meetings so that he could advise on production problems likely to arise from the machinery available and make the necessary adaptations. This practice was virtually unknown in British plants; it might have avoided an instance quote to us of a fabric melting when machined at high speed on an industrial machine--a problem not picked up in pre-production trials when model garments were produced at lower speeds.

In 1985 the response of the Clothing and Allied Products Training Board to serious shortages of maintenance mechanics was to launch the 'Engineering 2000' project, designed to upgrade the training of clothing mechanics by enrolling students on a specially designed BTEC Level III course rather than on a City and Guilds 469 course. Some 75 students obtained the BTEC award in 1988, representing a step towards raising the quality of maintenance skills in those (larger) companies sponsoring these students. Such small numbers are unlikely to lead to a general raising of standards of maintenance in the clothing industry--described to us by the British agent for a leading machinery supplier as 'a very serious problem indeed'.

6. Summary and discussion

Our central object in this series of comparisons of manufacturing plants in Britain and Germany has been to elucidate the effects on productivity of better machinery and better training in different types of industry. Our previous comparisons were based on matched plants in metalworking and woodworking industries; for the present study we chose clothing as an apparently simpler industry, which relies on little more than the familiar sewing machine and on a workforce which--it might be thought--does not need extensive training. In three important respects our findings echo those in our previous comparisons, and perhaps stand out even more clearly.

Quality of product

The German producers have moved into products with higher value-added--produced in small batches with more styling and more detail--and have virtually abandoned the production of long runs of simpler standardised styles to low-wage countries. Most British producers were still producing long runs of simpler styles, and so far were competing successfully against low-wage countries. It is remarkable that average German products exported from this section of the industry (women's jackets and suits) sell on export markets at more than twice the corresponding items from Britain; and that total German exports of women's clothing were twice the value of British exports. It is clear that there is considerable international demand for high quality products, and that German industry, despite very much higher wage-levels than in Britain has been able to meet that demand more successfully than British industry while maintaining a level of employment similar to Britain. It was repeatedly confirmed to us that only a small minority of British firms would be able to produce goods of the quality produced by the typical German plant.

Machinery

There was negligible British-made machinery to be seen in either British or German plants; the last manufacturer of sewing machines in Britain closed its doors in 1979. German clothing manufacturers used predominantly German machinery, and much of it had recently been renewed. The newer sewing machiens incorporated attachments and electronic controls which allowed closer and more automatic control. British clothing manufacturers were probably correct, we think, in saying that the advantages of these new machines were not of great significance in production; specialised adaptation of machines seemed to us more important, and had been taken further in Germany, probably because of the greater involvement of plant maintenance mechanics and technicians in pre-production planning.

Qualifications of the workforce

Over 80 per cent of the German machinists in the plants we visited had completed a two or three-year day-release course leading to an examined qualification similar to our City and Guilds course for skilled clothing employees (course no 460, part II). About ten times as many pass such examinations each year in Germany as in Britain; in our sample of British plants we did not come across a single machinist with such a qualification.

This was evidently a major reason for the higher output per employee in Germany. In a fashion industry, firms such as this depend for their success on frequent and prompt changes in style: in the German plants we visited, trained machinists reached full production levels on new operations more rapidly, there was a lower requirement for fault-finders (passers and supervisors), and less unpicking of bad work. There were similar differences between the countries at higher levels of qualification--the skilled partternmakers, machinery technicians and 'clothing engineers'--in all of which the German firms had access to a much greater pool of skills (roughly three and a half times as many qualifying in Germany each year).

