Sunday Reading

If you care about reducing poverty in developing countries and the United States, scrapping sweatshops and regulating Wal-Mart may not be the best strategies.

it may sound silly to say that sweatshops offer a route to prosperity, when wages in the poorest countries are sometimes less than $1 a day. Still, for an impoverished Indonesian or Bangladeshi woman with a handful of kids who would otherwise drop out of school and risk dying of mundane diseases like diarrhea, $1 or $2 a day can be a life-transforming wage.
Nicholas Kristof & Sheryl WooDunn, Two Cheers for Sweat Shops

Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs as food stamps ($28.6 billion) and the earned-income tax credit ($34.6 billion).
George Will, Democrats vs Wal-Mart

[Both via Greg Mankiw]

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12 Responses to Sunday Reading

  1. Martin says:

    As I understand it the problem with sweatshops is not the wages – we don’t want teachers and doctors in developing countries leaving their professions for the high wages of the sweatshop – but the conditions faced by workers. Many workers must work excessively long hours and suffer verbal abuse, dangerous working conditions and high levels of sexual harassment. The solution is not to shut down these factories but to improve the conditions of workers.

  2. derrida derider says:

    As I’ve said before, if conditions in these sweatshops are so horrific, why do people in developing countries flock in droves from the countryside to them? You simply won’t find healthy young adults in the villages for many kilometres around China’s coastal cities, for example – they’ve all left for the big smoke.

    Lefties really need to get to grips with the fact that often the alternative to sweatshops is not wholesome, caring factories but no factories. There’s only one thing worse than being poor in a country that sweats its poor – and that’s being in one that starves them.

  3. Sean Cooney says:

    Martin is quite right. Bad conditions certainly exist in many workplaces, associated mainly with health and safety issues. In places such as China, there is a pay problem, but it is associated not so much with pay rates as with the failure to pay as pay (i.e. wage arrears).

    Again the solution is not to shut down these enterprises, except where they pose a severe danger to health and safety and cannot be improved. It is to promote their improvement through a range of methods, including technology transfer, more sophisticated regulation and so on. In many places, this is occuring. However, as I understand the position in East Asia, at least, it is not simply a laissez-faire or market-driven process.

  4. Andrew Leigh says:

    Martin/Sean, don’t calls for improved safety standards amount to the same thing as calls for higher wages? Unless factories are unsafe because of capricious employers, safe workplaces generally cost more to run than unsafe workplaces. A clear example is China’s mines, where many (maybe most) mineworkers would lose their jobs if the safety standards were as high as in Australian mines.

  5. Russell Hamilton says:

    DD,

    It can be the case that wages in those factories are at about starvation level – you have to look at how the whole system works. If you depend on a few seasonal crops there will be times of the year that you have no income and little food. Then, even the pittance your wife or daughter can contribute from her factory wages is useful. When the crops are in season and there’s a bit of a surplus, some money can be sent to the daughter so that she can buy clothes etc. It isn’t a case of “they should save at that time and then later …” it’s about stretching tiny amounts of money a long way, and when you can get any money at all.

  6. Martin says:

    I would have thought that improving conditions in developing countries would come at third world prices and therefore would not price these countries out of the sweatshop market. It is possible that the sweatshops would threaten to move their factories to cheaper countries; perhaps a regional safety agreement or the like would be a possibility.

    On the Chinese mines I’ll have to take your word Andrew, but surely something must be done about the 6,000 miners that die ever year in China. It seems remarkably hypocritical that we are willing to accept shocking conditions for workers because they are poor and in another country. We wouldn’t stand for it in Australia.

  7. Sacha Blumen says:

    A question is how could “we” influence shocking conditions for workers in China?

  8. Russell says:

    Sacha – if you listen to Radio National more, you can find out:

    http://www.abc.net.au/rn/saturdayextra/stories/2006/1717009.htm

    the answer is consumer pressure (I’m still maintaining the rage against Nestle)

  9. Sacha says:

    Market pressure…

    The reason I asked that question was that it’s not uncommon for people to say that in any free trade agreement with China, Australia should insist on minimum labor standards (eg safety standards).

  10. derrida derider says:

    Russell, that’s not how most ex-peasants in China see it . The remittances flow overwhelmingly from factory to farm, not the other way. And I would be surprised if that were not so in most countries with enough factories.

    But even if you were right it doesn’t change my point – if subsistence-wage factory jobs is all that keeps families from starving, we should be even less keen on endangering any of those jobs by raising costs.

    As for OHS issues we run serious risks of putting inappropriate barriers up here by insisting on developed world standards, and screwing the people we’re trying to help. Indeed, given the incentives our own local producer interests have to hobble potential competition we can pretty well guarantee that any standards stipulated by our governments will be inappropriate. Not to mention the resentment that such paternalism will engender in the poorer country.

  11. Russell says:

    DD,

    The original post mentioned Indonesia and I was thinking of the situation in Indonesia when I was there – a while ago now. Even then It seemed to me that factory work was better around Guangzhou than around Jakarta. I knew some factory workers in Guangzhou, and Jakarta, and visited their village homes. In China the parents and grandparents seemed to have nothing yet they still gave anything they had to their comparatively wealthier city living children – so they could buy the nice clothes and watches etc their friends had and thus not lose face. (My own grandparents were the same – completely selfless).

    Re imposing inappropriate and paternalistic standards – often improvements for the workers can be obtained just by asking your suppliers in those countries to actually abide by the legislative standards the country already has.

    As for “endangering any of those jobs by raising costs” just how much do sports shoes sold in this country for $150 cost to manufacture? I suppose Nike or Addidas just couldn’t absorb an increase of costs from $10 to $15 a pair.

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