Jameson Mayr
MGMT-6350
International Business
Prof. Stodder
April 12, 2005
Thesis Statement
Child labor is an economic issue that cannot be eliminated through developed world
legislation or trade sanctions rather it can be eliminated through economic and educational
improvements in developing economies.
Abstract
Child labor is an issue of global concern. It is the contention of many anti-globalization
and workers rights activists that the expansion of global economic integration is a mistake that
fosters child labor, requiring international treaties and trade sanctions to eliminate. It is the
conclusion of this study that instead, globalization of the world economy is a positive trend
whereby increased foreign trade will help to end child labor. Just as the economic expansion and
growth of the industrial revolution, and increased educational opportunities in Great Britain and
the United States eventually outgrew child labor, developing economies shall also outgrow child
labor with increased economic integration into the world economy.
1. Introduction
It is the primary argument of many anti-globalization and workers rights that
globalization results in a race-to-the-bottom. These activists are proponents of the idea that free
trade creates added incentive for competitive advantage, resulting in increased child labor to gain
the lowest labor rate possible. In the motivation for low cost labor, developing countries with
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few labor regulations and abundant unskilled labor pools including children are prime targets for
corporations competing in the global economy (Palley, 2002). This argument will be refuted and
it demonstrated that globalization and greater integration of the global economy will eventually
decrease child labor.
In 1973, the International Labor Organization (ILO) Convention 138 defined age 15 as
the minimum age for employment. According to the ILO, in the year 2000, 211 million children
aged 5-14 were employed in the global economy. Of these multitudes, less the 15% were in
activities deemed acceptable by ILO standards. Acceptable labor is defined as light work by
children aged 12-14. (Neumayer & De Soysa, 2005). Once a part of everyday agrarian life, the
perception of child labor in the modern developed countries has become morally repugnant and
something to be ended.
In recent years child labor has been brought to the media forefront. From the circus of
exposing Kathy Lee Gifford’s involvement with Honduran sweatshops that evolved into a
personal crusade against such operations (Henderson, 1996), to the constant rallies against Nike
for outsourcing work to factories with child labor (Birdsall, 1998), to the furor over Pakistan’s
soccer ball sewing industry using child labor to create products sanctioned by FIFA
(McClintock, 2001), child labor has become a focal point for human rights activists and Western
worker unions as a morally repugnant practice. Both groups continue to lead efforts using the
media to make loud calls for regulation and banning of child labor by treaty or legislation.
Can child labor be decreased or eliminated through proclamation? Is it as simple as
international treaty? In 1989 the Convention on the Rights of the Child was adopted by all but
six member countries of the United Nations.
130 countries have ratified various global
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conventions or enacted legislation limiting child labor and establishing minimum ages (Hindman
& Smith, 1999). Yet child labor is still widespread, legislation has not provided the solution.
It has generally become accepted through empirical research and economic modeling that
the primary driver for child labor is poverty (Neumayer & De Soysa, 2005), followed by a strong
secondary driver of work force education (Brown, 2005). Historical references and current
research both show that economic efforts to address the root causes of poverty and education will
do more to end child labor then legislation has been able to. It will be shown that legislation
without supporting economic efforts is more harmful to the very children that the regulations
target for economic improvement.
It should be noted that this inquiry shall focus solely on poverty and education access as
contributing factors to existing child labor. It is acknowledged that social and cultural factors
contribute to the existence of child labor (Hindman & Smith, 1999). However, such factors will
not be considered, limiting this report to a manageable amount of information. It should also be
noted that no justification can be made for child labor in the sex industry or military service and
that child labor in such fields is unquestionably evil and should be eliminated regardless of
economic cost.
2. Historical Perspective
David Lindauer, Professor of Economics, Wellesley College, observed “We know of no
case where a nation developed a modern manufacturing sector without first going through a
‘sweat shop’ phase. How long ago was it that children could be found working in the textile
factories of Lowell, Massachusetts, of Manchester, England, or of Osaka, Japan? Should the
developing economies of today be any different?
If child labor is a necessary evil of
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industrialization, then a nation should be judged on how quickly it passes through this phase”
(Hindman & Smith, 1999).
