Nikhil Sridhar – January 11, 2019
Imagine doing the same task over 12 hours a day with few breaks in sweltering equatorial heat for a measly six cents an hour in a stuffy factory, absent an ounce of natural light. The manager of the floor censures your fellow workers for falling short of unrealistic standards in absurdly crowded conditions that are dangerous, at best. For millions across the Global South, this isn’t an exercise in imagination, but the reality of working in a “sweatshop”. However, for these same millions, it’s also a lifeline out of destitution.
At first glance, sweatshop labor seems directly in contradiction to the United Nations’ goal of “ decent work ,” which is loosely characterized by the ILO as work embracing “dignity,” “equality,” a “fair income” and “safe working conditions.” What the UN fails to acknowledge, however, is that to achieve the widespread acceptance of the decent work agenda, you must first have work, and sweatshops are a rung on the ladder to achieving safer and better paying jobs in an economy of higher wealth and living standards.
Best Possible Alternative
While the wages and conditions offered by sweatshops might seem appalling to you and I, it’s vital to appropriately contextualize the data. Wages in sweatshops are actually often higher than the median wages offered to laborers throughout the countries that these workers are in. In his extraordinarily thorough empirical analysis of the economics of sweatshops, Benjamin Powell found that in most economies that give refuge to sweatshops, individuals not employed in these factories are forced into relatively low-productivity sectors like agriculture.
Furthermore, in ten out of the fifteen countries Powell surveyed, he found that sweatshops paid at least 80% of the national average income, and in those other countries where sweatshop wages were significantly less than the national average, the workers were largely immigrants who made more money than the average citizen of their home countries. As one worker said :
“I do like to work here. I don’t like working in the fields anymore. I make more money here so it’s better here. There are also other benefits the company provides and that help us at home and with the family.”
While the exiguous salaries of Adidas and H&M factories fail to afford First World luxuries like iPhones and Kindles, they are a way out of abject poverty and to a higher standard of living .
Regulations Mean Less Work
Over time, low-wage work like sweatshop labor contributes immensely to economic growth and development which create higher wages, more productivity and lower hours, which, in turn, lead to the better working conditions the United Nations wants. Historically, gains in workplace conditions have been due to developments within the market as opposed to external forces, and relevant regulations simply formalized existing practice. This has been true even in the United States in the late nineteenth and early twentieth century, and more recently in such economies as Taiwan, Hong Kong and South Korea, which were sweatshop economies just 50 years ago and are now extremely successful developed economies with enormous wealth and high standards of living. Even China, where massive economic growth has been driven by low-wage factories, is seeing wages that are up over 60% since 2011.
Attempting to engineer First World conceptions of “decent work” into developing economies will almost undoubtedly cause more harm than good. Even if these governments were capable of enforcing strict labor laws ( which they aren’t ), rules significantly increase the costs for firms, which, to keep up with rising labor costs thanks to regulations and minimum wage laws, will have to lay off workers or simply produce elsewhere, leaving potential laborers behind, either unemployed or working in industries with lower pay and lower job security, and compromising the economic growth strongly associated with rising standards of living .
Academics like Denis Arnold and Laura Hartman have contended, however, that higher wages and safer working conditions actually stimulate efficiency in workers. The argument is that workers will be able to obtain better nutrition and be grateful for the higher wages, and offer higher productivity in return. Once again, the evidence points the other way. Powell has pointed out that most factories do in fact provide meals because they can do it cheaply. Additionally, the notion of “gift-efficiency” would have been embraced by corporations already if it meant higher efficiency, though this has not been the case.
The reality is that markets, rather than slipshod rules wrought with unintended consequences, provide a clear path from the deplorable conditions offered by clothing factories to well-paying, safe and “decent” work. The ticket to the UN’s ideal of decent work is not regulation and legislation, but economic liberalization.
This article was originally published at Mises.org. Nikhil Sridhar is a student of political economy at Duke University. He has won the Money Metals undergraduate essay contest two years in a row. He is interested in the study of Austrian economics and natural-rights philosophy.