Defending Sweatshops By Richard Rothstein Spring 2005

Transcription

1 Defending Sweatshops By Richard Rothstein Spring 2005 Nicholas Kristof is a great humanitarian journalist. In his New York Times columns, Kristof exposes third world famine, sex trafficking, genital mutilation, and genocide. He chides readers for championing human dignity in the abstract, but doing little to advance it in the concrete. He shames us by noting our attention to high-profile tragedies while we ignore more routine and systematic disasters. He doesn't merely report; he promotes Web sites where readers can contribute money, time, or political pressure to combat the suffering and exploitation he has documented. Mostly, we are well served by Kristof's method-describe individual victims, note the broader forces to which their tragedies are attributable; and then note how easy it would be to ameliorate the problem if only we cared-for example, by contributing to international aid groups. Yet on one topic-third world sweatshops-the method leads him astray. He rails against those who seek to improve the wages and working conditions of young women and children who toil in African and Asian sewing factories for interminable hours and meager pay, manufacturing Westerners' apparel. Kristof's view is that sweatshops are the best possible alternatives for these women and children. Were it not for such jobs, these laborers might starve in the rural communities from which they were recruited, work as prostitutes, beg on the streets, or pick through garbage. Third world workers want to toil in sweatshops, recognizing that it improves their prospects. It is arrogant (or worse) for Westerners to try to prevent them from exercising their judgment about what is in their own best interests. Campaigns against sweatshops, Kristof writes, "are often counterproductive, harming the very Third World citizens that they are intended to help." Kristof brings us the story, for example, of Tratiwoon, a young Indonesian woman who, with her three-year-old son, earns a dollar a day by selling scrap scavenged from a garbage dump in Jakarta. When Kristof asked her about the sweatshops that surround the dump, she "spoke dreamily about how much she would like her son to get a job in one when he is older." To people like Tratiwoon, Kristof explains, "a sweatshop represents a leap in living standards." Kristof assures us that the sweatshop work is only temporary. Every nation has to go through a sweatshop phase on the way to industrialization. We did; they must. If Asian and African factories can only be permitted, without liberals' interference, to exploit young women and children, someday these workers (or their offspring) will be prosperous. Sewing plants locate in places like Indonesia, Kristof explains, only because their labor costs are low. Competition is fierce among countries for this industry, and if Western activists succeed in forcing firms to raise wages, limit hours, or reject children as laborers, production would cease and be replaced in the global marketplace by those not bound by Western standards. If a nation enforced minimum wages or working conditions, industry would move to one where there was no enforcement. The result would be destruction of the hopes and dreams, indeed the lives, of workers in these plants.

2 For Western activists, Kristof has only contempt. He denounces "child labor hawks" who would keep children from working and so impoverish their families. Americans, he says, "get on their high horses about child labor," without sharing Kristof's own insights about its necessity and inevitability. The topic seems to demand such condescension. Paul Krugman, another Times columnist who is also right about almost every other issue, can't comprehend why any rational person would oppose miserable working conditions, so he takes refuge in pop psychology: women and children "are working at slave wages for our benefit-and this makes us feel unclean. And so there are self-righteous demands for international labor standards....a policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries." Other mainstream economists pile on. Jagdish Bhagwati accuses "gullible" student antisweatshop activists of pursuing an "illegitimate and narrow" agenda, fronting for unions whose "cynical manipulation of people's moral instincts" is only aimed at protecting domestic manufacturers from import competition. Lawrence Summers, president of Harvard and former U.S. Treasury secretary, is more respectful of student activists' motives, but he also casts his disagreement in moral terms. Economists, he tells Harvard students, are distinguished by the great respect they have for the choices individuals make for themselves, like the choice to work in a sweatshop. "As long as the workers are voluntarily employed, they have chosen to work because they are working to their best alternative. Is narrowing an individual's set of choices an act of respect, of charity, even of concern?... [T]he highest morality is respecting the choices and views of people whom we all want to help." Krugman believes that antisweatshop activists just haven't thought things through: "And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty." BUT IT IS ACTUALLY these conventional economists, blinded by theory to experience, who have not thought things through. Of course, it is generally true that if the price of something goes up, demand for it will fall. If manufacturers must pay more for labor, they will hire less of it. But the logic applies rigidly only in perfect markets, with perfect information, flexibility, liquidity, and substitutability. Thinking things through requires more than simple logic or even than random encounters with garbage pickers or teenage prostitutes. It also requires common sense and empirical data. Nowhere, for example, does Kristof question the wide disparity in sweatshop wages paid to workers in different third world countries. Why would an Indonesian contractor like Nike, for example, contract also in Mexico, where wages are at least four times higher? Kristof's logic would require that worker productivity in Indonesia be precisely 25 percent of that in Mexico, or that the cost of other factors be lower in Mexico than in Indonesia, offsetting higher labor costs. Otherwise, he could not claim that if Indonesian wages rose even a tiny bit closer to Mexican levels, seamstresses would be expelled to the garbage dump. But he has no basis for making such assumptions. While labor standards vary from country to country, technology for assembling apparel does not-that is dictated from New York, for all countries. Apparel manufacturers consider many issues in deciding where to site facilities; labor costs are one, but relatively small differences in labor costs are not.