Great Britain introduced the Industrial Revolution and with it increased child labor to fuel
the manpower demands of the burgeoning industries. It is generally accepted that Great Britain’s
explosive growth period occurred between 1760 and 1830. Through the abuses and excesses of
this economic revolution in the textile industry, the once accepted notion of agrarian child labor
evolved into industrial cruelty and a despised by-product. In 1830s, approximately 56,000
children between the ages 10 and 13 were employed in the textile industry, such that
approximately 20% of the textile workforce was under the age of 15. These numbers were
dwarfed by child employment in traditional agricultural and service roles at the time as only a
third of child workers were in industrial fields (Hindman & Smith, 1999).
It was during this period that the notion of working children as “lively elves” involved in
“sport” in the factory was introduced (Hindman & Smith, 1999). This concept children as
having “nimble” fingers able to perform certain industrial functions better then adults came into
being. This claim has continued to this day in the carpet industry in India where it held up as
justification for child employment. It should be noted that modern research has disproved this
concept. Research has demonstrated that child labor has lower productivity and lower quality
then comparable adult labor (Bachman, 2000).
The United States followed Great Britain into the Industrial Revolution. Alexander
Hamilton was an early proponent for the use of “women and children to fuel industrialization of
the New Nation” (Hindman & Smith, 1999). As child labor expanded through the industrializing
United States, anti-child labor movements began as they had in Great Britain. However, the
child advocates of Great Britain and the United States took varying approaches to limit child
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labor. The British attempted to steadily reform the practice while the American movement
attempted outright abolition (Hindman & Smith, 1999).
In 1833 the Factory Act was passed in Great Britain. This act abolished labor for all
children aged 9 or younger and limited the work week for aged 9-12 children to 48 hours, in
addition to mandating school attendance for those workers. Government officials were also
given access to factories to inspect conditions of both adult and child labor.
Despite the
regulations, child labor still did not peak in Great Britain until 1874 when more then 200,000
children aged 10-14 were employed in industry. Although compromising 8.4% of the 10-14
population, these children still only accounted for a third of employed children. Agriculture and
domestic services still employed the majority of children in the work force (Hindman & Smith,
1999).
The United States abolitionist approach took longer to implement as it was not until the
Keating-Owen Act of 1916 that child labor was prohibited from goods entering interstate
commerce. Following several court battles and legislation overturns, the Fair Labor Standards
Act in 1941 finally upheld an outright ban on child labor (Hindman & Smith, 1999).
The current wave of economic expansion began following World War II. However, there
has been a further acceleration in global economic integration since the 1980s. Globalization of
the world economy moved the focus of child labor advocates away from the developed West into
developing countries (Cigno, Rosati & Guarcello, 2005). The expansion of industrialization into
developing countries brought with it the same conditions that initiated the early child labor
reform movements in Great Britain and the United States.
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3. Treaties and Legislation
Formed in 1919 from the Treaty of Versailles negotiations, the International Labor
Organization evolved into a United Nations agency dedicated to the establishment of basic labor
rights. The ILO lays out its standards in the form of conventions which are then adopted by
member countries. As of 2005, the ILO has 178 member states.
In 1998, the ILO adopted their Declaration of Fundamental Principles and Rights at
Work.
This declaration was based on five core labor standards, the right to organize
(Convention 87), protection of worker unions from outside interference (98), the elimination of
forced labor (29, 105), the abolition of child labor (138), and elimination of discrimination (111)
(Palley, 2002).
Convention 138 establishes 15 as the minimum working age, except in developing
countries where the standard is lowered to 12 in specific cases. The convention was adopted in
1973, however only 80 countries have adopted the convention as of 2001. Countries such as the
United States, Mexico and India have not adopted the convention, although countries of concern
for child labor, such as Malaysia, Philippines, Honduras, El Salvador, and Indonesia, have
ratified the convention (McClintock, 2001).
Convention 182 calls for the immediate abolishment of the worst areas of child labor,
those of forced labor, slavery, military conflict, debt bondage, sex slavery, drug trade, and
hazardous work environments. By 2001 this convention has been adopted by almost all world
countries, 153 of the, then 170, member states (McClintock, 2001).
As stated earlier, in 1989, the UN Convention on the Right of the Child (CRC) was
adopted. The convention is to be administered by UNICEF. Article 32 of the CRC protects
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children from economic exploitation and from hazardous or harmful work, or work that
interferes with the child’s education (McClintock, 2001).
