By Will Palfrey
Sweatshops are a controversial form of production that are perhaps in the back of people’s minds when purchasing many sorts of goods. It is not a surprise that this is the case, as companies all around the world pursue ever-higher profits and are naturally drawn to countries where labour is comparatively, ridiculously cheap. We’re all so accustomed to reading ‘Made in China’ on our products, that we’re surprised when it says ‘Made in Vietnam’ instead; but the reality is the same – cheap labour, and the potential use of sweatshops. Since scandals involving Nike and their ‘approach’ to cheap labour, companies have been trying to source more ethical labour, or appear to be doing so. As an astute reader who is clearly interested in economics, you might be wondering: ‘What is the economics surrounding sweatshops, and if they are regulated by law, how come they still exist?’ We are going to have a look at that, and probably be disgusted along the way.
Nothing is for free.
Let us quickly define what a sweatshop is. While almost everyone has some idea of what a sweatshop is, we should make sure we are on the same page. Pulled from the old reliable Wikipedia, a sweatshop is: ‘a workplace with very poor, socially unacceptable or illegal working conditions.’ So, it’s pretty simple – a place that is incredibly close, or even below, the legal line in poor working conditions. It is worth noting that sweatshops do not have to use child labour, that is merely another harsh and unnecessary reality of cutting costs.
How much do my savings cost?
How popular are sweatshops? How many are there? How much money is being pumped in to, and out of, these morally bankrupt facilities? All very good questions, which I shall do my best to answer. The popularity of sweatshops is massive, particularly amongst the clothing industry. Most brands that you would see in your average shopping centre currently use, or at some point have used sweatshops. Here are just a few: Adidas, Nike, Disney, GAP, H&M, Primark, Victoria’s Secret, and Zara. Clearly, many brands use them, but how many sweatshops do they have? Do they have 1 sweatshop? 25? Has Nike secretly owned an entire island with thousands of sweatshops on it this entire time? Well, no, but there are many. It’s almost impossible to find an exact number of how many there are, even per company, because by definition, sweatshops are borderline unregulated. It was found, however, that Bangladesh alone has approximately 4800 garment factories employing 3.5 million workers. This is clearly a significant number of employees relative to Bangladesh’s population of 161 million, and Bangladesh is by no means the country with the largest number of sweatshops.
Regarding the last question about the economy of sweatshops, it is simply impossible to know. Without knowing the inside operations of every company using them, there are simply too many grey lines to read between for there to be a concrete number regarding the output of sweatshops in GDP (or any metric). We’ll discuss the pure monetary numbers soon, but for now I must leave you disappointed regarding this point.
Ungrateful? Or Unpaid?
Let’s talk wages. Some of the worst conditions of working in a sweatshop are the monetary ones. It is general knowledge that sweatshops are typically forcing people to live on the poverty line or below, so let’s quantify that. Seeing as we used Bangladesh as an example earlier, we’ll continue with that for consistency’s sake. The average sweatshop wage in the apparel industry there is reportedly $0.13 US, or about $0.18 AUD (Powell, 2004). This is clearly awful… or is it? According to the same report, the wage of $0.18 favours well compared to the average per capita income, and Bangladesh has the 2nd lowest wages out of the 10 reported.
Now the catch: the hours worked per week. A worker in Bangladesh will break even with the average per capita salary, but only if they work 50 hours per week, or up to 70 hours if they want to earn up to around 125% of the per capita salary (Powell, 2004). 50 hours is clearly above the standard 40 hour working week in Australia, with the national average hours worked here being 40.6 hours in 2016 (Burgess, 2016). The poverty line in Bangladesh is $1.90 USD per day as of 2016, so it’s clear that even given the ‘good’ wages, Bangladesh has a severe poverty problem.
So that’s wages. Clearly, it’s bad, but maybe not as bad you may have thought. The working hours required are horrendous, there’s no hiding that, but the average living standard for a given country is attainable in most cases.
