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Platypus Innovation Blog

16 November 2015

Are sweat-shops bad?

"Slavery was bad -- I don't think I need to justify that statement too much -- but sweatshops..."
An interesting pub conversation led to the question: Should sweat-shops (and other bad labour practices) be shut down?

I think the answer is yes! -- but it is not as straightforward as one might think.

Why do people work in sweat-shops?
Putting up with low-pay, long shifts, wretched and dangerous working conditions, and where sexual harassment is common and unpunished? Because the alternatives are even worse. So if you close down a sweat-shop, those employees are worse off. The same mostly goes for child-labour

E.g. On the stopping of child labour in football manufacturing:
Some perplexing implications are emerging... said Sajid Kazmi of the Sustainable Development Policy Institute in Islamabad. "And if children cannot work in the football industry they will shift to more hazardous industries." Source: The Guardian, [1] 
If a factory closes down, even a bad factory, the short-term result is worse for the employees. In the West, sweat-shops were the first stage in a rise in living standards -- why shouldn't they similarly be a stepping stone upwards in the modern global market?

Firstly, globalisation has weakened the position of Labour: Moving production is not cheap, but it's a lot easier and cheaper than it used to be (and the constant improvements from automation, internet knowledge, and easier inter-business workflows will continue to make it cheaper). That makes it easier for producers to play one country off against another, thwarting unions and driving down labour pay & conditions. So an improvement in one area may only be temporary, before production moves on to a cheaper more desperate region.

The route historically followed by The West, where better working standards were driven by unions and regional left-wing political movements is no longer as effective.

Secondly, I challenge the idea that imposing standards leads to factory closures. It's more likely to move them (as happened in the football example referenced above).

If a bad factory closes, but a better one opens -- the net effect is that people are better off. Some people are worse (the employees of the old factory who then got worse jobs or no job), but that is counter-balanced by the people who now have better jobs: the overall impact is positive.

If public pressure leads to e.g. Marks & Spencers[2] avoiding sweat-shops, then that could trigger some factories closing down. However the consumer demand will still be there. If we assume (a) that the sweat-shop labour costs were a small fraction of the total cost, and (b) that the level of demand in the West for many products is not terribly price-sensitive (such that, say, a 10% change in pricing will not noticeably change sales)*. Then closing down sweat-shops does not cause net unemployment -- instead it leads to an overall improvement in labour conditions.

This also suggests that a lot of power for improvement lies with the consumer, if we shop humanely -- our buying preferences can have a big enough effect on sales to outweigh the benefits of sweat-shops.

So: do buy fair trade, and do pressure big brands to treat their (typically out-sourced) workforce properly.

[1]: "Football ban sends child workers into worse jobs", The Guardian, April 2001
[2]: "10 Major Clothing Brands Caught in Shocking Sweatshop Scandals"
*I claim Western demand for many products (e.g. footballs) is not that price-sensitive, even though shopping habits are. That is, people will often compare prices and pick the cheapest, but would have bought anyway at the higher priced options. So if one retailer raises their price, they may lose sales, but if the price for product goes up across the board, sales will remain level.

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