The Economics of Sweatshops

Often times, economists are asked about sweatshops. Individuals often assume that sweatshops are morally wrong and thus question why they exist. However, they are not morally wrong. In fact, sweatshops are actually one of the first positive signs of growth for those in developing countries.

Adam Smith taught us in The Wealth of Nations that two free individuals will only trade if they both perceive themselves as benefitting from the transaction. We know that a businessman would find it beneficial to pay workers a low wage. However, if the long hours of hard labor at low wages do not make the worker better off, why would they choose to work there?

It is hard to define a low wage. Americans often gasp at the wages for which those in developing countries are willing to work. A low wage by American standards does not necessarily deem it a low wage. One must analyze the wage by the standards in the country in which it is being paid. In the United States, $5 per hour would be deemed an unacceptable wage because it is below our minimum wage. Similarly, the citizens of the United States enjoy a higher standard of living. Those who are considered poor still drive cars and own televisions. However, in other countries this is not the case. In developing countries, the main concern is often food and shelter. When the standards of living are so low, the money can go a lot further.

We are often told horror stories of those in southeast Asia who are working for less than a dollar an hour to make tennis shoes. This often causes Marxist outrage. However, there is no need to worry. Individuals voluntarily choose to work in these environments. If the wages and conditions are so bad, why would anyone choose to work there? Often times they choose to do so because they have no better options. In other words, the job in a sweatshop is better than no job at all.

Sweatshops are also key signs of growth in developing nations. As more and more of these shops open, more and more individuals can find work. The competition for labor will continue to push wages higher. This increase in employment and wages causes the society as a whole to see in increase in the standard of living.

Individuals choose to work in sweatshops because it is better than the alternative.

16 responses to “The Economics of Sweatshops

  1. “Slavery might also be better than starvation, yet nobody advocates a return to slavery. Just because a bad job may be better than starvation doesn’t justify labor abuses such as the beating and raping of workers or the threatening of worker’s families—all abuses that have been regularly documented by independent researchers visiting sweatshop factories (Breslow, 1995; Foek, 1997). While accepting that a bad job might be better than nothing, we should continue to fight the abuse of human lives, and even a basic study of history reveals that most human progress as a society has occurred through such struggles for progress, not through maintenance of the status quo. If we justify abuse under the premise that is better than the worst alternative, we create a slippery slope leading down to the complete devaluation of human life. As New York Times columnist Bob Herbert, a vocal critic of sweatshop abuse, writes, “What’s next, employees who’ll work for a bowl of gruel?” (Herbert, 1996).”

    -A Consensus Statement on Sweatshop Abuse and MIT’s Prospective Actions in Pursuit of International Labor Justice

    Signed by Individual Faculty Members and Students of the Massachusetts Institute of Technology

    August 2001

  2. Abuses are not what economists advocate here. The presumption is that workers are free to work or to stay home. This is distinctly different from slavery, where the person is forced to work against his will. Truth be told, all work for wages is slavery of a sort. Those who would end employment of children or the existence of sweat shops are like the busy bodies in government who go about tampering with the mechanics of the free market. So if you want to protest something, then speak out against anyone or anything that takes away the individual’s right to choose.

  3. I don’t see how you are helping people by making them sicker with your horrible work conditions and low pay. how do they afford a doctor? the company should be held responsible for medical bills. There’s been cases where workers do not get paid. Youre just a corporate pig rolling around his own shit and eating it.

  4. The issue is not working conditions, it is freedom. The most basic natural law is the right to life, liberty, and property. When a sweatshop owner exploits workers, blackmails them, threatens them, beats them, he violates the worker’s natural rights. Who is going to go and defend those workers’ rights? I like the way you vocalize your concern. Drawing attention to the injustice is a great idea. But if you are suggesting we legislate against products made this way, I think it would be altogether futile and cause more harm than good. The issue is not how sweaty or unsanitary the shops are, it is the fact that people are wicked and given the chance they will exploit and enslave their fellow man.

  5. Sweatshop conditions are wrong! Americans who say they aren’t don’t have a clue because they have never worked in one!

    • Learn to look into bigger picture. Yes it’s wrong in ways that’s brutal and beats people. But it’s beneficial for the world.
      And it’s open to everyone. Unlike other jobs that requires specific requirements, anyone can have a job and earn money.
      And that’s what the poor people need. They want job and they want money to raise their family and support much as they can.

      We, in the other hand, look for luxerious lives. And because our wage is higher than theirs, we assume their paid little. Their concern isn’t about fancy cars or house. It’s about food and place they can live. We need to recognize the standards and main concerns before arguing about this.

