Top 3 Ways Sweatshops Help The Poor Escape Poverty

Desert Island Game (game, beginner): Can you learn something about trade and cooperation by being marooned on a desert island?
Trade Ruler (game, advanced): As the Supreme Ruler of an island, you want the country to prosper. By engaging in international trade, you can achieve this goal.

The New York Times recently reported on the case of Nokuthula Masango, an employee at a clothing factory in New Castle, South Africa. Masango works long hours in tough conditions all for only $36 per week. If that sounds low, it is, even by South African standards where the legal minimum wage is $57 per week. Many people would describe Masango’s factory as a sweatshop, and many would say that the owners of the sweatshop are treating Masango and their other employees unfairly. Now in this video I don’t want to try to fully settle the question of whether sweatshops treat their workers unfairly or not. Let’s grant for the sake of argument that they do. The point I want to make here is that even if sweatshop workers are treated unfairly, there are three points to be made in defense of sweatshops.

First, it’s important to remember that the exchange between the worker and her employer is mutually beneficial, even when it’s unfair. Sweatshops make their employees better off even if they don’t make them as much better off as critics think they should. Consider sweatshop wages. As you might recall, Masango earned $36 a week at her sweatshop job. Compare this with her friend, who lost her job at a sweatshop after it was closed for violating minimum-wage laws and had to find work as a nanny. That friend wound up earning just $14 a month, less than 12 percent of what Masango earned. And this wage gap is typical of sweatshop jobs relative to other jobs in the domestic economy. Studies have shown sweatshop jobs often pay three to seven times the wages paid elsewhere in the economy.

So even if we think the conditions of sweatshop labor are unfair, relative to their other alternatives, sweatshop labor is a very attractive option for workers in the developing world. And this is why those workers are often so eager to accept so-called sweatshop jobs. Now no one on either side of the debate defends forced labor, but so long as sweatshop labor is voluntary, even in a weak sense of being free from physical coercion, workers would only take a job in a sweatshop when that job is better for them than any of their other alternatives. This is true even if we grant that sweatshop workers’ freedom is often limited in a variety of unjust ways by their government or by the so-called coercion of poverty.

Coercion constrains options, but as long as workers are free to choose from within their constrained set of options, we can expect them to select those jobs that offer the best prospects of success. And when given the choice between working in a sweatshop or working on a farm or working elsewhere in the urban economy, workers consistently choose the sweatshop job.

The second point to be made in defense of sweatshops is this: Even if you think sweatshop labor is unfair, it is a bad idea to prohibit it. Think of it this way: People only take sweatshop jobs because they’re desperately poor and low on options. But, taking away sweatshops does nothing to eliminate that poverty or to enhance their options. In fact, it only reduces them further, taking away what workers themselves regard as the best option they have.

Now, of course, most anti-sweatshop activists aren’t trying to shut down factories, but sometimes well-intentioned actions have unintended consequences. The layoffs faced by Masango’s friend are a stark demonstration of this. That friend was fired because the owners of her factory decided it would be better to stop doing business altogether than to pay the legal minimum wage. And while you can make it illegal for factories to pay low wages, you cannot make it illegal for them to pay no wages by shutting down altogether.

The third and final point is this. It’s better to do something to help the problem of global poverty than it is to do nothing. And sweatshops are doing something to help. They’re giving people jobs that pay better than their other alternatives, and they’re contributing to a process of economic development that has the potential to affect dramatic increases in living standards. Most of us, on the other hand, do nothing to improve the lives of these workers, and that includes American companies that don’t outsource their production at all but instead give their jobs to U.S. workers, who by global standards are already some of the world’s wealthiest people.

So take the perspective of one of the world’s poor for a moment and ask yourself which looks better to you: The American company that outsources to a sweatshop or the American company that, because of its high-minded moral principles, doesn’t? Maybe the sweatshop is run by people who are greedy and shallow in their motivations and maybe the other company is run by people with the purest of intentions. But good intentions don’t get you a job and they don’t feed your family. So which looks better now?