Despite the widespread acceptance of the ILO and CRC standards, child labor remains
widespread. This is similar to the initial legislation introduced in the nineteenth century by Great
Britain. Regulations can be adopted and added, however, without enforcement, there is no
benefit.
In the late 1990s Senator Tom Harkin of Iowa attempted to prohibit US importation of
goods produced from child labor. Such efforts failed to gain support and no actions were taken
(McClintock, 2001). However, with a surge of boycott publicity in 1996, over 50,000 children
were fired from textile jobs in Bangladesh. This may be seen as a good start, however it should
be noted that wages in the area did not increase with the firing of thousands of children. In
addition, many of the now unemployed children without a viable outlet such as education ended
up working in the informal economy, in areas such as crime or prostitution (Guha-Khasnobis,
Mehta & Agarwal, 1999). Such unintended consequences must be considered before legislation
and regulation are used.
One of the failings of the legislative and regulatory approach championed by many is that
without enforcement, its measures will only push child labor into the fringes of the economy
where wages are lower and protection from exploitation weaker (Becker, 1997). This concern
was played out following the furor over the Pakistani soccer ball sewing industry. While
children once employed in that industry were pushed into education programs, it is openly
acknowledged that there were far worse jobs for children in the Pakistani economy, jobs that
were unaffected by the international media attention (Bachman, 2000).
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Using national legislation to rectify international problems can put the regulating nation
at a disadvantage, raising the prices of its imported goods versus other competing countries. An
interesting idea described in greater detail by Thomas Palley in 2002 is the incorporation of labor
standards and accords as part of IMF, WTO, and World Bank loan covenants. Such a concept
would alleviate such level-playing field concerns. Further by incorporating such standards, the
developing countries that depend on such financial aid would be forced into real enforcement.
Palley’s discussion of enforcement is hampered however by the suggestion that such process can
be governed in a manner similar to current intellectual property enforcement (Palley, 2002).
Unfortunately, noting the status of intellectual property protection in the developing world,
suggesting that child labor restrictions could be enforced in a similar manner is a self-defeating,
though interesting recommendation.
4. Economic Research
The focus of reform efforts has been on export-oriented industries that directly impact the
lives of purchasers in developed countries. However, it should be noted that only a small portion
of child labor is actually impacted by this focus (Birdsall, 1998). ILO data from 26 developing
countries shows that 87% of child workers are in traditional child labor roles, 70% in agriculture,
fishing, forestry, and hunting and 17% in the service industry. Only 8% of workers are actually
involved in manufacturing and 2% in construction and mining. Of these various industries, it is
estimated that only 5% of child workers in developing countries work in export-oriented
activities that are the focus of much of the child-labor reformer efforts.
In 1998, Basu and Van published an oft cited economic modeling effort. In it they
attempted to model the household decision of whether or not to send children to work. Through
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the machinations of their model, it is made evident that there are multiple equilibriums, some of
which contain child labor, and others that do not. The primary output being that simply raising
the wages of existing works may not solve child labor; rather push the labor market into a new
equilibrium in which child labor still exists, but at decreased levels (Basu & Van 1998).
Swinnerton and Rogers in a 1999 commentary on the Basu and Van model raised the
question of income distribution. Using data from a World Bank study, they noted that the strong
relationship between per capita GDP and child labor weakens as the country reaches the upper
level of per capita GDP, $1,000-$4,000. They show through iteration of the Basu and Van
model that income distribution may account for this weakening relationship. With increased
income distribution, equilibriums without child labor can be eliminated (Swinnerton & Rogers,
1999). In their 1999 reply, Basu and Van acknowledges that an inherent assumption to their
model is minimal profit sharing amongst citizens versus Swinnerton and Rogers’ full profit
sharing. As they state, “reality lies in between” (Basu & Van, 1999).
The importance of this research is that it provides supporting data to both workers rights
groups and globalization supporters. While workers rights groups gain evidence for the benefits
of increased labor organization and income distribution back to the workers, the globalization
supporters gain evidence that with increased trade and commerce, child labor decreases.
Smaller scale economic modeling work done by Rogers and Swinnerton in 2004
questions the altruistic nature of parents. As poverty is decreased, parents realize that their
children will return less to them then they sacrificed for their children’s education. As a result,
with increasing wages, child labor may sometimes increase. This is a relatively dark conclusion.
