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Help the world’s poor: Buy some new clothes

This is a guest post written by Benjamin Powell, an assistant professor of Economics at Suffolk University and a Senior Economist with the Beacon Hill Institute.  He is the editor of Making Poor Nations Rich, and is currently writing a book entitled No Sweat: How Sweatshops Improve Lives and Economic Growth.

Back to school shopping leads many people to buy apparel that was made in sweatshops. Rather than feel guilty for “exploiting” poor workers, shoppers should rejoice.  Their spending is some of the best aid we can give to people in poorer countries.

When workers voluntarily take a job they demonstrate that they believe the job is the best alternative available to them – even when that job is unsafe and the pay is very low compared to wages in the United States. That’s why economists with political views as divergent as Paul Krugman and Walter Williams have both written in defense of sweatshops.

Sweatshop jobs are often far better than the vast majority of jobs in the countries where they are located. David Skarbek and I researched sweatshops that were documented in U.S. news sources (or see here for my shorter, more general defense of sweatshops). We found that sweatshop worker earnings equaled or exceeded the average national income in 9 out of 11 countries we studied. Working in a sweatshop paid more than double the national average in four of the countries.

Sweatshops can also play a crucial role in economic development. Sweatshops bring investment, better technology, and the opportunity for workers to build skills. It was not long ago that sweatshops existed in many now-wealthy Asian countries.

New York Times columnist Nicholas Kristof wrote that “We need to build a constituency of humanitarians who view low-wage manufacturing as a solution” for poverty in the third-world.   I hope many AidWatchers will join that constituency by defending sweatshops.

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20 Comments

  1. mz wrote:

    Where wages are only low relative to wages in other countries, they are otherwise high in the country/region where the sweatshops are located, and wages are the only issue, there might be a point here.

    But criticisms of sweatshops are rarely restricted to wages. Occupational health and hygiene, job security, hours worked and paid, and worker power are just some of the issues frequently cited in both general and specific critiques of sweatshops. To ignore them in support of sweatshops creates a strawman argument.

    Nevertheless, their seem to be at least three main problems with the central thesis presented: (1) “better than the rest” is a far cry from the litmus test for “good”, (2) criticisms of sweatshops do not equate with endorsements of alternative vocations, (3) where wealth accumulates within a value chain is an important consideration, particularly if you’re going to extol the virtures of sweatshops to “shoppers [who] should rejoice”. After all, maybe those workers should make more money/have better working conditions for the price paid at retail, or, if that’s too crazy of an idea, perhaps the shopper is due for a deeper discount.

    Posted August 31, 2010 at 8:31 am | Permalink
  2. zee wrote:

    Benjamin, was that blog post specifically written for this audience? As mz very well outlines, it is desperately simplistic for a “senior economist” and assistant professor. FFS. I hope you’ve merely cut and paste from the dust-jacket for your upcoming book.

    Posted August 31, 2010 at 8:44 am | Permalink
  3. Jeremy L wrote:

    Good point that if people are choosing these jobs voluntarily, it must be the best option they have. But surely people working in terrible conditions for long hours is nothing to rejoice about even if their wages are above average. I’ve always thought of this as exporting poverty. The people on the production end don’t get some of the wealth they’re due making the product cheaper thereby making the poor on the consumption end a bit richer.

    Posted August 31, 2010 at 10:13 am | Permalink
  4. Benjamin Powell wrote:

    MZ and Zee: Blog posts aren’t the place for long scholarly defenses. Good posts touch on a point and direct readers to the other sources with more information. My link to my more general defense of sweatshops addresses working conditions. Below I paste some of it. A longer more scholarly version can be found in my Human Rights Quarterly article here:

    http://mail.beaconhill.org/~bpowell/reply%20to%20sweatshop%20sophistries.pdf

    Compensation can be paid in wages or in benefits, which may include health, safety, comfort, longer breaks, and fewer working hours. In some cases, improved health or safety can increase worker productivity and firm profits. In these cases firms will provide these benefits out of their own self interest. However, often these benefits do not directly increase profits and so the firm regards such benefits to workers as costs to itself, in which case these costs are like wages.

    A profit-maximizing firm is indifferent between compensating workers with wages or compensating them with health, safety, and leisure benefits of the same value when doing so does not affect overall productivity. What the firm really cares about is the overall cost of the total compensation package.

