Out of Poverty: Sweatshops in the Global Economy

bordsilver · Jul 8, 2014

Excerpt from the Introduction of the recently released book of this name.

Professor Benjamin Powell said:

Wages and working conditions in Third World sweatshops are appalling compared to the wages and conditions that I and most readers of this book are likely used to. Any decent human being who has witnessed poor workers toiling in a sweatshop should hope for something better for those workers. So why have people such as Krugman, Collier, and many other economists from across the ideological spectrum defended sweatshop employment? These economists have defended sweatshops because they are the best achievable alternative available to the workers who choose to work in them, and the spread of sweatshop employment is part of the process of development that can eventually lead to higher wages and improved working conditions.

How bad are the alternatives to sweatshops? In Cambodia, hundreds of people scavenge for plastic bags, metal cans, and bits of food in trash dumps. Nicholas Kristof reported in the New York Times that "Nhep Chanda averages 75 cents a day for her efforts For her, the idea of being exploited in a garment factory working only six days a week, inside, instead of seven days in the broiling sun, for up to $2 a day is a dream." Other common alternatives are subsistence agriculture, other informal sector work, begging, or even prostitution.

Recent international trade did not invent poverty. The history of humanity is one of poverty. In most places in the world, for most of human history, people had low incomes, worked long hours, and had short life expectancies. Poverty has been the norm and unfortunately still the norm for much of the world's population. Although first World citizens often express a desire for an end to poverty, normal Third World rural poverty does not raise the sense of moral outrage that sweatshops do. People become more outraged about sweatshops because the poor workers are toiling for our benefit. Unfortunately, that moral outrage can lead wealthy consumers and their governments to take actions that, although they may assuage their feelings of guilt. make Third World workers worse off by taking away their ability to work in a sweatshop and throwing them into an even worse alternative such as scavenging in a trash dump.

This book provides a comprehensive defense of sweatshops. I do not deny that sweatshops have wages far below the levels in the developed world. Nor do I deny that sweatshops often have long and unpredictable working hours, a high risk of injuries on the job, and generally unhealthy working conditions. Sweatshops also sometimes deny lunch or bathroom breaks, verbally abuse workers, require overtime, and break local labor laws. Despite these atrocious conditions, sweatshops are still in the best interest of the workers who choose to work in them.

Sweatshops that coerce their workers with the threat of violence or use the local government to do it for them are the one type of sweatshop I condemn and will not defend. That is slave labor and has no place in a moral society. That type of sweatshop cannot be defended by the economic arguments made in the remainder of this book. If a worker must be coerced with the threat of violence to accept a job, then that job is obviously not the best alternative available to that worker otherwise they would have voluntarily taken the job.

Despite all of their drawbacks to Western eyes. most sweatshops with low wages and poor working conditions are places where workers voluntarily choose to work. Rarely do employers actually use the threat of violence to obtain employees. Admittedly, workers' other options are often much worse. A starving person with no alternative employment is likely to take a very bad job if offered one. But that does not change the fact that the bad job was his best option. To help sweatshop workers, more options are needed. Unfortunately, much of the anti-sweatshop movement is aimed at taking away the sweatshop option without replacing it with something better that is actually attainable.
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bordsilver · Jul 8, 2014

Professor Benjamin Powell said:

Economic theory is used throughout this book, but nowhere do I advocate economic efficiency as my ethical standard. The welfare of poor workers and potential workers in the Third World is the standard used throughout this book. Nowhere do I favor economic efficiency, the welfare of Western consumers, or profits at the expense of workers. The welfare of the worker is the end; the crucial question is the means to achieve it. Any serious anti-sweatshop activist must be concerned with this question. Market forces motivate how firms interact with workers: thus, activists need to appreciate the role they play as a means to helping workers. Economics puts limits on peoples' utopias. Wishing does not make things so. Economic theory forces us to examine how actions taken by activists, nongovernmental organizations (NGOs), governments, consumers, and others will impact the incentives of businesses that employ sweatshop workers. Unfortunately, many actions for which the anti-sweatshop movement has agitated adversely impact incentives and harm worker welfare.

Chapter 2 introduces the anti-sweatshop movement. It is a diverse movement that includes celebrities, ministers, students, politicians, intellectuals, unions, and consumer activists who advocate for policies such as international labor standards and minimum or 'living' wages in the name of helping workers. When a country fails to adopt their favored policies, they will sometimes advocate imposing trade restrictions against the country. In other cases, they may simply protest an individual firm or company that uses sweatshop labor, which can lead to consumer boycotts.

But what effect will such actions have on the welfare of workers? To answer this question we need to understand the economic forces that determine sweatshop wages. Chapter 3 explains how the maximum wage that workers can earn is limited by their productivity and their next best alternative employment limits the minimum wage they will voluntarily accept. Unfortunately, many actions taken by activists do nothing to raise these two bounds: in fact, they often advocate policies that would push wages above the maximum level employers are willing to pay. As a result, sweatshop wages do not improve; instead, the jobs disappear. The second half of Chapter 3 examines possible exceptions scholars have raised to the basic theory outlined in the first half of the chapter.