3 Another incomprehensible assumption made by Kristof and his allies is that Western do-gooders ("warm and fuzzy humanitarians," Kristof calls them) want labor standards only in a single country-whichever Kristof happens to be visiting at the moment. Even if a modest increase in Indonesia's minimum wage tempted manufacturers to move their facilities to, say, Mexico, the temptation would be frustrated if Mexico simultaneously enforced a comparable increase in its minimum. The fear that labor standards would cause manufacturers to flee only makes sense if some countries were exempt from global regulation. Kristof never explores why he thinks this is likely. Also puzzling about the absolutism of the free-marketers is that their logic applies equally to domestic social welfare legislation that they fail to oppose with equal vigor. There are, of course, conservatives and business leaders who claim that our own minimum wage, social insurance, and health and safety laws hurt the very workers these laws intend to benefit. Whenever a domestic minimum wage increase is proposed, they insist that the result will be low-wage workers' unemployment, not increased compensation. Perhaps Kristof, Krugman, Bhagwati, and Summers secretly agree, but they are not noticeably vocal in opposition to such reforms. NOT QUITE a century ago, this indeed was the argument made by business leaders and economists against regulation of our own sweatshops. They asserted that sweatshops were good for children because the alternatives were worse. For example, they often cited Charles Wardell Stiles, a medical crusader for the treatment of intestinal parasites among rural children, who argued that employment in factories was beneficial because children could more easily be treated in factory towns than home on "soil polluted farms." In a tone similar to that of sweatshop supporters today, novelist Julia Magruder denounced "ignorant sentimentalists" who saw misery only in sweatshops and not in the worse conditions of unemployed children. Manufacturers testified that child labor was a necessary first step in industrialization because adult hands were too "knitted and gnarled" for factory work; Only children were nimble enough, and if they were not permitted to work, their families would go hungry and fail to settle in cities where, at least, future generations might prosper. If twelve-year-old children of destitute widows were deprived of work, a typical manufacturer challenged a congressional committee, what are these families going to do? Until Franklin Roosevelt intimidated the Supreme Court, justices prohibited sweatshop regulation on constitutional grounds. A minimum wage law, they reasoned, violated workers' right to contract freely with employers for compensation appropriate to their productivity. If legislation precluded them from offering their labor at a reasonable price, employers would find their hire unprofitable, with the result being not higher wages but unemployment. In many minimum wage cases on which courts ruled, named plaintiffs were often young women who sued their states for denying them the opportunity to offer their labor at the price their limited skills could command. The 1923 Adkins case, in which the Supreme Court forbade all minimum wage legislation, was brought by a twenty-one-year-old black hotel elevator operator who said the law forced her termination because she was not productive enough to justify paying what was now required, so the law left her worse off than before. Not only did the Court agree that she had a constitutionally protected right to sell her labor for whatever price she chose; it also took note of women's new right to vote and concluded that full citizenship made restricting their liberty of contract an anachronism.