    Workers, on the other hand, do care about the mix of compensation they receive. Few of us would be willing to work for no money wage and instead take our entire pay in benefits. We want some of each. Furthermore, when our overall compensation goes up, we tend to desire more non-monetary benefits.

    For most people, comfort and safety are what economists call “normal goods,” that is, goods that we demand more of as our income rises. Factory workers in third world countries are no different. Unfortunately, many of them have low productivity, and so their overall compensation level is low. Therefore, they want most of their compensation in wages and little in health or safety improvements.

    Posted August 31, 2010 at 10:37 am | Permalink
  5. JPT wrote:

    Madagascar just suffered a terrible tragedy when 60% of their “sweatshops” closed due to Madagascar losing AGOA privileges. 80,000 new unemployed dont care that they worked full days for a low wage. They care now that they dont have any wage. In this country there is no alternative employment and those new unemployed certainly arent going to care if someone up the value chain was making money too, they just want some money themselves. Their working conditions might not have been the same as conditions in Geneva but I havent seen any employment experts from there that have ever really worked. Dont get me started on ILO. When an entire village will walk an hour each way to a paying job I think the consumer should buy two shirts as their expression of solidarity. Fight Poverty Buy More Stuff Made By Poor People!!!

    Posted August 31, 2010 at 11:42 am | Permalink
  6. Andy wrote:

    Great post (and linked articles) Benjamin, this is a very insightful perspective that has not received adequate airtime in most discussions on low skilled, labor intensive export industries in developing countries. It’s very easy to demonize foreign firms for paying low wages, providing a superior alternative to these firms is entirely another matter.

    (Although no doubt these views are unpopular in some circles, as is evident here)

    Posted August 31, 2010 at 12:10 pm | Permalink
  7. ans wrote:

    A lot of folks here in Haiti would “voluntarily take a job” of being repeatedly punched in the face if that was the only option available to them to earn some money. Not really voluntary, then, is it…

    Posted September 1, 2010 at 8:26 am | Permalink
  8. mz wrote:

    Benjamin: I do apologize if you thought I was after a scholarly defence as it wasn’t my intent at all.

    You argue suggest shoppers (presumably everyone) should be happy about sweatshops and see them as positive. The main point you make to support this is that, in some cases, sweatshops are sometimes the least worst alternative to workers in countries where they’re located. I simply find your argument unconvincing and provide three reasons why.

    I can certainly agree that sweatshops (a value-laden term that probably doesn’t help your case, by the way) can be the best source of employment given the context. And I’ve personally met people who wanted to work in them because they were more attractive alternatives than their current occupations.

    But your arguments have a normative basis that many people, myself included, cannot accept. Specifically, that a company’s “right” for profit-maximization trumps workers’ “rights” for healthy and decent workplaces.

    You also seem to ignore the legal/social context that in part makes something acceptable in one country and not another, assuming (or preferring) a pure market mechanism is in effect. The exception to this, of course, is in your paper, where you argue against the notion of establishing mandatory codes of conduct.

    If a factory pays well relative to other vocations, is safe for the workers, and doesn’t play games (e.g. no harrassment, respects contracts, pays on time, etc), then wonderful. But many don’t, and your argument provides cover for them. Worse, your conclusions support the context that allow them to become the norm and flourish.

    Going back to the beginning, your argument does not support the idea that sweatshops are “good”, only that they are (in some cases) less bad than other alternatives. For me, that’s simply nothing to rejoice about. Rather than defend sweatshops, I suggest we’d be better off working to make them (and alternative vocations) safer and more rewarding for poor workers.

    Posted September 1, 2010 at 8:45 am | Permalink
  9. Hi Ben,

    Kevin apparently tried to comment here but got his comment e-swallowed. So he commented on his blog instead; here’s the link.

    Roderick

    Posted September 1, 2010 at 10:23 am | Permalink
  10. rachel wrote:

    how do you know that sweatshop labor is voluntary? what about how in china walmart locks female workers in dormitories? if there are so many mechanisms in place coercing people to do it and get it to work, doesn’t that mean people wouldn’t voluntarily choose it?
    in america patriarchal ideals are deployed to get female consumers to believe they need to keep buying goods, and if there’s something so elaborate constructed to get people to do it, it must be coercion– and a lot of women in factory labor had chosen to move to urban centers to skirt marriage or prostitution, but sometimes women choose marriage or prostitution over factory work, so either isn’t so great

    “”Don’t believe you have rights” means “don’t believe you’re getting any protection in exchange for your obedience,” because after millennia you still offer up your obedience without demanding any compensation, taking a pure loss; don’t believe you’ll be able to blossom in a society created to exclude you: if you’ve been given any rights, it’s only because in order to demand them you let yourself be normalized, and now the enemy can integrate you in a way more to your liking.”

