Truth to Power

The economics of clothes hangers

Dry-Cleaning Economics in One Lesson

Another day, another news story about economic wackiness. Gas prices rise, the dollar sinks, and stores are limiting rice sales. What could be next? Clothes hangers.

Yes, clothes hangers. Marie Sledge, co-owner of Rome (Georgia) Cleaners, states, “Hangers last year at this time were $28 a box, where now they are $56.” News reports indicate that cleaners in Springfield, Missouri; Birmingham, Alabama; and Harlem are also encountering doubling hanger prices. In response, many cleaners are posting signs in their shops encouraging customers to return used hangers.

In a March 19 news release the Department of Commerce “announced its affirmative preliminary determination in the antidumping duty investigation on imports of steel wire garment hangers from the People’s Republic of China.” Translation: The government will now impose tariffs on hangers imported from China. The tariffs vary by supplier, ranging from a lightly starched 33 percent to a truly stiff 221 percent. With hanger prices potentially tripling because of tariffs, it’s easy to understand the disruption facing dry cleaners.

The department defends antidumping duties as being necessary to protect American jobs. Indeed, news reports indicate that M&B has hired about 50 new workers and may double its workforce over the next two years. Alas, as is so often the case, such thinking ignores Henry Hazlitt’s admonition in Economics in One Lesson to “trac[e] the consequences of [a] policy not merely for one group but for all groups.” In the case of the great hanger crisis of 2008, other groups lose jobs in response to the protectionism that enriches M&B and its employees.

News reports indicate that higher hanger prices will cost cleaners $4,000 or more per year. Suppose that cleaners try to pass the increased cost of hangers along to their customers. Charging an extra, say, 10 cents per item will cause at least a few customers to reduce the number of items they send out for cleaning. If so, cleaners will need fewer employees, and M&B’s jobs will have come at the expense of cleaners’ employees. (Similar logic would apply if cleaners reduced their workers’ hours or wages in response to higher hanger prices.)</em>

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