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The Tabberone™ Archives
These articles concern what we consider major trademark and copyright issues. They are usually reproduced with the original source referenced. Bear in mind, these articles are copyrighted and commercial use without permission of the authors may be considered infringement. The intended use here is educational, commentary and non-commercial. The reason they are reproduced in the Tabberone™ Archives, as opposed to just providing a link, is because links disappear and pages are removed. That presents a messy confirmation process that is annoying to the browser (you) but also presents a credibility issue. We do not claim any rights in these pieces. Do not regard the absence of a copyright statement or © to mean the article is not copyrighted. Some sites do not have a copyright statement.

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Source:
http://www.colby.edu/par/Winter%2098/Laogai.htm

May 15, 2003 - Content has not been altered except to remove links.

University of Michigan

Sweatshop Myths

Breaking the Anti-Sweatshop Myth
by David Tannenbaum

The rising tide of the free market will lift all boats. In an unregulated global economy, comparative advantage will give everyone a fair shake. Let the economy run free, and watch poverty and oppression go the way of big government and misplaced idealism.

These are the slogans that undergird the "liberalization" of world markets and the principles that run through our Econ 101 textbooks. Unfortunately, slogans are a rough measure of reality, and the world is more complicated than a supply-and-demand curve. Anti-sweatshop codes of conduct seek to address the realities of the free market. For the most part, the codes have enjoyed tremendous support. Several universities have already accepted all or parts of the codes, and the national media has followed the movement with rapt attention. However, there have been skeptics. Some free marketeers claim to take the "high moral ground," offering frightening rhetoric about the harm anti-sweatshop codes will inflict on the workers they aim to help. Behind the rhetoric, six persistent myths can be identified:

Myth #1: Anti-sweatshop codes impose Western values on developing nations.
Prohibitions on child labor and forced labor, the right to unionize, and the other provisions of the proposed anti-sweatshop codes can actually be found in the United Nations' Universal Declaration of Human Rights, the conventions of the International Labor Organization, and the law books of many developing nations. These protections are regularly subverted by foreign companies who either run their own factories or sub-contract to local manufacturers.

Myth #2: Anti-sweatshop codes will result in unemployment in developing nations.
This argument assumes that the production costs associated with creating a safe workplace and paying a living wage will drive foreign investors out of developing nations and back to more developed nations. Naysayers rarely back up these claims with empirical data. In actuality, the proposed improvements are changes at the margin, making it possible to improve working conditions without sacrificing employment. For example, in the Dominican Republic, where workers are paid 8¢ for a hat that sells for $19.95, even doubling the wage would be a small change. Economist Richard Rothstein has written that in Bangladesh, wages could "easily be doubled without undermining the profitability of Bangladesh garment manufacturers or reducing the (already negligible) reinvestment of profits in capital development." (Boston Review, Dec/Jan 1995)

Free marketeers also assume an elasticity of labor demand close to infinity-raise wages or production costs just the littlest bit and investors will flee. A landmark study by economists David Card and Alan Krueger found that small but significant increases in the U.S. minimum wage actually had none of the detrimental effects predicted by theoretical models. Since a developing economy is even further from the textbook model of a perfect market it is even more likely to stray from the theory's predictions. It is true that there is a certain level beyond which a wage increase would have detrimental effects, but this is a reason for determining what that level is, not for rejecting wage increases outright.

Myth #3: Sweatshops are a necessary stage in development.
Many developed countries have gone through a "sweatshop phase," but this doesn't mean that every country has to. Anti-sweatshop activists are not calling for an end to foreign investment or low-skill labor, which may be an important factor in normal development trajectories, just an end to avoidable exploitative labor practices.

A corollary to this argument is that sweatshop conditions will disappear on their own as an economy develops. But in most instances, exploitative labor practices have ended because of political movements, not because benevolent governments and charitable manufacturers have willingly improved conditions. Governments in countries with export-led economies are even less likely to enforce labor standards unilaterally for fear of losing business to other countries: this is why a company-wide measure, like an anti-sweatshop code, is particularly appropriate.

Myth #4: A ban on child labor will hurt children more than it will help them.
Historically, this is one of the most popular arguments proffered by those intent on perpetuating exploitation. Similar arguments have been used to justify slavery, indentured servitude and prostitution. In developing countries, where many adults are unemployed, children could go to school if their parents were employed and received a sufficient wage. This is another argument for mandating a "living wage," but a ban on child labor would also induce a natural rise in wages because the labor market would become more competitive. For this reason, Cornell economists Kaushik Basu and Pham Hoang Van have concluded that developing economies have two potential equilibria: one where children work and another children where the adult wage is high and children go to school. The latter equilibrium will come about only by strict enforcement of child labor prohibitions. (American Economic Review, June 1998) It should also be remembered that child labor comes at the expense of families whose adult members are unemployed.

It may be true that, in the short-term, children whose parents do not replace them in factory jobs may face consequences worse than a textile factory job. One possible solution-which has been implemented in India, Pakistan and Bangladesh-is to require companies to compensate children they have employed. Codes of conduct that don't currently have this provision must be flexible enough to include it.

Myth #5: A "living wage" can't be calculated.
Settling on a definition of "basic needs" and calculating appropriate wage levels is difficult, but far from impossible. The several U.S. cities (e.g. San Jose, Minneapolis) which have passed living wage ordinances are proof of this. Moreover, many other economic standards that require some degree of subjective measurement, like the CPI "market basket" of goods and the "poverty line," are used despite the difficulties inherent in their calculation.

Myth #6: Anti-sweatshop codes are disguised attempts to protect U.S. textile jobs.
Not only are the intentions of anti-sweatshop activists not protectionist, the codes themselves are unlikely to have protectionist effects. In a 1996 paper for the World Bank, Princeton Economics Professor Alan B. Krueger said it best: "The gap between wages and working conditions for unskilled workers in industrial and developing economies is so great that any realistic set of minimal labor standards is unlikely to have much impact on trade flows (Grossman and Krueger 1993)."

There is no compelling evidence that codes will have deleterious effects. Certainly codes of conduct do not address all the market's problems, and for this reason they should be seen as just one piece of a larger strategy. Nonetheless, anti-sweatshop codes represent a far more attractive alternative than the status quo.

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