Sweatshops

On April 25th a poorly constructed garment factory building in Bangladesh collapsed killing over five hundred workers. This sort of tragedy, not to mention the sometimes deplorable conditions workers must endure in such sweatshops, inspire many Americans to boycott products made in such factories. Protestors believe that they're acting in solidarity with the impoverished workers whose misery is compounded by their grueling, unsafe working conditions.

It's an understandable response, but it's also shortsighted and counterproductive. Benjamin Powell explains why in an article in Forbes.

He observes that there are in Bangladesh some 4,500 garment factories employing approximately 4 million workers. In the grand scheme of things, he states, the workers are better off with the factories than they would be without them; the benefits outweigh the risks. He writes:

In fact, compared to other opportunities in Bangladesh, the garment industry pays reasonably well. As I discuss in my forthcoming book, Sweatshops: Improving Lives and Economic Growth, while 77 percent of Bangladeshis live on less than $2 a day – the international poverty standard – and 43 percent live on less than $1.25 a day, workers at the much-demonized Bangladeshi “sweatshops” average more than $2 a day. Granted, that’s not a lot. But it’s more than they would earn elsewhere.

If United States companies stopped buying from these factories what would happen to these workers? According to Powell, and common sense, if the factory loses U.S. customers the workers will lose their jobs. That's hundreds of thousands of workers who would, as a result of our good intentions, have no income with which to support their families. I daresay that 100% of these wretched people would prefer their current deplorable working conditions to no work at all.

Some activists argue that rather than abandoning the factories American clients should demand upgraded safety standards, but this is a solution that fails to take into account what the workers themselves want. Here's Powell:

[W]e need to recognize that safety is not free, and some workers – as well as consumers, ultimately – will pay a price.

As an economic matter, employers are largely indifferent as to how their labor costs are balanced – that is, whether the compensation consists of wages, the administration of safety standards, health care benefits, or vacation time. A cost is a cost.

Workers, on the other hand, do care about the mix of compensation. When workers are poor, they want most of their compensation paid in wages, because they are trying to feed, clothe, and shelter themselves and their families. When activists insist that companies invest more in safety, what they are doing, in effect, is overriding the preferences of low-income workers.

As part of the research for my book, I surveyed Guatemalan workers in firms where the National Labor Committee had raised red flags and called for improved safety standards. More than 95 percent of the workers we surveyed were unwilling to give up any pay for increased safety.

One's heart goes out to people living and working in such conditions, but the temptation to "do something" to force reform is, as it is in most cases, fraught with unintended consequences. As hard as it is to accept, as much as some might want to do something to alleviate these terrible working conditions, the workers themselves would doubtless prefer we just mind our own business and continue to buy their products.