4 Supporters of labor legislation responded to such claims with empirical data. Because most early regulation only protected women, a natural experiment existed. If minimum wages led garment makers to hire fewer women, the ratio of male to female workers in the industry should rise after a minimum was enacted. In fact, nothing of the sort happened. In Massachusetts, then a center of textile and garment manufacturing, women made up 32 percent of all employees in these industries in 1912, when the state passed the nation's first minimum wage law. Ten years later, women still made up 32 percent. From 1912 to 1922, nearly two thousand new factories in these industries were established in Massachusetts, total employment did not fall, and the capital invested more than doubled. Opponents of labor standards might argue (although without evidence) that female employment might have risen even higher in the absence of minimum standards, but the least that can be said is that regulation did not cause significant unemployment of women workers. Other states had similar experiences. In 1922, nine years after a minimum wage was adopted in Wisconsin, the state Industrial Commission reported that "[s]cattered instances of the displacement of women by men are reported; but there is no question that on the whole the number of women employees has been reduced much less than the number of men employees. Even in factories where men might easily replace women, they have not done so to any great extent." Partly, the reason was that early minimums were modest. Surely, larger increases might have reduced demand for low-wage labor by encouraging employers to relocate to states where standards were not in effect, by increasing labor costs to the point where clothing prices rose and total demand for garments declined, or by reducing returns to capital invested in clothing relative to sectors where fewer women were employed. But modest minimum increases could be absorbed by manufacturers, and costs associated with relocation were greater than those associated with compliance. For marginal employers, mandated wage increases were fatal, but their failures provided greater market share for more efficient firms that could afford the minimum wage, resulting in little or no overall employment loss. The requirement to pay a higher wage gave many employers incentives to invest in training so that workers would become worth what they now must be paid. Resulting productivity increases more than offset the higher wage costs. When the Supreme Court was considering Adkins, the manager of a Kresge store in Washington, D.C., submitted testimony regarding the impact on his sales force: "We are getting a higher standard of efficiency as a whole; however, with the minimum wage has come the necessity of educational work on salesmanship. I believe the minimum wage has brought employers and employees close together and has taught the employer to build for a higher standard of service and has also taught employees that greater efficiency must come with higher salaries." The most vocal crusader for minimum wage regulation in those days was Edward Filene, a wealthy retailer who was nonetheless active on behalf of the National Consumers' League that led minimum wage agitation. Modest increases, Filene concluded, forced employers to better train low-wage workers, so that higher productivity would justify higher wages. In the absence of minimums, too many firms were lazy and uninformed-not required to pay higher wages, they