We’ve been focussed on Bangladesh for most of this read, and that’s for a reason – sweatshops in Bangladesh are considered to be beneficial for the country’s economy. The goods created by sweatshops account for roughly 80% of the country’s exports, giving significant contributions to GDP (WARonWANT, n.d.). Speaking of GDP, GDP per capita increased from $510 in 2000 to $972 in 2015, with a growth rate of 6.5% in 2015 (Canepa, 2016). While there’s no data regarding the growth rates of sweatshops during the same period, clearly there is something to be said for the contribution of the labour force created by sweatshops. This is obviously a controversial point, but it is worth seeing if there are any upsides to sweatshops, as crazy as it sounds.
Consider a world without sweatshops for a moment, where the supply of the labour force greatly exceeded any possible demand for the labour. Where would these hard-working labourers go? How would they earn money? Well, the ‘Lewis Theory’ attempts to describe the growth in developing nations and how the labour force distributes itself throughout this growth. The part of the theory relevant here is the excess labour from agriculture, which is inherently not very productive, moves to sectors with higher levels of technology, increasing productivity (Canepa, 2016). This then creates capital growth which can be re-invested, increasing capacity for the excess supply, and the cycle continues.
This theory obviously presents a case for the presence of sweatshops in developing nations, which can be seen at a case-level when we discussed Bangladesh. This theory can also be seen in effect in China, as between 1986 and 2010, 160 million citizens had migrated from the coastal, agricultural-focused areas to the cities (Canepa, 2016). Currently, it is the largest internal population migration of any country. So, clearly, there is at least an incentive to move to the city in China, and the exports of Bangladesh made from sweatshops have been a significant factor in the reduction of their poverty.
Utopia, made in China.
So, is there any possible way to eliminate the negatives of sweatshops while also keeping the positives? Surely developing countries could have sufficient employment and wages without having their safety and working conditions ruined. Unfortunately, part of what makes sweatshops so desirable is their negatives. Having a near-endless supply of workers willing to work for whatever wage you pay them for 12 hours a day decreases the costs of good produced by an absurd amount, and hence the profits of the importing company.
Nike, of all companies, has taken strides to improve their working conditions in their sweatshops ever since their scandal in the 90s. There is mixed consensus on how far exactly they’ve come, but they ensure that they pay at least the poverty wage to all their workers (which is somehow a step-up), and provided a list of all of their factories in 2007 to invite regulation and corporate responsibility (New Idea, 2019). Other than that, it appears how far they have come depends on the year, index used, and who is enquiring. It’s fair to say that no company of the sheer size of Nike will ever distance themselves from sweatshops, nor do they have the incentives to make the shops nice places to work.
I would argue that until the relevant developing nations develop their human rights and labour law regulations and actively enforce them, there is simply no way to please the companies obsessed with protecting their bottom line, and also please the workers that near-slave away for 70 hours a weak for the poverty wage. While in certain situations sweatshops can be better than the alternatives, picking between two evils is still picking an evil. Boycotting companies will only make things worse, as what little income these poor workers have will disappear, and buying items made in the factories feels dirty. So, what can we do? At the very least, be aware. There are many brands and companies that strive in ethical production, and deserve support and profit. While it’s hard to imagine a world where we don’t lean on the ‘Made in China’ label, spending a little more money to clear your conscience of any unethical practices may be a price worth paying.
Are sweatshops beyond redemption, or are they truly essential in some economies? UQES Publications welcomes reader correspondence on our articles. If you wish to reply to points raised, or believe a perspective has been missed, feel free to send respectful responses to email@example.com. We will endeavour to publish correspondence in subsequent articles.
Burgess, M., 2016. New data reveals the states where Australians work the longest and shortest hours each week. [Online] Available at: https://www.news.com.au/
G., 2016. Why the World Needs Sweatshops. [Online] Available at: https://web.northeastern.edu/
New Idea, 2019. Nike sweatshops: inside the scandal. [Online] Available at: https://www.newidea.com.au/
Powell, B., 2004. Sweatshops and Third World Living Standards. [Online] Available at: https://www.independent.org/
WARonWANT n.d. Sweatshops in Bangladesh. [Online] Available at: https://waronwant.org/