Sweatshops - Sometimes the Least Bad Option

by Jacob Maichel

It is no secret that exploitation has run rampant in the world since the fall of man. People exploit each other everyday for one reason or another but some things seem exponentially more evil than others, right? One thing I have noticed while discussing capitalism with friends is a well intentioned distaste for sweatshops and child labor in third world countries. Though it sounds backwards,should we re-evaluate our views on sweatshop?

It is easy here in the United States to reflect on these jobs, often in the garment industry, and feel pity for those who work them. Unfortunately this sympathy replaces rational thought and leads to activists calling for an end to sweatshops. What actually happens when those sweatshops are closed?

If you are working in a sweatshop it is likely because it is your best opportunity. In these developing countries like Vietnam, Nicaragua, Indonesia, Honduras, El Salvador, etc. many of the workers are moving from poor agricultural farm lives with no skills to industrial cities. Likely this sweatshop labor is better than farm life and many people in the country desire these jobs. Though the pay may be low by our standards it is often double or triple the national average. The labor may be hard but the workers are often much better off than their fellow countrymen. As long as the exchange of work is voluntary (not abhorrent slave labor) than we should enable people to make choices regarding their financial stability.

We have even seen the negative effects of domestic legislation that targets sweatshops in developing countries and have not learned our lesson. A particularly convincing example of this is in 1993 Senator Tom Harkin banned imports from countries using child labor in response factories in Bangladesh fired 50,000 children. The children’s best alternative for work? According to a study by Oxfam, a British charity, the majority went into child prostitution or starved to death.

To further illustrate this Ben Powell and David Skarbek, both of whom have written extensively on this subject, published an article in the Journal of Labor research and were the first to quantify alternatives for sweatshop laborers. In 11 countries where there are active accusations of exploitation, the typical factory worker makes significantly more than the average working age adult. When we force improvements on these factories such as a mandatory minimum wage or safety standards, it may end up worse overall for workers. Higher wages or workplace improvements will likely cause profit-maximizing firms to lay people off or reduce wages where they can - again hurting the people we seek to help. Instead, allowing for competition is likely the best way out of impoverished conditions. If competing factories move into the same market people with skills applicable in those factories will be able to choose where to work. This will drive wages and quality up as companies attempt to capture the best workforce.

It took the United States over 150 years to industrialize and one of the wealthiest countries in the world, Hong Kong, had sweatshops just 30 years ago. Factory work makes employees more skilled and creates a competitive market place critical for healthy economies and living lives of fulfillment. The good news for sweatshops today is the abundance of new technology and high amount human capital. If we do not undermine these countries right to develop then they will industrialize much faster than the United States or Hong Kong. As long as exchanges are voluntary, you don’t make someone better off by taking their best solution to a serious problem.

 Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University