The Youth Training Scheme, introduced as a one-year scheme in 1983 and extended to two years in 1986, was intended to contribute to remedying Britain's skill deficiences. On the basis of the firms visited in this inquiry, it was very clear that so far it has been no more than a very first step towards enabling youngsters to gain an initial competence. The clothing industry's training board (CAPITB) has devised a scheme of qualifications in accordance with the government's requirements for the receipt of the YTS wage-subsidy, but the standards to be attained at the end of the second year are below that reached by German trainees in the first half year of their two to three-year training course. Any follow-through to higher levels of skill as a result of the introduction of YTS has not yet been apparent in Britain; indeed, the number reaching City and Guilds craft standard in clothing (course 460, Part II) has fallen in the past eight years from 900 to 400. Shortages of skilled machinsts were endemic in the British plants visited--one high-quality British producer wanted 'fifty machinists, now'.

The low supply of skilled operating personnel and of maintenance skills, and the lack of British-based machinery producers, constitute serious obstacles for those British clothing producers at present engaged in mass production, who wish to move to more differntiated and higher-priced products. The same skill-shortages greatly impair the performance of the smaller number of British producers of high-quality garments where the potential advantage conferred by low wages relative to Germany seems to be seriously offset by a lack of skills in production planning and 'garment engineering' and manufacturing.

With improvements in transport and communications, and the decline of barriers to trade, advanced industrialised countries are likely to be subject to increasing international pressures as industrialisation proceeds in distant countries. While the costs and delays of transport have fallen, their impact varies from one industry to another according to the bulk and value of the product and the means of transported used, and continues to determine the optimum economic location of industry.

In clothing, for example, transport costs from the Far East can be absorbed by wage-differences if the goods are sent by sea, and provided the delays of sea-transport are not important; but, as yet, mass-produced clothing products cannot absorb the costs of air freight. Consequently, runs of standard garments (such as men's shirts), where a six-week delay in transport may not matter, can successfully be manufactured in the Far East, but women's fashion items need to be made nearer to the ultimate customer. It is in this very substantial 'niche' in the range of clothing products that German producers have successfully established themselves in the past decade; their success is undoubtedly based on their ability to exploit the advantage of proximity to sophisticated markets using the broad range of skilled manpower yielded by their vocational training system.

If British producers have not--in any substantial way--taken the same path as the Germans, the reasons are evident in the lower availability of skilled manpower and the very high cost of retraining employees on full dult wages; no individual clothing producer can be faulted for his decision to produce long runs of standardised garments, and for attempting to benefit from low British wage-levels and the growth of chain stores selling much the same goods up and down the country. But two clouds have appeared on the British producers' horizon, both alrerady larger than a man's hand. The first is that as real wages rise in other industries in Britain, the British clothing manufacturer finds it increasingly difficult to compete with low-wage countries--in practice he cannot afford to pay the higher wages paid by expanding neighbouring industries (for example, an expanding car manufacturer may need more sewing machinists for car upholstery, and he is prepared to pay much higher wages than a neighbouring clothing manufacturer can afford to pay and meet competition). The second cloud is that British consumers, with rising standards of living, are increasingly turning to more highly-styled garments adn are prepared to pay more for them; retailers in Britain are consequently forced to challenge British clothing manufacturers to produce a greater variety of products, or face the consequences of further imports.

If the greater unification of Europe in 1992 leads to the replacement of individual country MFA quotas by a simple total EC quota, associated price movements--upwards in the case of Britain--may give British manufacturers of cheaper standardised garments a breathing space in which to effect the transition to a more differentiated product (see Appendix C for a more detailed analysis). In the longer term however, the increased numbers of low-cost producers admitted to EC membership and pressure for the liberalization (and even abolition) of the MFA--seem likely to intensify still further the pressures on British producers.

In assessing the broader implications of this study, it may first be said that though international competition has had a particularly severe impact on clothing manufacture in both Britain and Germany, it would be mistaken to regard this industry as seriously untypical; on the contrary, it is better to regard it as an industry from which wider lessons are to be learnt precisely because of the clear effects of international competition. All sectors of manufacturing industries in advanced economies are under pressure from newly-industrialised countries with lower wage-rates and mass-production capacity. One proven response to this challenge, is to produce a differentiated and evolving product to meet the great variety of specialised needs. To do this and to take advantage of economies of batch-production, the work-force must be highly skilled in key areas to minimise costly retraining when product specifications change. From the three sectors of manufacturing we have so far studied, it seems clear that the greater part of the British workforce is insufficiently skilled, flexible and polyvalent to be capable of meeting these challenges. More disturbingly, current British policy-initiatives seem focused too much on narrow skilling; we see no evidence that these policies will bring about an increase of adequate dimension in the breadth of training that will be required by tomorrow's industry.

