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

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

The labor supply effects are the basic outline of the logic that underlies almost all nations' laws against child labor, as well as the international minimum age standard set in ILO Convention 138 and much of the anti-child labor statements during the recent protests against the World Trade Organization, World Bank and International Monetary Fund.

This model does describe in very simplified form the long-term history of child work in the economic development of developed economies. But in the short-term, the virtuous circle seldom occurs in real life as quickly as the simple, static model suggests. The reason for the model's short-term failure is that child work results from a complex interweaving of need, tradition, culture, family dynamics and the availability of alternative activities for children.

History

History suggests that children tend to work less, and go to school more, as a result of several related economic and social trends. Some of the reasons why children work were discussed earlier. They point to a truism that is often overlooked in discussions about the economics of child labor: the political economy of a place plays at least as big a part as per capita income in determining the level of child labor there.

* Prosperity reduces both the incidence of child work and children as a proportion of the total workforce. A World Bank graph plotting children in the work force against GDP per capita shows a dramatic fall in children's labor force participation up to $1,000 GDP per capita. [21]

* But national wealth alone does not determine, and cannot explain, incidence of child work and proportion of children in the work force. At higher levels of GDP per capita, the relationship between the proportion of children in the labor force and per capita GDP is not as easily predicted. The World Bank has no strong explanation for this looser association between national wealth and children in the work force, apart from a possible statistical anomaly and "cultural differences." The closest association (or best "predictor") of proportion of children in the work force in an economy is the structure of production: child work is more likely to occur in economies with a greater share of agriculture in GDP. [22]

* The incidence of child work reflects the structure of the local economy. Of the 250 million working children, sixty-one percent are in Asia, thirty-two percent in Africa, and seven percent in Latin America. [23] That makes some intuitive sense in that the bulk of the world's population is in Asia. The disproportionately large percentage of child workers in Africa, however, is due to the high proportion of children in the labor force--about two out of five. This reflects Africa's high rate of poverty and the high proportion of rural population in Africa.

* Although child labor is most strongly correlated with poverty, child work also is partially determined by local structures of economy, finance and production, as well as cultural norms and practices. Children are more likely to work, for instance, if they are from poor, minority or culturally marginalized populations. Girls are more likely to work in the home and many informal enterprises unregulated by law. Girls are also more likely, in many cultures, to be denied schooling. [24] A more complete list of determinants of child labor includes age, gender, family size, distance to and cost of schooling and parents' educational status. Also, child work is highly correlated with the incidence of family enterprises--but families who have their own enterprises are not always the poorest in their region. [25]