Yesterday’s post on child labor generated some great comments, and I’d like to respond briefly to a few of them here.
Jambaramba asked whether low wages for children are a result of their poor bargaining position. I responded that you can’t raise wages nationwide through bargaining. (You might raise them in one sector, but only at the cost of lowering them in other sectors, and overall you’ll make people poorer, not richer.) The only way to raise wages is to make people more productive. This means providing them with more and better capital and giving them opportunities to trade. Manfred followed up with a super comment elaborating on this point. I promise to blog about the supporting theory and evidence sometime soon.
Harold asked about the motivation for various laws that were passed in 19th century Britain to limit child labor. There’s a fascinating story behind these laws; apparently they were generally opposed by large families but supported by smaller families who preferred not to compete with their neighbors’ children in the labor market. As families shrank, political power shifted and the (now more numerous) smaller families had their way. (Families shrank at least partly because the return to education rose, creating an incentive to limit your family size so you could afford to send the kids to school.)
Harold also raised this question:
Say the factory owner spends much of his wealth on imported goods and pays the children a pittance. If he is forced to pay the children more, or to employ adults instead, he will have less to spend on imported goods. The workers spend their money locally, so more money goes artound the local economy, making thenm all better off. I am sure I have missed something here, but what is it?
Answer: First, if he pays the children more, he will employ fewer children; it’s not at all clear that the total income of all children—or of the working class generally—goes up. Second, if the workers buy local goods, they’re going to drive up the demand for local goods and hence the demand for local labor, which is good for other workers. But if the employer buys imported goods, he has to sell local goods in order to afford them, which also drives up the demand for local goods and hence the demand for local labor. So there’s no net gain to the locals here.
In another comment, Harold (following up on a thoughtful comment from Bennett Haselton) suggests that by boycotting factories that employ child labor, we can force them to employ adults, who earn more, are made richer, and therefore choose to educate their children. He ends with “Most parents with funds do choose to educate their children (I think).”
To the last point first: Yes, the evidence is strong that people pull their children out of the labor force as soon as they can afford to; across the Third World, we see child labor falling wherever incomes rise. T”hose patterns seem to be closely mimicking the patterns we saw in the West 150 years ago. But your plan for enriching the parents through boycotts won’t work, which brings us back to the earlier point that you can’t raise wages without raising productivity. Which brings me back to my promise to blog about that soon.
Philip posted a strongly worded comment with some valuable and important facts. I am grateful for the input regarding legistlative history, the SACCS program (which I will learn more about) and Tom Harkin’s voting record (some of which was new to me, and which does paint a more honorable picture than I did). Obviously I disagree with the conclusion that I would “condemn these children to a life of poverty-ridden labor”.
There were also several good comments suggesting that the anti-sweatshop crowd might be more motivated by ignorance (or, according to Philip, by knowledge), and less by bigotry, than I gave them credit for. Perhaps that’s so.
Thanks for the link to the paper – very informative. It is about the effects of child labor restrictions (CLR) on the fertility choices of families and child labor rates, including a detailed model. It appears to me to be very clear on one point – CLR can and do reduce child labour, in theory and in practice.
Some quotes: ” Basu and Van (1998) – CLR can increase the wage sufficiently to push family incomes above subsistence, even when children do not work”
“Both [models] include static multiple equilibria in labor market, and CLR can be used to select the “good” equilibrium [low child labor, small families].
In the authors model, a single equilibrium is reached without regulation, and multiple steady states relies on politico-economic mechanism that is absent from the other 2 papers.
On p 5 is a clear demonstration that child labor did fall after introduction of CLR in Europe and USA.
p9 “If supply of child labor is restricted the supply of unskilled labor falls, and the unskilled wage rises.”
The authors model results in 2 outcomes – one option without CLR, high child labor and large families. the other the opposite. Each is supported by the majority of unskilled adults in each case, so becomes “locked in”
In the model, neither technological change nor CLR are solely responsible for the decline in child labor, but both contribute.
In Europe, CLR was more closely associated with change in fertility than structural characteriostics of the economy – Italy for example was mainly agrarian, Britian industrial, and the differences in living standards was very large.
“In our example, if no CLR are introduced, child labor rates remain at 60 to 80 percent throughout. The restrictions therefore account for the major part of the ultimate decline in child labor”
They point out that different countries at similar stages of developments do indeed tend to fall into one of the two outcomes.