5 got by without the training or organizational improvements that generate productivity advances. More recently, David Card and Alan Krueger, in Myth and Measurement, examined contemporary claims that minimum wages only hurt low-wage workers. Card and Krueger, too, cited natural experiments. They found, for example, that after New Jersey's minimum wage increased in 1992, low-wage employment rose faster than in neighboring Pennsylvania, where there was no boost. In Texas, after a federal minimum wage increase, they found faster employment growth at fast-food restaurants affected by the hike than at those where wages were already above the new minimum. They wondered why economic theory failed in these cases and speculated that minimum wage increases sparked higher productivity, partly because of reduced employee turnover and partly because employers were forced to ensure that employee time was used more efficiently. SURELY, Kristof and his allies are right that imposition of first world wage and hours standards on Asian and African workers would destroy jobs. Cost increases that are too great would cause rising prices and falling demand. But wages can be increased significantly without big price impacts. Sweatshop workers in Asia earn something like $2 a day, perhaps for twelve hours of work. Tratiwoon would love the opportunity for her son to earn that much. But does Kristof have any reason for assuming that, if Indonesian employers were forced to raise pay to, say, $2.25 or even $2.50 a day-leading to a big boost in workers' living standards-this requirement would be so burdensome that sweatshop workers would lose jobs and join Tratiwoon in the garbage dump? Does he have any basis for thinking that manufacturers in Indonesia have already explored every opportunity for productivity improvements and would be unable to make more efficient use of employees if given a financial reason to do so? Can he be certain that, if such an increase caused a shirt's cost to manufacturers to increase by even 10 cents per shirt in New York City, demand would fall or retail prices would rise to such an extent that investment capital would drain away from the apparel industry? He knows answers to none of these questions and can't learn them only by interviewing Jakarta's garbage pickers. But let's imagine that the cost of a shirt did increase by a few cents as a result of reformers' agitation. What's so bad about that? Nicholas Kristof would be the first to support using tax revenues to increase U.S. foreign humanitarian aid, now only a small fraction of the rate of other industrialized nations. A price increase for shirts, resulting from international labor standards reforms, would also be a sort of tax-on consumers to support higher third world living standards. It is hard to fathom an argument that finds such a tax not only bad economics, but immoral. Kristof should, as he does, beseech readers to send contributions to buy school lunches for children in Chad. In his inimitable and admirable style, Kristof concluded a column in which he accused labor rights activists of impoverishing families in that country by putting their ten-year-old children out of work: "I spoke with officials at the World Food Program, and they'd be thrilled to have private groups or individuals help sponsor school feedings.... Children in Africa will be much better off with a hot meal and an education than with your self-righteous indignation [at their sweatshop employment]." But it can't be immoral to insist that those same readers pay a little more for apparel so parents of children in Chad can themselves provide lunches for their children.

6 IT IS TRUE that industrialized nations went through their own sweatshop phases, but, as we have seen, they also went through simultaneous reform phases. In his historical survey of sweatshops both here and abroad, my longtime friend Robert J.S. Ross, in Slaves to Fashion, recounts efforts to rein in the most exploitative abuses in the garment industry. Some of the reforms came as a reaction to the Triangle Shirtwaist fire of 1911 in which 141 young women died in a New York sweatshop in which fire exits had been locked to prevent union organizers from sneaking in to agitate the women. Ross traces the union, consumer, and legislative developments that led to a sweatshop-free era, roughly from the end of the Second World War to the mid 1970s. But he also shows that a sweatshop phase is not inevitably temporary. With deregulation and weaker labor, consumer, and liberal political movements, sweatshops have returned to this country. Contempt for minimum wage-and-hour standards is now characteristic not only of immigrant garment assembly plants in New York and Los Angeles but of mass retailers like Wal-Mart. Employees, even in twenty-first-century America, rarely protest; like third world peasants or early twentieth-century elevator operators, they want freedom to contract with employers for sweatshop work, fearing that if not permitted to make such a deal, they will be worse off. If the experience of industrialized nations is a model, then Kristof and his allies should not only ask Asian and African workers to toil in sweatshops, but should also urge reformers to insist that minimum standards for their compensation and working conditions be improved. And they should warn that improvements won by worker or consumer agitation cannot be assumed to be permanent; if any society lets its guard down, as ours has done, sweatshops and exploitation will return. Kristof and similar writers invoke the examples of such places as Japan, South Korea, Hong Kong, and Taiwan to suggest that in the third world today, a sweatshop phase leads to middle-class prosperity. But none of the Asian or African nations that are now sites for low-wage manufacturing are today permitted-by the International Monetary Fund and allied financial institutions-to impose the sorts of capital controls and industrial planning that played such an important role in the development of the "Asian tigers." Japan and similar nations had sweatshops, but their economies evolved into middle-class industrial societies by rigidly (perhaps overly so) interfering with the free market. Progressives and New Dealers had the (now unfashionable, but not false) view that modest increases in the disposable incomes of the lowest-paid workers would boost overall demand, leading to increased employment that might offset any possible disemployment effects of a minimum wage. It is hard to imagine why the same forces would not also occur in the third world today. If Indonesian sweatshop wages were to increase by a few percent a year, in real terms, there would be some demand-side benefit for the Indonesian economy as a whole. Franklin Roosevelt believed that a minimum wage law was essential, not only to relieve misery, but as part of his strategy for economic recovery because it would boost workers' purchasing power. Many New Dealers were also convinced that labor standards had to be coordinated across the nation; otherwise, a Massachusetts minimum wage law could create incentives for manufacturers to flee to Alabama. But this did not mean that minimum wages should be identical in every state

