In recent years, there has been a dramatic growth in the outsourcing of production by companies to developing countries. This globalization of production has led the world’s focus on manufacturing methods, specifically the use of sweatshops. The term ‘sweatshop’ in today’s world has gained a predominantly negative connotation due to the Western perspective of this establishment. It evokes a variety of emotions from people without a great deal of understanding of what the term describes or the reasons for its existence.
As always, every issue has two sides, and in the case of sweatshops, it can be viewed as either the violation of human rights and dignity or as the building blocks of a country’s economy. This raises the very pertinent question of whether sweatshops are actually helpful or harmful. This essay attempts to argue that sweatshops are in fact beneficial to all parties involved i. e. the workers, the host governments and the Multinational Corporations (MNCs). Workers voluntarily choose to work in sweatshops since they offer the best employment option in their countries.
Governments use sweatshops as a means to welcome technology and capital to the country and as a solution to the problem of unemployment and low income. MNCs that are responsible for maximizing shareholder wealth, seek to reduce costs and therefore outsource production to countries that have low wages. The US General Accounting Office (GAO) defines “sweatshop” as an “employer that violates more than one federal or state labor law governing minimum wage and overtime, child labor, industrial homework, occupational safety and health, workers’ compensation, or industry regulation” (Pugatch, 1998).
Accepted by many as the industry standard, it is important to remember that this definition only provides a precise, legal interpretation of the term and that sweatshops can exist in many forms. The existence of a sweatshop does not lie in the working conditions per se, but rather in the relation of employer to employee. In the words of historian Leon Stein, “The sweatshop is a state of mind as well as a physical fact… The sweatshop, whether in a modern factory building or a dark slum cellar, exists where the employer controls the working conditions and the worker cannot protest” (Pugatch, 1998).
The emergence of sweatshops has roughly been estimated to the late 19th century in the United States and Western Europe (mostly England and France). Following the industrial revolution people from rural areas and immigrants alike began to flock to cities in search of employment, creating an excess of labour. Some believe that the mass influx of people and their desperate desire to get any job they could at any wage, no matter how low, made them prey for manufacturers who sought to reduce cost of production.
This situation provided a ripe atmosphere for sweatshops to develop in new industries, mainly in the garment industry. Some of the common sweatshop conditions include pay that is below minimum wage, excessive working hours, a dangerous working environment and conditions that create and foster health problems. The concept of sweatshops gained momentum as workers lacked access to the kind of knowledge and resources that would enable them to overcome the impossible working conditions, while governments (both local and national), were unwilling to intervene on their behalf.
Since the late 19th century, sweatshops have grown in both numbers and locations. Some developed nations still play host to a few sweatshops, but a majority can be found in developing and less developed countries. Bangladesh for example has 3. 5 million workers, 85% of whom are women, who work in 4,825 garment factories to produce goods for export to the global market, principally Europe and North America. The Bangladeshi garment industry generates 80% of the country’s total export revenue.
MNCs looking to reduce cost of production outsource o countries where labor is cheap and labor laws are lax. According to the Shareholder Theory, profit maximization is the one and only obligation that the company has towards it shareholders because this will translate to maximizing shareholder wealth. As a firm is set up by those who have monetary share in it, the firm’s only resolution should be to serve the need and interest of these owners as the shareholders are reliant on their investment to procure return (Ferrell, Fraedrich & Ferrell 2008, p43).
Therefore firms attempt to produce at the lowest costs possible by any means, to ensure maximization of return. It is common practice in today’s globalized economy for a majority of companies to outsource production, and possibly use sweatshops. MNCs justify their use of sweatshops with the argument that they are an important source of job creation and livelihood in many places, which lack the same. Less developed countries provide favorable economic conditions and freedom, in order to attract companies to set-up factories within their borders.
The establishing of sweatshops brings in a huge influx of foreign direct investment and technology, which helps create jobs and reduce poverty. MNCS choose countries like Bangladesh only for their low wages even though the skill level of workers and productivity is low. If governments decide to increase regulation in these countries, it will come at the expense of the jobs that these factories offer. MNCs will switch to other countries that have workers with higher levels of productivity and better skill sets, like Guatemala for instance.