While the modeling cannot be denied, the questioning of parental altruism for is not a
consideration that that this paper will make (Rogers & Swinnerton, 2004).
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Further research on child labor in Vietnam resulted from the Vietnam Living Standards
Survey conducted in 1993 and 1998. The rice industry is a significant source of funds in rural
Vietnam. During the Survey, the price of rice increased by 30%. This rise in price resulted in a
9% decrease in child labor. Data reduction was able to justify that at least 45% of this decline in
rural Vietnamese child labor was due to the increased price of rice. Several conclusions were
extrapolated from this data. First, increased globalization in export-oriented industries will
actually lower child labor rates rather then increase it as claimed by anti-globalization activists
protesting at most WTO meetings. Second, that trade sanctions aimed at abolishing child labor
rates, such as Senator Harkin’s failed efforts in the 1990s, may in fact increase child labor in the
impacted countries. (Edmonds & Pavcnik, 2005).
A study of Foreign Direct Investment published in 2005 used a large sample size of
world nations. The resultant data showed that with increased FDI penetration into a country, or
increased globalization impact, child labor rates were lowered. A further result of this study was
that the more open a country was to trade as defined by the summary of a countries imports and
exports divided by GDP also resulted in lower child labor rates. Such a result drives the
conclusion that increased exports to developed countries do not foster child labor in and of itself
and in fact greater globalization and integration into the global economy will lower child labor
rates (Neumayer & De Soysa, 2005).
Free education for children has been offered by many as the simple solution to child
labor. If children are in school, they are not working. However this simplistic approach does not
always hold true. In Bangladesh, school attendance often does not reduce the amount of time
working (Amin, Quayes, & Rives, 2004). In addition, through regression analysis Cigno, Rosati
and Guarcello in 2002 showed that higher school attendance is not statistically important in
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lowering child labor in the work force. This result is reinforced by the FDI study of Neumayer
and De Syosa whose analysis came to the same conclusion (Neumayer & De Soysa, 2005).
However, the Cigno, et al., results do show that that developing countries with better educated
work force, i.e. greater percentage of completed primary education, increases the wage rate faster
and lowers child labor rates as compared to other developing countries where the percentage of
population that has completed primary education is lower (Cigno, Rosati, & Guarcello, 2002).
This conclusion is a double-edged conclusion, the placement of child workers into school
will not decrease child labor rates however the resulting increase in educated work force will
create a skill premium for that nation’s work force as compared to other developing countries.
As a result of this skill premium, wage rates will increase, resulting in lower child labor. This
conclusion has been born out in results from Vietnam, where there exists a relatively large work
force with completed primary education. Such arguments and research put together a case that
continued globalization is a benefit to workers, rather then a detriment (Cigno, Rosati, &
Guarcello, 2002).
5. Conclusions
Since the industrial revolution began in the eighteenth century, countries undergoing
industrialization have had to deal with the moral issue of child labor in factories. While not
questioning the moral repugnancy of this issue, it should be noted that all industrializing
countries have passed through and eventually out of this stage. The question then becomes how
does the world move forward and eliminate child labor as quickly as possible? Current research
directs us to the conclusion that through a combination of integration into the global economy
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and improved educational opportunities for the poorest children most susceptible to child labor,
child labor rates can be decreased and eventually defeated.
Significant efforts have been made in developed countries to regulate child labor out of
existence. Further efforts have focused on eliminating child labor through trade sanctions.
These efforts will only hurt children. Unless a universal ban can be implemented and more
importantly, enforced, most political efforts to end child labor will only hurt the children they
intend to protect.
Research in the form of mathematical modeling and analysis of actual data from
developing countries both come to the general conclusion that poverty is the root of all evil, not
capitalism or globalization.
Poverty limits access to education which has been shown to
decrease child labor and improve the economic well being of families.
Through greater
integration into a global economy and improved opportunities for education, globalization has
empirically been shown to reduce child labor. Child labor cannot be cured easily rather it is
something that will take continued development and dedication to globalization and free trade to
overcome. Just as Great Britain and the United States overcame their legacy of child labor
through greater economic expansion, higher wages, and increased education opportunities, the
developing world will be able to do so in the future as well.
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