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Sweatshop Dilemmas

Jan 12, 2012 • Businesses, Developing Economies, Economic Debates, Households, Labor, Macroeconomic Measurement • 200 Views    No Comments

Is it okay to have sweatshops in developing nations?

NY Times writer Nicholas Kristof, and Nobel prize winning economists Paul Krugman and Milton Friedman have all said, “Yes.”

Kristof points out that the parents of children scavenging in a noxious Phnom Penh garbage dump perceive Thai sweatshops as a path out of poverty. They don’t benefit when factories close because trade agreements require labor standards; they lose jobs when consumers boycott firms whose Asian factories employ child labor. As Paul Krugman says, “While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.” 

But still, listening to monologist Mike Daisey describe his worker interviews outside a Foxconn electronics factory in China, the horrors of sweatshop work become real. Very low pay, long hours, dangerous working conditions. It brings back memories of the Triangle shirtwaist factory fire (March 25, 1911).

The Economic Lesson

Milton Friedman explains in Free to Choose that sweatshops enabled his parents to work when they arrived in the U.S. In a Hong Kong factory, Dr. Friedman says it was “the power of the market” that increased labor’s wages when demand grew for their skills.

An Economic Question: How would you resolve the dilemmas presented by sweatshops in developing nations?

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