Sweatshops and Prosperity

Texas Tech economist Benjamin Powell has done extensive research on sweatshops, including a recent book on the subject published by Cambridge University. He has a new article in the Summer 2014 issue of The Independent Review titled “Meet the Old Sweatshops: Same as the New Sweatshops.” The article traces the history of sweatshops in 19th-century Great Britain and U.S. as well as post-WWII East Asia. It documents the incredible increase in living standards, to which sweatshop wages contributed. Perhaps more important, it looks at the impact labor laws had on sweatshop conditions and their eventual elimination:

The short answer is that the laws played very little role in ending sweatshop conditions. For the most part, the laws were adopted once the United States had already reached a level of development that had mostly eliminated the conditions the laws made illegal. Great Britain’s first restrictions on child labor applied only to children under nine years old, and Massachusetts’ child labor law, the first in the United States, limited the workday to ten hours only for children under twelve. The United States didn’t pass meaningful national legislation against child labor until 1938, when its per capita annual income was more than $10,200 (in 2010 dollars)…Similarly, the first federal U.S. minimum wage wasn’t introduced until 1938, and it set the minimum at 25 cents per hour when average productivity was already 62.7 cents (Cowen and Tabarrok 2009, chap. 7). The first state minimum-wage law wasn’t passed until 1912 in Massachusetts, and it applied only to women and children. Other national labor legislation didn’t come until the United States was even more developed…The same pattern is true of workplace safety regulation. Fishback finds that “[m]ost [safety] regulations appear to have codified existing practices in the relevant industry” (2007, 310–11)
(pg. 17).

Despite the loud protests, research demonstrates that Third World sweatshops provide an above average standard of living for their workers compared to others within their economies. Also, as economist Alex Tabarrok has noted, “the soft-hearted demand for international labor standards often masks labor union protectionism.” This isn’t to say that we should be content with all examples of sweatshop conditions. But, as Powell concludes, “Poorer countries today would be better served if antisweatshop scholars and activists had a better understanding of how the historical process played out in wealthy countries” (pg. 120).

Check it out in full.