This is why some people don't use wool. I got this from PETA. Go to (broken link removed) to read the rest for yourself.
Many people believe that shearing sheep helps animals who might otherwise be burdened with too much wool. But without human interference, sheep grow just enough wool to protect themselves from temperature extremes. The fleece provides effective insulation against both cold and heat. Wool was once obtained by plucking it from the sheep during molting seasons. Breeding for continuous fleece growth began after the invention of shears.1
Wool-Producing Countries Abuse Sheep
With about 100 million sheep, Australia produces 30 percent of all wool used worldwide.2 Flocks usually consist of thousands of sheep, making individual attention to their needs impossible.
In Australia, the most commonly raised sheep are Merinos, specifically bred to have wrinkly skin, which means more wool per animal. This unnatural overload of wool causes animals to die of heat exhaustion during hot months, and the wrinkles also collect urine and moisture. Attracted to the moisture, flies lay eggs in the folds of skin, and the hatched maggots can eat the sheep alive. To prevent “flystrike,” Australian ranchers perform a barbaric operation—mulesing—or carving huge strips of flesh off the backs of unanesthetized lambs’ legs and around their tails. This is done to cause smooth, scarred skin that won’t harbor fly eggs, yet the bloody wounds often get flystrike before they heal.3
Within weeks of birth, lambs’ ears are hole-punched, their tails are chopped off, and the males are castrated without anesthetics. Male lambs are castrated when between 2 and 8 weeks old, with a rubber ring used to cut off blood supply—one of the most painful methods of castration possible.4 Every year, hundreds of lambs die before the age of 8 weeks from exposure or starvation, and mature sheep die every year from disease, lack of shelter, and neglect.5 Faced with so much death and disease, the rational solution would be to reduce the number of sheep so as to maintain them decently. Instead, sheep are bred to bear more lambs to offset the deaths.
Shearing Is Painful
Sheep are sheared each spring, after lambing, just before some breeds would naturally shed their winter coats. Timing is considered critical: Shearing too late means loss of wool. In the rush, many sheep die from exposure after premature shearing.
Shearers are usually paid by volume, not by the hour, which encourages fast work without regard for the welfare of the sheep. Says one eyewitness: “[T]he shearing shed must be one of the worst places in the world for cruelty to animals … I have seen shearers punch sheep with their shears or their fists until the sheep’s nose bled. I have seen sheep with half their faces shorn off …”6