Friday, February 25, 2005

Matt's Sweatshops Paper

Feel free to continue any discussion or comments on Matt's paper here.


Blogger H. E. said...

OK, I'll bite. This was outside the scope of your discussion but isn't the real worry about sweatshops not the short-term effects on workers but the long-term effects on the workers and others, and on the economy? Sweatshop workers aren't acquiring skills--particularly bad if they're kids. Empirically Asian countries that were quite poor did better over time than comparably poor countries in sub-Saharan Africa because they invested in education.

When a large chunk of the population, particularly kids, are in employed by foreign firms to make cheap products for export--or in prostitution, or in soldiering--you aren't building human capital. At the beginning of the industrial revolution boot-stapping was feasible. Save up money from drudge work, start a small business, work your way up, multiply these small success stories and a nation of shopkeepers industrializes and builds wealth. That scenario isn't feasible in a post-industrial global economy.

5:54 PM  
Blogger H. E. said...

Here is a NYTimes op-ed piece that's relevant.

8:26 AM  
Blogger H. E. said...

Here is a NYTimes op-ed piece that's relevant.

8:27 AM  
Blogger Matt Zwolinski said...

Thanks for the comment, H.E.

You write, "isn't the real worry about sweatshops not the short-term effects on workers but the long-term effects on the workers and others, and on the economy?"

I think it's important to distinguish these two types of argument. If the worry is that sweatshops have negative long-term effects on the workers, then we have an issue of rationality to deal with -- why are sweatshop workers choosing employment that is bad for them in the long run? This does fall within the scope of my argument. As an empirical matter, however, I think this is a tough argument to push through. Sweatshop workers typically aren't forsaking education so they can work and have money to play video games and buy skateboards. They're typically working so they (or their family) can *eat*. Sweatshop employment might be worse for their long term interests than a number of other possible uses of their time, but often times the opportunity cost of those other options is simply too high. It's *possible* that sweatshop workers are unreasonably discounting their future interests, but I see no reason to believe this is actually the case. [Things are more complicated with child labor, since the decision to work is made in these cases by the parent, rather than by the worker themselves. I also doubt that parents are sacrificing their children's long-term well-being for short term gain, but I don't get into this in my paper.]

If, on the other hand, you're concerned not about the long-term effects on the workers themselves, but on the economy as a whole, or on certain other groups of workers, then we're no longer dealing with an argument about irrationality. We're dealing with a case of externalities. Perhaps there's a kind of collective action problem at work -- all workers would be better off if all workers refused sweatshop labor and engaged in capital-developing activities instead. But each worker has an incentive to take the immediate payoff of a sweatshop job and hope to free-ride of others' developmental activity.

Again, I don't know how plausible this is as an empirical matter. It's outside the scope of my current paper, but here's a stab. The Asian countries are a tough example. I'm actually surprised you bring them up, as they're usually cited as a case of economies where sweatshop labor was one step on the road to economic development and self-sufficiency. Sweatshops do, after all, tend to develop some capital in a country -- they inject wealth, teach skills both with certain sorts of equipment and with Western management practices. But it's hard to attribute causation in the big picture.

9:10 PM  
Blogger H. E. said...

I wasn't considering long-term effects on workers in my comment but on the economy. Likely for most sweat shop workers it's the best they can do for themselves both in the short run and the long run because education and training aren't an option however I suggested that the economies of these countries would likely do better in the long run if they made these options more widely available.

For Asian countries, have you looked at Easterly The Elusive Quest for Growth. Easterly is a fan of sweat shops and suggests that education isn't all that important, citing I think Bangladesh which sewed up the market for men's shirts. But Bangladesh is still a very poor country.

It's really an empirical question what produces the best results, and not so much a matter of whether there should be sweatshops or not but how many, whether it's worthwhile to invest in alternatives that would give at least some workers other options etc. And along with the sweatshops the Asian countries that showed growth also invested in education and training and other sorts of interventions.

What I'm suggesting is that letting the market work and hoping that having lots of sweatshops taking advantage of the huge supply of cheap, unskilled labor isn't by itself likely to work.

11:00 PM  
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