ACKNOWLEDGEMENTS

We should first like to thank the clothing manufacturers, importers, and distributors of machinery for the clothing industry, both in Britain and Germany, whose management and staff have given such generous amounts of time to help us with this study. In this country, we also received valuable advice from: Mr. B Bains, Mr G Vaughan, West Midlands Clothing Resource Centre; Mr B Bohm, Mrs Rita Smith, London College of Fashion; Mr P Cave, Secretary, Clothing EDC, National Economic Development Office; Ms L Fox, Mr D Wright, British Clothing Industry Association; Mr G Fryer, British Clothing Centre, Leeds; Mr B Gibson, Clothing and Allied Products Training Board; Mr B Gibson, Head of Department, of Clothing and Design Technology, Mr D Sinclair, Hollings Faculty, Manchester Polytechnic; Mr N Kearney, Mr P Singh, Mrs A Spencer, Deputy General Secretary, National Union of Tailors and Garment Workers; Mr A J Lewis, President, European Clothing Industry Association; Mr J Rodgers, Clothing and Allied Products Industry Training Board; Mr G Saunders, Editor, Drapers Record; Ms V A Tait, Project Officer, Local Collaborative Project 'Clothing Production in London', and a number of senior buyers and managers in major department stores. In Germany, we are grateful for help from the following: Herr V Adler, Ifo Institut fur Wirtschaftsforschung, Munich; Herr W Baumgarten, Gesellschaft fur Arbeitsorganisation und Technik, Berlin; Herr Bogeholz, Gertrud-Baumer Schule, Dusseldorf; Herr B Ganer, Deutscher Gewerkschaftsbund, Textil-Bekleidung, Berlin; Herr H Hopp, Bundesverbandes Bekleidungsindustrie e.V.; Herr E Kratsch, Bundesamt fur Wirtschaft, Eschborn; Herr R Kreutzer, Oberstufenzentrum fur Bekleidung, Berlin; Herr F Kruse; Frau Neigenfind, Consultant to Berlin Chamber of Commerce; Herr Dr Sangha, Statistisches Bundesamt, Wiesbaden; Herr R Schone, Industrie-und Handelskammer, Berlin; Herr R Schreiber, Verband der Damenoberbekleidungsindustrie, Cologne.

This article has benefited from valuable advice from a number of colleagues at the National Institute; in particular thanks are due to S J Prais, N Oulton and V Jarvis.

APPENDIX A: SELECTION OF THE SAMPLE

In choosing a sample of comparable plants to be visited in Britain and Germany, we looked for plants in the middle of the size-range (a much larger inquiry would be needed if we wished to represent plants throughout the size-range). The most detailed official information on sizes of plants in Britain is now based on returns for Value Added Tax; these indicate that half of all employees engaged in the manufacture of women's outerwear are in plants of over about 100 employees, and half in plants below that size; for Germany the corresponding median plant-size is 85, based on their annual surveys of employment in manufacturing (the surveys for their Industrie and Handwerk establishments have here been combined; the latter account for only about a tenth of total employment, and their size-distribution has had to be approximated faute de mieux from the only earlier information available for 1977--but this should not lead to any substantial error).