    Posted September 1, 2010 at 11:34 am | Permalink
  11. Diane Bennett wrote:

    @Rachel
    “in america patriarchal ideals are deployed to get female consumers to believe they need to keep buying goods,…”

    I’m sure you didn’t mean that only (dumb) American women are consumers. Or that only (smart) men are behind American marketing schemes. One might think you were painting with a pretty broad brush.

    Posted September 1, 2010 at 12:09 pm | Permalink
  12. Benjamin Powell wrote:

    MZ: Sorry for the confusion. The comment about scholarship was directed to Zee. The part about working conditions was directed to your second paragraph.

    1 and 2 in your original response are really one problem in my mind. I say sweatshops are “good” if they are the best achievable real world option. If criticisms of sweatshops don’t offer a better option then the rest collapses into good. Point 3 needs to take account of price theory. Yes corporations profit. But all decisions are made on the margin. If they had to profit less through giving up more money to labor then on the margin they would employ less labor making many poor workers worse off. I talk about this in one of the linked papers.

    Your latest post addresses “rights.” Asserting a right doesn’t make it attainable. Economics puts limits on people’s utopias. Enforcing a “right” to health and decent working conditions will end up either unemploying workers or changing their mix of compensation against their desires. This is where critics of sweatshops need to argue exactly what economic mechanisms will allow them to improve the situation without making workers worse off.

    I agree that we should want to see workers become better off. The question is how. There is some room for ethical branding that shifts demand curves out, but this is a niche market, not the norm. The real game is the process of development that increases labor productivity and labor market competition. Sweatshops are part of that process. So humanitarians should join me in defending sweatshops from their critics until critics can offer better mechanisms for improving living standards.

    Posted September 1, 2010 at 5:14 pm | Permalink
  13. Humanitarian wrote:

    Benjamin: I don’t think that there is too much evidence that being a submissive worker in a sweatshop is a way out of poverty itself. Allthough getting punched in the face only once a day is clearly an improvement compared to getting punched 5times a day…but that still is NOT progressive economic policy.

    Isn’t it a little awkward, that all developed countries have minimum wages, workplace security (at least some!) and at least some form of public health insurance which is completely lacking in some countries of south-east asia (and the US)??? Labor market competition is the way out if you believe in the incentives put on people by completely deregulated (labor) markets. If you are an economist with a close relationship to reality, you might observe that any industrialized country has at least some form of minimum wage, workplace security and other form of social security regulation (see also Wallis’ paper of 2010 on New Deal, Democracy and Capitalism), and is still better off than “sweatshop-nation”.

    In Austria, we didn’t and don’t have too many sweatshops, we have a little industry and public insurance systems…still, the 7th richest country of the world. So it depends on the way you think about the economy…from a supply-side-perspective, where structural reform is the ONLY way… or from a realist perspective, where people are not just input factors who – to gain at least some standard of living – have to subdue themselves for years or even decades like people subdue to any kind of god or whatsoever.

    Allthough it remains me at least “puzzled”, that this advice (subdue, subdue and subdue) is always coming from the richest nations and their “scientific army”.

    Posted September 3, 2010 at 6:32 am | Permalink
  14. Benjamin Powell wrote:

    Humanitarian,
    The minimum wages and other health and safety regulations were adopted after the wealthy countries were well past the stage of development of most sweatshop using countries today and even then many of the laws simply codified what was exisiting practice anyway. For example, the first U.S. minimum wages was 25 cents an hour in 1938. At the time the average wage was already 62.7 cents per hour. See “Good for the Goose, Bad for the Gander: International Labor Standards and Comparative Development” for a study of how much more development is needed in poorer countries before they reach the level of development that the U.S. had attained when it adopted various labor standards.

    http://www.peterleeson.com/Good_for_the_Goose__Bad_for_the_Gander.pdf

    Posted September 3, 2010 at 8:26 am | Permalink
  15. Niti wrote:

    Surely there is a way for sweatshops to be beneficial for the country and its employees without them being places where torture is used as a form of exploitation. Women are suffering all kinds of violence in some of these factories, something that certainly can be avoided without hindering the growth of the country.