If sweatshop workers lose their jobs, what are their other alternatives? Are they all destined to scavenge in trash dumps? Chapter 4 systematically investigates how sweatshop wages compare to alternative employment in the countries where they operate. It compares the apparel industry wages in sweatshop countries, and those in the very firms that the Western press has identified as sweatshops with the average income in each country. The apparel industry, and even the firms recognized as sweatshops, usually pays more than the average national income. Sometimes they pay two, three, or even four times the average pay in the country. Sweatshop jobs are not just better when compared to scavenging in trash dumps. They are better than many of jobs in the countries where they are located.

Even some critics of sweatshops will admit that the wages paid by sweatshops are better than worker alternatives. But then they claim that the real problem is the deplorable health and safety standards in these factories. But health and safety standards and working conditions more generally, are intimately tied to wages. Employers care about the total cost of compensating workers but care little about how that cost is divided between wages and other forms of compensation. Workers do care. As a result, firms have every incentive to make the mix of compensation match the preferences of their employees As Chapter 5 argues, health and safety standards are low because the workers' overall level of compensation is low, and they prefer the vast majority of that compensation in wages The best cure for low health and safety standards is the process of economic development.

What about the children? In 1993 U.S. Senator Tom Ilarkin proposed banning imports from countries that employed children in sweatshops. In response, Bangladeshi firms laid off 50,000 children. What was their next best alternative? According to the British charity Oxfam, many of them became prostitutes or starved. Prostitution and starvation are clearly worse alternatives than sweatshop labor. Chapter 6 explains how all of the preceding arguments apply to children as well as adults and how economic growth leads to the abolition of child labor.
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bordsilver · Jul 8, 2014

Professor Benjamin Powell said:

What about ethics? Don't workers have a "right" to better treatment or higher wages? Even if the sweatshop is the workers' best alternative, is it not still unethical to buy their products? Chapter 7 makes an ethical case for buying sweatshop products on consequentialist grounds, considering issues of background injustice and exploitation.

Anti-sweatshop activists often seem to forget that they live in countries that once had widespread use of sweatshops too. Chapter 8 will provide some historical perspective by examining the role that sweatshops played in the development of the United States and other wealthy countries. Sweatshops are important in creating new technology and capital that eventually raises labor productivity. This process of economic growth leads to improved wages and working conditions. Although the process took more than 100 years in the United States, it can happen much more rapidly today because the world has a greater amount of capital and technology that it can export to these poor countries. Witness the rapid rise of the Asian tigers and China's growth today. Chapter 8 will also demonstrate that the level of development the United States had achieved before adopting more stringent labor standards was muchgreater than the level of development in sweatshop countries today. If the United States had adopted more stringent standards when it was as poor as the sweatshop countries today, it would never have grown to be as rich as it is now.

Chapters 9 and 10 describe how sweatshops can be replaced with better alternatives. Chapter 9 builds on the previous chapter by describing how the process of economic development takes place and the necessary enabling environment that allows a country to grow out of sweatshops.

Sweatshops may be the best option currently available for workers, but any moral person would aspire to help improve those conditions. What good can activists possibly do? Chapter 10 outlines positive steps activists can take to improve the lives of sweatshop workers. Ethical branding is one option, and there is a role for profit or nonprofit firms in monitoring this labeling. Trade policy and immigration law are other areas in which activism could help. All the actions outlined in this chapter would help improve the lives of poor sweatshop workers, but they will be marginal compared to the main cure.

The very process of industrialization and development, of which sweatshops are part, is ultimately the cure for sweatshops. As capital accumulates, technology improves, and as workers build skills productivity rises. As firms compete with each other for the productive workers, total compensation gets bid up. This process raises wages and improves working conditions, and it occurred in virtually all of the wealthy countries in the world today. I have studied sweatshops for the past ten years. In that time I have become convinced that many well-meaning people advocate actions that are detrimental to the lives of sweatshop workers because they do not understand the economic forces that govern the creation of sweatshops and their alternatives.
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Edit: Available from all good book stores Even Amazon.

betterinvestmentthanshare · Jul 8, 2014

How do you get these countries governments to start taking responsibility for their own people in poverty?

How do you you get the people in these countries to stop bearing child after child into poverty?

Give to charity? You'll be lucky to see 10c in every donated $1 go to those that need it most.

These problems are not new, been with us for many, many decades.

mmm....shiney! · Jul 9, 2014

betterinvestmentthanshare said:

How do you get these countries governments to start taking responsibility for their own people in poverty?
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It's not the responsibility of government to do this.

You can help by not joining in campaigns to end sweat shops.

betterinvestmentthanshare said:

How do you you get the people in these countries to stop bearing child after child into poverty?
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That process has already begun, hand-in-hand with economic development comes a reduction in the sizes of families. For example in Bangladesh, women are having on average about 3 kids.

Lord_Dudley · Jul 9, 2014

Alternative to sweatshops....I have found a way to help a few to get out of poverty. Through Micro Financing. It is not a hand out or a donation. It your money is being used to for something more usefull. It is sent directly to those who will use it.

Check it out. Kiva.org

hawkeye · Jul 9, 2014

betterinvestmentthanshare said:

How do you get these countries governments to start taking responsibility for their own people in poverty?

How do you you get the people in these countries to stop bearing child after child into poverty?
.
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There's always the risk that government will plunge people back into poverty (or worse) at any stage of the cycle, Let's not encourage their bad behaviour by pretending that they help.

renovator · Jul 9, 2014

I have to say after living in asia for 3 years the guy is somewhat correct .Any job is better than no job.
People accept jobs that are way under award wages just to have money for food for themselves & kids . A little money is better than none.

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