Table A1 summarises the size distribution of plants in the two countries manufacturing all types of clothing, and those specialising in women's clothing; on the whole the latter plants are slightly smaller in both countries. When contracting firms for our sample inquiries we did not have precise information on their sizes. In the event, the average size of the plants that agreed to cooperate were larger than the above medians; but--bearing in mind that plants in the industry employ more than a thousand--the excess is not great: the average plant in our British sample employed 150, and the average plant in our German sample employed 110. In both countries almost all the plants in our samples lay in the central range covering half of all employment in the industry (that is between the lower and upper quartiles as shown in table A1).

The major uncertainty attached to these figures arises from the existence of outworkers and a very large number of small plants in Britain working in the so-called 'grey economy', not covered in official statistical or other returns. As a result of amicable relations that we established with interested parties in the trade (on the basis of our purely economic and scientific--rather than tax-gatherering--interests), we were able to visit some eight such small plants employing on average of about a dozen full-time employees each. Estimates of the total number employed in such plants in Britain varied; we were given the impression that the total for all clothing was of the order of 100,000 (the limits lay between a minimum of 50,000 and a maximum of 200,000!).

APPENDIX B: COMPARISONS OF PRODUCTIVITY BASED ON PRODUCTION CENSUSES

It needs to be understood in considering questions of productivity, that at least two differing statistical methods can be applied to the problem. The first of these ('industry of origin approach') starts from quantities of commodities as recorded in the Census of Production weighted by producer prices to give value of output. The second method is based on expenditure purchasing-power-parities (PPP) which can be used to convert the value of output to a common currency.

This PPP exchange-rate is based on international comparisons of retail prices carried out under the auspices of the Statistical Office of the European Communities; these make an attempt to specify closely the products compared, but it has to be kept in mind that the actual collection of prices is carried out by each country's own statistical officers (the same person does not go to both countries in pricing the specified items, and detailed product comparability depends on written specifications rather than on the enumerator's judgement). The most recent comparison showed German clothing prices in 1985 at DM 4.77/pound sterling, which was 9 per cent higher than in Britain when compared to prices of GDP as a whole, and 26 per cent higher than the currency exchange rate (derived from Purchasing Power Parities and Real Exchange Rates 1985, OECD, 1987, p.50). In other words, clothing purchased in Germany would seem expensive to a British visitor both when compared to average clothing prices in Britain, and in relation to German goods in general.

Comparisons of productivity of clothing industries in Britain and Germany for 1968 using the first method outlined above showed a gap of some 15 per cent (based on A D Smith, DMWN Hitchens, and S W Davies, International Industrial Productivity, 1982, p.123, with adjustments to bring the two countries' statistics to the same year). But the real gap was probably greater, since differences in workmanship and design are not allowed for in such compilations where producer prices in one country are used to weight output for the two countries compared. If we follow the second method outlined above for the same year (1968) (by applying a PPP for clothing from the World Bank calculations for 1970 to the net outputs from the censuses of 1968, with an adjustment for movements in retail prices in 1968-70), we find a German productivity advantage of 40 per cent. Using the same method to calculate German net output per employee in a recent year (1985), the total for 1985 was DM 49,700 (Statistisches Jahrbuch 1987, p. 172), equivalent to 10,400 pounds sterling converted at a purchasing-power-parity (PPP) exchange-rate (as explained above) for clothing; this is 21 per cent higher than the net output of 8,590 pounds sterling per employee for 1985 shown by the British Census of Production for the Clothing industry (Business Monitor 1986, PA 453, p.10).

Nevertheless the German productivity-advantage in clothing in 1985 of 21 per cent (based on PPP methods) is only half as great as the 39 per cent in total manufacturing when calculated by the same methods (26,300 pounds sterling per employee in Germany, 18,970 pounds sterling in Britain, taking for this purpose a PPP of DM 3.70/pound sterling, derived as an average of three published commodity groups that are principally drawn from domestic manufacturing: household equipment and operation, transport and communication, and machinery and equipment).