The predominant argument against sweatshops is that they exploit workers by paying them unconscionable wages, making them work overtime without compensation and poor working conditions. One of the most important things to remember is that workers voluntarily choose to work in sweatshops and this must mean something. Understandably they are choosing from a bad choice set, but if this is their top choice, it just might be that the public has misunderstood the concepts of sweatshops.
Matt Zwolenski argued in LearnLiberty Website (2012) that sweatshops help the poor to escape poverty. Workers in developing nations deem sweatshops as the best income option available. In fact, sweatshops in countries such as Bangladesh and African nations tend to pay three to seven times higher than any other employment opportunities available in their economy (LearnLiberty. Org 2012). Zwolinski claims that sweatshops are a form of mutually advantageous exploitation between the workers and the employers.
The total amount of money the employers are willing to spend on cost of production is limited by the workers productivity. Employers are indifferent about how they divide their budget on wages and providing apt working conditions, but workers prefer higher wages than better working conditions because they are responsible for feeding, clothing and providing shelter for their family. The wages enable the workers to sustain a better living condition than what would have been provided by other local industries.
He also defend sweatshop on the grounds that relatively poorly paid jobs are better than no jobs at all (Zwolinski 2007, p707). In accordance with Immanuel Kant’s ethics, opponents of sweatshops dispute the arguments justifying unconscionable wages by asserting that sweatshops overlook human dignity and human rights. Immanuel Kant states that human beings should never be treated as means to an end; in fact they must be treated as an end itself (Insert Bib).
The three reasons he gives for this are that humans are rational beings who can think practically, who have autonomy and have intrinsic value not merely instrumental value (Insert Bib). Nonetheless, It is important to note that sweatshop workers’ choices to accept the conditions of their employment are morally significant, both as an exercise of their autonomy and as an expression of their preferences through practical thinking. Some organizations call for MNCs to voluntarily improve working conditions, at least when their arguments are based on he claim that workers have a moral right to such improvement (Zwolinski 2007, p689). This argument is a little skewed because, workers voluntarily choose to work at sweatshops knowing wellenough what they are getting themselves into. MNCs should not have a moral obligation to change the way the market works, but rather try to improve it because they want to help humanity. The working conditions in sweatshops are considered inhumane by Western Standards, but it is key to remember the context in which things are happening.
Bangladesh is a country that is deeply plagued by poverty. The standard of living, average household area, mortality rate etc. are all dismal compares to Western standards. So the conditions that the workers experience are not as bad as people make the them to be, because living the life they are living on a daily basis is much harsher than the conditions they face at sweatshops. Working conditions in the US were not always as high as they are currently.
With the accumulation of capital and technology, workers’ productivity increased and factories competed to retain workers or add-on more highly productive workers. To avoid losing workers, factories started bidding up their compensation, offered health benefits and better working conditions like the ones employees associate with good jobs today. This is how workers’ conditions improved in the past and presumably in the future. HOW TO CITE A PODCAST!! Unfortunately, the role of the government has been very limited.
In the past, the improvement of working conditions happened among the employers and employees, and the government intervened later only to codify the changes. Governments of poor nations struggle to provide jobs and improve welfare due to the lack of resources. Instead the government seeks to attract MNCs to set-up factories in their country and this brings in capital, technology, improves workers’ skills and productivity and most importantly creates jobs. Therefore sweatshops are seen as a viable and beneficial option. Podcast Citation Sweatshops have played a very important role in most developed nations getting to where they are today.
In fact, the economies of the US and UK were built on the backs of sweatshop workers. Due to the lack of capital and technology in the past, sweatshops lasted longer. Countries like Hong Kong, Singapore, Taiwan, South Korea and Japan exploited the use of sweatshops and the vastly available capital and technology to arrive at the fast-paced global economies that they are today. Podcast Citation It is argued that foreign investments in the form of sweatshops are necessary evil to growing nation’s economic development. These nations have to accept sweatshops as a form of initial capital given that abolishing sweatshop will devoid these nations a chance for rapid growth.