    I too support the importance of industrialisation in the development of a country, definitely more effective than aid (!), but this does not justify the conditions in which many of these workers are put under. And until this is not resolved, we should all feel guilty if we buy clothes made under these conditions, and we should lobby retailers to make sure that there is human dignity in these sweatshops.

    I therefore disagree with the argument: ‘When workers voluntarily take a job they demonstrate that they believe the job is the best alternative available to them’… How can this be said, when for many there is no actual alternative? I do not want to be disrespectful, but this sentence sounds to me like cheap neoliberalism. I think we can do better political economy…

    Industry is hugely important for poorer countries, as it was for current rich countries, but workers should be able to benefit from this without putting their lives at such risk.

    Posted September 7, 2010 at 10:02 am | Permalink
  16. Michael Bourne wrote:

    Saying sweatshops are necessary and good because ethically sourced clothing will always be a niche is a cop out.

    I reckon (I have no evidence, I’m just thinking aloud) one of the major reasons why ethically sourced clothing is still a niche is because of intelligent people telling us that sweatshops are necessary and good.

    The bitter irony is that the reason the CEO of an unethical company is pard so much is because they succeed in making me want to buy unethical goods.

    Information (an assumption of perfect competition, lest we forget) is surely the key here. There’s nothing like seeing a battery farm for making you want to buy free range…

    Posted September 8, 2010 at 10:54 am | Permalink
  17. Raphael wrote:

    Benjamin, I am curious to know where you draw the ethical line. People “voluntarily” enter into prostitution or sell their organs for money. One can argue that as long as they are increasing their utility, that’s fine. But is there ANY ethical line that should not be crossed?

    Posted September 8, 2010 at 5:34 pm | Permalink
  18. Humanitarian wrote:

    Thanks for the linked document. The conclusio they draw is just one of the many fallacies economists replicate over and over again…ask me, i studied it for almost 7 yrs!!! For further “enlightenment” see the works by European economists Eckhard Hein, Engelbert Stockhammer or Indian economist Amit Bhaduri (too much to link it here).

    @Raphael: Economists NEVER EVER draw ethical lines…you cannot formalize them into a 70-equations-model!

    @Benjamin: As i told you before…getting slapped one time a day is still an improvement compared to getting slapped 5-times a day…does it make me happy to slap people when i walk into the bathroom in the morning to put on my new “sweatshop-produced” t-shirt??? Do you?

    Posted September 12, 2010 at 4:04 am | Permalink
  19. Helen Sworn wrote:

    I have lived and worked in Cambodia for the past 12 years and I would like to ask you what should be done when the workers themselves clearly KNOW that they are being exploited and have to come out on strike to ask for a LIVING WAGE… I know many garment factory workers who are unable to provide for their families.. I think it is highly condescending for you to justify sweatshops in this manner – your observations are simplistic in their essence without knowing those who are having to tolerate this life of poverty. Does this mean we should have left children working up the chimneys as they did in the Victorian times – at least it was a job you may say…

    Posted September 13, 2010 at 8:33 am | Permalink
  20. Lance Robinson wrote:

    It seems that the argument of this post is that sweatshops should be tolerated as necessary evil on the climb out of poverty. This simplifies too much. The claim is that as long as people are voluntarily taking the job that proves it’s good. Really? If one’s starting point is utter desperation, you are a prime candidate to volunteer to be severely exploited.

    Is it understandable that in developing countries there may not be the same safety conditions or other equivalents as in more developed parts of the world? Sure, but to make this recognition and use it as an argument to justify sweat shops without nuancing what is intolerable is naive at best. It certainly allows us westerners to not feel bad about exploiting the rest of the world for our standard of living now doesn’t it?

    This is a clear example of taking a potentially valid point of exception, driving it too far without nuance, until it becomes another point all together.

    Posted September 13, 2010 at 9:39 am | Permalink

6 Trackbacks

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  2. [...] Powellhas an excellent guestpostover at AidWatch on sweatshops and development. See Ben’spaperwithDavid Skarbekfor more on [...]

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