This is very clear that restricting child labor reduces child labor (or at least can do so). If reduction in child labor and smaller family size and more education are desired outcomes, then from this paper and the literature reviewed within it, pressurizing countries to adopt and enforce CLR must be good policy. The models show that the developed nations got to where they are today in part through child labor restrictions.
I don’t know if this ever got submitted for peer review.
OK so you can’t enrich the parents by boycotting child labor. What about lending the families the money to educate their kids, would that work? (Or you could pay them like SACCS does, but when it’s a gift rather than a loan, it’s a harder political fight to raise the money, and you might run out.)
OK, I did not read all of yesterday’s comments, but I’d like to address Harold’s quoted comment:
Say the factory owner spends much of his wealth on imported goods and pays the children a pittance. […] The workers spend their money locally […]
Steve gives a very convincing answer to that, but in addition I have a question: why does Harold assume that the factory owner is more likely to buy imported goods than his workers are? (I could then repeat, with Harold: “I am sure I have missed something here, but what is it?”)
Without giving a complete answer to Bennett Haselton’s comment above, I have a couple of remarks.
First, if education is a good investment, then there is no need for the State to step in to lend money. The State can, of course, give loans for education at lower rates, but that is getting dangerously close to Fannie Mae and Freddie Mac. In any case, it is a partial subsidy.
Second, a subsidy must come from somewhere, and you better make sure that it is not coming, directly or indirectly, from the pockets of the parents whose children you are educating, or else it’s pointless.
Harold,
I don’t understand why CLRs, normally imposed on the employer, would reduce the supply of child labor. It seems to me that it would reduce the demand for child labor, thereby decreasing the wage available to children. From the firm’s perspective, child labor vs unskilled adult labor would be perfect substitutes in an isocost/isoquant diagram. When the CLRs are enacted, the cost of child labor increases, thereby causing the isocost line to rotate in toward the origin, holding the intercept of adult labor constant. Since the 2 options are perfect substitutes for one another, their isoquants are straight lines connecting the 2 axes, and instead of retaining the ability to choose anywhere on the isocost line (the tangency isoquant would have originally laid directly on the isocost assuming they are indeed perfect substitutes and wages were equal), the firm must instead go to the point where they use only adult labor (unless they have an advantage over their competitors in avoiding detection/prosecution for violating the CLRs). Total labor would remain constant (same isoquant),total cost would remain constant (choosing zero child labor allows the firm to choose a point that was available on the previous isocost), and the only change would be that adult labor is substituted for child labor.
If you have trouble following that, replace ‘isoquant’ with ‘indifference curve’ and ‘isocost’ with ‘budget line’ and the analysis is the same.
Also I didn’t actually draw it out, and I haven’t worked on this type of problem in a while so I could be horribly wrong.
Snorri: The family of the working child is in my example by definition at subsistence level. I think that nearly all their purchases would be of local goods, food and accomodation. The factory owner requires cars, televisions etc. which are not made locally, so must be imported.
Douglas. I have not followed your post entirely, I will need to spend some more time with it. I have not completely understood the model in the paper, but get a general grasp of what it is about. I don’t know if this will help. The authors assumed that unskilled child labor is interchangable with unskilled adult labor. Child labor restrictions must surely reduce the supply of child labor, by definition. The sort of CLR I think is being discussed is a law such as “you must not employ children under 13”, or “you must not employ children for more than 10 hours a day”. It does not increase the cost of child labor, but directly forbids it. I am not sure if the model considers laws requiring higher pay for child labor, but I don’t think so.
The main point is that from the work of these authors, and those quoted within the paper, child labor restriction laws do reduce child labor, and were instrumental in reducing child labor in the history of Europe and the USA. Without these restrictions, it is quite possible to get to a situation with high child employment, low education and large families. This situation will be favored by the majority of adults, so will become “locked in”. With restrictions – which we could call “child protection laws”- we can get to a low child employment, small family, high education situation “locked in”. The point is that the market on its own is unlikely to lead to the latter, more desirable, outcome.
I have another point to make – the model in the paper is run over time, with decisions made by one generation affecting the next. The outcome is not instantaneous. I think the isocost / isoquant model is an instantaneous one. I suspect this can explain the difference in outcome from the two. The time model may not help todays children, I don’t think it is designed to test this. It shows that eventually the outcomes are better with CLR than without.