However, the PPP method probably leads to an underestimate of the German productivity advantage in 1985 because the 1985 PPP (measured as DM per pound sterling) is likely to be too high. The reason is as follows. PPPs are calculated using the pattern of consumption as weights, not production, and so are strictly inappropriate for productivity calculations. If imports and exports are small, this may not matter too much. So the 1970 PPP may be fairly close to the correct value (ignoring any errors in measuring the individual prices). But in 1985, the pattern of consumption diverged markedly from the pattern of production, particularly in Germany it seems, with its concentration on unstandardised goods. The higher-value goods produced in Germany--in which, it has a comparative advantage--are thus under-represented for our purposes; this exclusion raises the calculated PPP exchange rate, and thus gives too low an estimate of the German productivity advantage. The inclusion of imports reinforces that bias since quota restrictions on imports from low-wage countries have led to higher prices for standard varieties in Germany than in Britain.

We can also compare productivity growth in clothing in the two countries for the period under consideration (1970-85) using as deflators the appropriate producer price indexes for the net value of output in current prices per person employed, and assuming a German advantage of 40 per cent in 1970. Instead of the 21 per cent German productivity advantage in 1985--itself arguably an underestimate--British productivity on these calculations appears to be slightly ahead of the German level, having increased by a factor of 2 in the period 1970-85 while German productivity rose by a factor of only 1.4.

This suggests that the producer price indexes may be systematically biased which would arise if--for the sake of comparability over time--they are over-weighted by standardised varieties. It is more than possible that competition from cheap imports of standardised varieties has been greater in Britain and that the price of standardised goods has grown less rapidly than of unstandardised ones; the British price index thus may well have a greater downward bias. Consequently the derived deflated index of production in Britain probably shows too great a rise in quantities produced in relation to Germany's; UK productivity growth will therefore be over-estimated, both absolutely and in relation to Germany.

The productivity calculations for clothing reported in this Appendix refer to the clothing industry as a whole. In our samples of comparable plants producing high-quality women's outerwear, reported in the main part of this paper, we observed a much greater productivity gap--of the order of 100 per cent; this suggests (a) that in other branches of the clothing industry, the German productivity advantage is lower than in women's outerwear; and (b) that in Britain, plants producing more standardised garments have higher productivity levels than those in the high-quality sector. This standardised production probably accounts for some 75 per cent of the value of British output.

While the available statistics are subject to the considerable reservations set out above, in broad terms they suggest: (1) that in the past twenty years the value of net output produced per employee was greater in Germany than in Britain; (2) that Germany's productivity advantage in clothing is not as great as in manufacturing generally; (3) that the gap between the two countries in clothing productivity has narrowed considerably in the past twenty years, (4) the real German advantage in this industry lies in qualitative aspects, which are not adequately reflected in the available statistics.

APPENDIX C: CLOTHING PRICES AFTER 1992

Our own investigations of prices for this study, and more detailed analysis at individual country level, confirms that prices of standard garments in Britain and Germany, such as jeans and ladies raincoats at the cheaper end of the market, matched as far as possible for quality (and almost invariably imported into both countries), are sold at a higher price in Germany than in Britain. By contrast, very little price variation between the countries is to be observed in high quality womens' wear. The reason for this difference seems to be as follows, and has implications for the future of the British clothing industry after 1992.

Though few official obstacles to trade in clothing remain between EC member countries, yet where MFA import quotas of goods such as jeans are exceeded by home demand, and where (as in Germany) the price at which domestic manufacturers are able to produce is high, the result is a price level significantly higher than in a country (as England) where domestic manufacturers are able to produce at a lower price level. If 1992 leads to the replacement of individual country's MFA quotas by a single total EC quota, exporters from low-cost countries will seek to sell clothing in what are, at present, the most lucrative markets, such as Germany. A new lower temporary equilibrium price for cheaper types of clothing may therefore be expected to emerge in Germany, and a new higher temporary equilibrium price in Britain. This price movement, although dependent on the artificial restriction of the supply of low-priced goods, may give British manufacturers of cheaper standardised garments a breathing space in which to effect a transition to a more differentiated product.