The Case for Sweatshops

A recent discussion I had motivated me to try to coherently summarize my thoughts on ‘sweatshops’ (I don’t like the rhetoric associated with that term, but for lack of a better word I’ll use it), and why I don’t think they’re necessarily evil.

I’m sure there are situations where the working conditions are pretty terrible in many factories in the third world. But if people are not forced to work there (which would make this another issue entirely - slavery), then I see no reason to object to their wages or working conditions on principle, just because they are below our standards. These people are choosing to work there because it is a better option than their next-best alternative. And it’s not just libertarian economists who see this. Nicholas Kristof had a long article in the NY Times ($ req'd) (which is not exactly a bastion of conservative perspectives) on sweatshops in southeast Asia:

Indeed, talk to third world factory workers and the whole idea of "sweatshops" seems a misnomer. It is farmers and brick-makers who really sweat under the broiling sun, while sweatshop workers merely glow. … Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory - working only six days a week, inside instead of in the broiling sun, for up to $2 a day - is a dream.

If this is what workers in the third world think, isn’t that what really matters? It’s not whether or not YOU would want to work there, it’s whether or not they want to. And in surveys on the subject of multinational corporations, people in the third world have a more favorable opinion than those in the west. And to throw a wrench into the view that these sweatshops really offer such appalling wages, look to evidence like that of the University of Michigan professor who studied wage rates in Nike factories in Vietnam and Indonesia and found that workers there earned on average five times each country’s respective minimum wage.

And if these sweatshops are indeed a positive economic choice for the workers, pressure to raise wages in these third-world operations is not in the best interests of those employees. What would happen if companies were forced to pay wages equal to those in the developed world? The answer is that they would shut down the factories and go back to making clothes in North America or Europe where workers are more productive and the increased labor costs are therefore more justified. And we’d all pay more for goods and services because the cost of labor that went into an item would increase. So third-world workers would be out of a job and back to doing whatever it was they were doing before (you know, what they left to take the job in a sweatshop, presumably because it was a better option), and we’d all be poorer because the cost of goods and services would increase – and this would hit the poor people in the developed world the hardest. So in the efforts to “do something” about the low wages and/or poor working conditions in sweatshops, activists in the west are doing a disservice to poor people around the globe.

So what can we do to help people who are obviously living lives we don’t feel are at a level of economic development we would wish upon anyone? Choosing not to buy products from companies that have “sweatshops” is not the answer: campaigns against companies end up forcing people to take options that are even worse than working in a sweatshop. For example, boycotts of these companies in Nepal have forced young workers into the sex trade. Of these types of negative unintended consequences, I’d say we should do our best to avoid them. The best thing to do for workers in the third world is to buy, buy, buy from those companies – that way, they can afford to raise wages for workers and open new factories. (More importantly, if we want to help people in the third world we should stop subsidies to industries, especially agriculture, in the developed world. But that’s another argument). Countries will develop as the people obtain wealth. Hong Kong was until relatively recently primarily based on manufacturing as its economic base – using what we would call sweatshop labor – and is now one of the richest, most vibrant economies in the world.

One caveat – the key to all of this is that the employees are willing to work. Coercion or slavery isn’t free trade, and should be condemned on all ethical legal grounds. But as Radly Balko puts it:

But if people living in poverty are willing to work the wages multinationals want to pay them, we shouldn't stand in the way. Corporations get cheaper labor. The world's poorest people can begin to inch their way out of poverty. Western consumers get cheaper goods. And we begin the process of moving the world's poorest economies down the road to prosperity, which benefits all of us.

I’m open to criticism about this, but I feel that the evidence leads to the conclusion that 'sweatshops' do more good than harm to people in the third world, and for that reason (as well as the cheap goods they provide) they should be embraced, not demonized, by the wealthiest people in the world.