I like the idea of this, but the labels you've used here are wrong.
The paragraph from the source you've used says this:
0.40 euros: cost of 400g of cotton raw material bought from the US by the factory in Bangladesh; 1.35 euros: the price H&M paid per T-shirt to the Bangladeshi company; 1.41 euros: after adding 0.06 euros per shirt for shipping costs to Hamburg in Germany; 3.40 euros: after adding some 2.00 euros for transport in Germany, shop rent, sales force, marketing and administration in Germany; 4.16 euros: after adding 0.60 euros net profit of H&M plus some other items; 4.95 euros: after adding 19% VAT, paid to the German state.
The 4.95 euros for the T-shirt and the 60 cents profit per shirt are, of course, multiplied by the many millions: this is a mass market business. The Bangladeshi factory makes 125,000 shirts per day, of which half are sold to H&M, the rest to other western retailers. One worker at the factory, even after a 17% pay rise, earned just 1.36 euros per day, based on a 10-12 hour day. The machine she works with produces a target of 250 T-shirts per hour.
Not enough information was given in the article to work out the labour cost per T-shirt, including the other workers involved, but it is well within the 95 cents margin that the factory receives from H&M after the cost of the cotton (i.e. 1.35 –0.40). The 95 cents covers labour costs, power costs, the cost of materials needed (other than cotton), depreciation of machinery and other items, plus a margin for the local manufacturer’s profit. A reasonable estimate would be that the average labour cost to produce one T-shirt is around 10-15 cents.[v] In that case, H&M’s profit margin is four to six times what is paid to the workers in Bangladesh making the T-shirts.
It isn't correct to say that 0.95 euro (second point) is for labour - as that is the price that the brand pays the factory - which includes labour, capital payments (equipment), rent, local tax etc. The 'profit' point in the diagram is the profit to the brand selling the t-shirt in Germany - clothing is a multiple stage process and the factories are often different, so there is a level of profit being made by factory owners at each stage.
Labour costs (in the sense of costs of factory labour) are going to be far lower than 19% of the sale price. Joeturner 02:03, 13 May 2013 (PDT)