Harold: I think your last two posts, re the Doepke model, are accurate—and that the model does give a plausible scenario in which CLR can be desirable in the long run.
Harold- Congratulations. I have clearly been making my case in the wrong language.
Bennett-
“OK so you can’t enrich the parents by boycotting child labor.”
I don’t think it’s in dispute here whether parents of children who lose income are enriched (or even impoverished) by child labor boycotts.
The issue is whether reducing child labor (by whatever non-market means)…
(1) increases wages and income of parents, generally, (through reductions in the supply of labor) offset the income lost from their children,
(2) increases the long-term income of child laborers by increasing the likelihood they will receive more years of schooling and reducing the persistent physical and psychological damage of long hours of labor at a very young age, and
(3) increases the wealth of the society at large via the effects of (1) and (2).
There is evidence available that answers both (1) and (2) in the affirmative. I don’t know about evidence re: (3).
“What about lending the families the money to educate their kids, would that work?
These families are not creditworthy. Moreover, this solution violates the laissez faire assumption that seems to previal on the other side of this argument, i.e., it’s a non-market intervention that distorts the market.
Harold,
Nice work. Thank you.
Harold: “I have another point to make – the model in the paper is run over time, with decisions made by one generation affecting the next. The outcome is not instantaneous. I think the isocost / isoquant model is an instantaneous one. I suspect this can explain the difference in outcome from the two. The time model may not help todays children, I don’t think it is designed to test this. It shows that eventually the outcomes are better with CLR than without.”
In reading this, I’m struck by the similarities between Harold’s argument here and Steve’s argument about the effects on labor of eliminating all taxes on capital.
Despite the fact that making all capital tax exempt implies an inevitable and irreversible shift in tax burdens to labor, Steve makes the “rising tide (eventually) raises all boats” argument. Similarly, Harold notes that according to the Doepke model, CLR may not help today’s children but eventually does so.
I raise this point because it drives home to me an asymmetry (double standard, maybe) in the libertarian arguments I see here.
On the one hand, libertarians move readily and enthusiastically from the immediate effects of one of their policy prescriptions to the secondary and tertiary effects laissez fair theory leads them to. For example, if we eliminate all taxes on capital, it will enrich capital owners (before it benefits labor), who will invest more thereby raising worker productivity, which creates more jobs and raises wages. See, they say, labor benefits; society benefits.
This is a wonderfully coherent narrative, and any initial, short term dislocations are easily dealt with through the invocation of “creative destruction”.
On the other hand, when they are asked to consider the merits of some economic reform prescription, the libertarian brain freezes. They grasp at some intial market distortion, wave it furiously in the air, and condemn the proposal as dragging society toward poverty and socialism.
Just try to get them to discuss the beneficial secondary and tertiary effects of a reform prescription (as Harold does above–under “Working Overtime”). Make an agrument similar to the concept of creative destruction about how those follow-on effects overcome the initial effect they condemn. It’s all for naught.
It is very rare to see even a modest concession of merit like Harold received from Steve.
This is why I say libertarian advocacy of laissez faire policies
has come to resemble less economic theory based on evidence and reason and more like faith-based ideology.
We all need to keep an open mind. I come here for stimulating ideas, that really get me thinking: can that be right? I try to keep an open mind, and with the interest on capital one, after much discussion (a quick economics lesson) have come round to the view that no tax should benefit everyone. Some of the ideas. I think – wow, of course, or after thinking about it they really make sense. Others still seem wrong, but I can’t always quite put my finger on why.
Harold-
If you haven’t taken a look at the posts under “Worked Up” that are relevant to this discussion, I recommend it. The tenor of those posts is different from what you find here.
It’s time we take a closer look at the article by Shahidul Alam that is Steve’s point of departure for his defense of child labor.
As I read it the first time, it didn’t seem to pass the smell test, and now that I’ve looked at it closely I see why. Let’s take a critical look at the article instead of taking it at face value as our libertarian friends have done:
I’ll discuss the red flags in the order I’ve found them.
* First clue:
“According to a press release by the garment employers in October 1994: ‘50,000 children lost their jobs because of the Harkin Bill.’”
Alam earns his first red flag by citing a *press release* from one of the parties with the greatest economic interest in discrediting child labor reforms. He appears to present this piece of public relations with complete credulity and without the professional detachment one would expect.
