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.
(Copyright Business Today)
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