7 or even that they should be identical for all industries, because cost structures varied by industry. Franklin Roosevelt's proposal for a minimum wage was for a higher level in the North than South. His 1938 message to Congress said, "No reasonable person seeks a complete uniformity in wages in every part of the United States; nor does any reasonable person seek an immediate and drastic change from the lowest pay to the highest pay." States at lower levels of economic development should have lower minimums; the choice need not be between regulation that was completely insensitive to developmental stages or no regulation at all. Roosevelt eventually dropped his demand for regionally varied minimums, partly because the initial uniform national minimum was set lower than he thought necessary. The minimum was initially set at twenty-five cents per hour (about half of the average manufacturing wage at the time), with a rapid and guaranteed rise to forty cents per hour. Roosevelt initially had wanted much more. IN INTERNATIONAL labor affairs, we are now at a stage more analogous to the Progressive Era in American history than to the New Deal. The possibilities are remote that transnational regulation can improve conditions under which third world workers toil. The prevailing free-trade consensus and power of financial institutions make it inconceivable that, say, the International Trade Organization will permit first world nations to require imports to be manufactured in accordance with minimum, but developmentally appropriate, standards that raise real compensation of workers without overreaching so that a nation's comparative advantage is compromised. Instead, agitation similar to that of Edward Filene's Consumers League is now in order, precisely the sort of warm and fuzzy humanitarianism that earns Nicholas Kristof's contempt. As Ross's Slaves to Fashion describes, college students have organized a "sweat-free" movement, but it so far finds little resonance among consumers generally. Some retailers and manufacturers have responded to public embarrassment (like Kathie Lee Gifford's tearful acknowledgment that her clothing line was the product of Salvadoran workers' exploitation) by adopting their own codes of conduct for third world manufacturing plants, but how to monitor these plants and enforce the codes remains a major problem. Can retailers or manufacturers be trusted to monitor their own codes of conduct? If not, how and by what groups will monitoring be done? How much emphasis should reformers place on advancing the right of workers themselves to organize for self-protection? How much should consumer pressure insist on "top down" reform-requiring higher wages, fewer hours, and safer conditions even when workers themselves are not sufficiently organized to demand these? This debate, too, has antecedents. The American Federation of Labor, in the first decades of this century, staunchly opposed minimum-wage regulation because it might give workers less reason to organize and might encourage employers to resist paying more than the minimum. Regulation, Samuel Gompers said, "will result in a long era of industrial slavery." The AFL was willing to tolerate a minimum wage applied only to women because women were not permitted to join its member unions anyway. Today, organizational and financial support for student and consumer organizing comes from the labor movement itself. This gives rise to the charge that the demand for labor standards is not only self-indulgent on the part of spoiled, affluent college students, but is also protectionist, an attempt to keep investment and jobs from migrating to the third world. This charge is silly

8 because the modest wage increases that might result from an effective international standards regime would not cause manufacturers to rethink their global sourcing strategies. No clothing assembler will move back from Jakarta to New York because of a requirement to raise wages from $2 to $2.50 a day. But while silly, the labor movement invites this charge because it and the student and consumer organizers it sponsors have failed to make sufficiently clear that they do not propose that third world wages be raised to first world standards. Little or no intellectual work has been done to investigate precisely how much a fair but developmentally appropriate minimum wage should be for each of the nations that export to the West. Surely, we need not accept Nicholas Kristof's view that this is the best of all possible worlds when it comes to sweatshops. But just as surely, there is an alternative between utopia and unrestrained exploitation of the world's most powerless workers. Richard Rothstein is a research associate of the Economic Policy Institute and a visiting professor at Teachers College, Columbia University. He is the author of Class and Schools: Using Social, Economic, and Educational Reform to Close the Black-White Achievement Gap (Teachers College Press, 2004).