He earns a second red flag by making press releases (instead of direct interviews with sources) a significant part of his research. (Similar examples provided below.)
* Second clue:
* “A UNICEF worker confirms ‘the jobs went overnight’.”
* “A senior International Labour Organization (ILO) official has no doubt that the original bill was put forward ‘primarily to protect US trade interests’”
* “When UNICEF and the ILO made a series of follow-up visits they found that the children displaced from the garment factories were working at stone-crushing and street hustling – more hazardous and exploitative activities than their factory jobs.”
* “In the wake of the mass expulsion of child garment workers it was plain that something had gone very wrong. UNICEF and the ILO tried to pick up the pieces.”
* “‘What we have done here in Bangladesh is described as fantastic,’ says a senior ILO worker. ‘I wonder how fantastic it really is.'”
What do these passages have in common? They all purport to provide, without attribution, direct quotes from UNICEF or ILO officials or represent (official?) UNICEF/ILO positions.
ALL of Alam’s quotes from UNICEF and ILO sources are anonymous, which is curious, since Alam is presenting these statements and assessments as if they reflect official UNICEF/ILO positions, so there should be no need for anonymity.
If, nevertheless, for some reason these officials felt the need to be quoted off the record, professional practice requires Alam to tell us the officials spoke on the condition of anonymity and why they made this requirement.
Similarly, in the only two instances where Alam seems to be attributing quotes to people using their real names (both of them industry representatives), he only gives us their first names–no affiliation, no title, and no location.
Red flag #3.
* Third clue:
“When UNICEF and the ILO made a series of follow-up visits they found that the children displaced from the garment factories were working at stone-crushing and street hustling – more hazardous and exploitative activities than their factory jobs.”
I’ve done some research. This statement comes word-for-word from a UNICEF report, not from any interviews with UNICEF officials. (It can be found at http://www.unicef.org/souc97) This report presents a far more balanced assessment of Bangali child labor reform efforts than Mr. Alam suggests. Mr. Alam has been selective in his use of material within in a single source.
Here’s a more damning example–the first two conclusions from the UNICEF report Mr. Alam (and through him, Mr. Landsberg) cites:
“1. Hazardous and exploitative forms of child labour, including bonded labour, commercial sexual exploitation and work that hampers the child’s physical, social, cognitive, emotional or moral development, must not be tolerated, and governments must take immediate steps to end them.
“2. Governments must fulfil their responsibility to make relevant primary education free and compulsory for all children (article 28
of the Convention) and ensure that all children attend primary school on a full-time basis until completion. Governments must budget the necessary resources for this purpose, with donors ensuring adequate resources from existing development aid budgets.”
These conclusions directly contradict the anti-interventionist, libertarian ideology you all advocate.
That’s red flag #4.
* The fourth clue:
“Tom Harkin is sponsored by a key US trade union….”
The claim that Tom Harkin “is *sponsored* by a key US trade union” reflects one of two possibiliities: either (1) Alam is practicing spin here (which I don’t think is the case) or (2) Alam has uncritically and naively accepted the spin of industry opponents of Harkin’s bill (which is what I’ve concluded).
“It was when it [the Harkin bill] was reintroduced after these amendments in 1993 that the Bill had its devastating impact in Bangladesh.”
Note the passive language here which is a classic rhetorical device used to slip unattributed or unsupported conclusions into a piece hiding advocacy behind a pose of detached reporting. Again, this might represent spin on Alam’s part. I think it probably reflects an effort to hide his source.
That’s red flag #5.
* The fifth clue:
I’ve done some research on Mr. Alam’s background. When he wrote this article in 1997 he had no credentials and apparently no experience reporting on child labor, the economics of child labor, international efforts to curb child labor, the history of child labor in Bangladesh or anywhere else in the world, or journalism of any kind. I cannot find another piece he has written on child labor since this article was published 13 years ago.
By all accounts, Mr. Alam seems to be a gifted photographer.
What on earth gives him the exalted status to warrant libertarians trotting out this article as an argument for preserving child labor *13 years* after it was published in a leftist rag?
Maybe it’s because that’s the best they got.
Philip – very detailed analysis. We must be careful not to believe everything we read.
Yes, Harold.
I have noted, and perhaps you have too, that laissez faire ideologues, like all ideologues, are strongly inclined to nitpick every little bone capable of contention of any work that challenges their faith-based ideology, while swallowing whole weightless junk like this.