The Political Economy of Child Labor and Its mpacts on International Business

Business Economics, July, 2000 by S. L. Bachman

Second, firms must ask themselves: What is honest disagreement about child labor, and what is manipulation? When European anti-child labor activists first objected to imports of rugs made by children working in horrific conditions, and in bonded labor, the Europeans were opposed by rug merchants and manufacturers in Pakistan, India, and Nepal who said that the children were simply learning traditional skills passed down through their families. In some families, that was indeed the case. In other workshops, children had been recruited into working for unrelated employers, for long days, in poor working conditions and in bonded labor. [17]

Third, while some child labor involves what can only be called exploitation, other cases involve a mixture of exploitation and a measure of good will. Employers in industries as different as the Bangladesh garment industry and Mexican agriculture have voiced mixed motives for hiring children. The employers were clearly taking advantage of low-skilled workers, desperate for work even at low pay. But when these employers explained that some parents could not work if the children were sent home, they were also correct: many of the parents did not have child care or after-school care for their children. [18]

The employers' explanations sounded hollow when the employers had done nothing themselves to help provide child care or after-school care for the children of their workers. And yet, implementing any solution is never as simple as it might appear to outsiders. And in any case, identifying a solution involves determining whether any action taken by an individual firm will make a positive difference and what kind of action will make the most difference. (This is after the firm has decided it can afford the fix.) These topics will be explored below.

A last word about definitions: for the rest of this paper, for reasons of simplicity, "child work" will refer to all kinds of work, whether beneficial or harmful. "Child labor" will be defined as work perceived to be harmful, or potentially harmful, to the child, including underpayment and other forms of exploitation. Any more precise definition of child labor must be specific to local circumstances, involving "a comparison between the conditions of work on the one hand and age, gender and ability (of the child) on the other." [19]

The Economics of Child Work

The economics of child work involves supply and demand relationships on at least three levels: the supply and demand of labor on the national (and international) level; the supply and demand of labor at the level of the firm or enterprise; the supply and demand for labor (and other functions) in the family. But a complete picture of the economics of child labor cannot be limited to simply determining supply and demand functions, because the political economy of child labor varies significantly from what a simple formal model might predict.

Suppose a country could effectively outlaw child labor. Three consequences would follow: (1) the families (and the economy) would lose the income generated by their children; (2) the supply of labor would fall, driving up wages for adult workers; and (3) the opportunity cost of a child's working time would shrink, making staying in school (assuming schools were available) much more attractive. In principle, a virtuous circle would follow: with more schooling, the children would get more skills and become more productive adults, raising wages and family welfare. [20] To the extent that the demand for labor is elastic, however, the increase in wages implies that the total number of jobs would fall.