      Also, what have we done for them? Do we really have rights to say that they shouldn’t have sweatshops because they’re brutal? What have WE done for those people? Did we give them money to buy a house, better car, and more food? Americans run to dollar store everyday to buy cheap food and items. Wealthy nation like United States have over hundreds of dollar stores in business. We all seek cheap items and to support our mass consumption, sweatshops opened.

      Do we really have any rights to call sweatshops are wrong?

      I think not. What have we done for them?

  6. The absence of the work opportunities provided by sweatshops can quickly lead to malnourishment or starvation. After the Child Labor Deterrence Act was introduced in the US, an estimated 50,000 children were dismissed from their garment industry jobs in Asia, leaving many to resort to jobs such as “stone-crushing, street hustling, and prostitution.” UNICEF’s 1997 State of the World’s Children study found these alternative jobs “more hazardous and exploitative than garment production.”[6].

    I dont think you have a clue what its like to starve and or prostitute yourself.

  7. People who work in sweatshops do not have a choice. Their rights are being exploited because the countries that they live in do not have systems in place to protect the poor, these countries are not part of the UN! What you are saying is that people choose to work in sweatshops, but sweatshop labour is their only option, it is either work for 26c an hour (Afghanistan), or live on the streets and become victims of even more horrendous crimes. That is not a choice.

  8. YEAHH!!! Exactly FREEDOM FTW ..
    YOU ARE SOO AWESOME ROSE

  9. Did you people even read the whole thing? I mean.. -__-..
    people CHOOOOOSEEE to work there. it’s their FREEDOMM ok?
    Whoever talks about freedom, think of their freedom.
    Why do they choose to work at sweatshops even thought the “world” is against it? Because they want to. They don’t care what we say as long as they can get their food and shelter. Do you know how it feels to starve to the point where you sell your own children and yourself?

    Do we know how it feels to work in the sweatshop? No.
    But we do know how it feels to be hungry, and even with little hunger, we Americans run to resturants and feed ourselves with food. Because we have money. Do they? They don’t have options like us. They die for job.
    So they can at least continue on with their lives.
    Higher wages for them? The reason why China was able to develop further was because of those sweatshops and cheap labor.

    People who says sweatshops are inhumane and brutal, you don’t know a single thing about them. It’s better to be beaten than to die of hunger.
    It’s way better to work long hours instead of having your children die front of your eyes because of hunger. Poor conditions? You ask them if they really think they can survive without sweatshop.

    If there’s wealthy country, there has to be poor. And if there’s a poor, there must be a support. and that’s what sweatshop is.

    Suck it!!!! That’s the reality

  10. Way to go, Sarah :) :) :)
    Sweatshop or not, the people have a right to choose. Unless they are being kidnapped, which is another thing.

  11. Sweatshops are good as well as it can do harm to people. It removes poverty, malnutrition etc. but it also causes diseases from the working conditions in the factories.

  12. The issue is not whether sweatshops are an alternative to death, it is that corporations are hungry for cheaper labour and really couldn’t be bothered whether their practices are saving someone’s life. Corporations are concerned about maximizing profits, this is done by outsourcing to offshore manufacturing. This is a loss of American manufacturing jobs (hence the economic state of the US), and it is a loss for all of the poor labourers in the developing countries where manufacturing is produced. It is complete stupidity to believe that this work develops a country. China, as a state, may be better off to have foreign firm investment. The people of China, however, are far from being better off. You cannot justify sweatshops by saying that it is better than their starvation. Yes, it can provide the worker a livable wage to merely purchase the rice necessary to live. The question is not of “choice” or freedom on developing country workers. This is a question of why we allow corporations to so severely strangle the global economy to the extent which both developed country workers and developing country workers are marginalized. This is a question of consumer education. It is easy to say that sweatshop labour is fine and dandy, but to really understand and show empathy, not one warm soul on the face of this earth would choose consciously choose an economic system which allows for this kind of activity to exist. For those of you who are happy to accept such conditions, please continue to enjoy your consumer goods that make you so fulfilled. For those of you who understand that this corporate reality has gone too far from what the institution was intended to do, educate yourself as to who you are willing to purchase from. Don’t just read the Far Trade or Sweat Free label, really investigate the company’s manufacturing processes and ask yourself if the purchase of their goods are really worth your financial contribution to this exploitation. When sweatshop’s do well, workers work harder, not more comfortably.

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