Sweatshop Ethics

Sweatshops Definition:  A shop employing workers at low wages, for long hours, and under poor conditions.  Factory where workers do piecework for poor pay and are prevented from forming unions; common in the clothing industry

Common Abuses  Forced overtime  Locked bathrooms  Starvation wages  Pregnancy tests  Denial of access to health care  Workers fired and blacklisted  Occasional beatings  Withheld wages

Dhaka Fire 2012

1. Explain this event: A Fire at Tazreen Fashions factory (24/11/2012), 112 Killed.

2. Relation: How does the fire relate to Walmart?

3. Explain the Business Connection between Walmart and its suppliers 1) Walmart 2) Success Apparel 3) Simco 4) Tuba Group Walmart and its suppliers

4. Income Difference/Inequality 1) How much does a Bangladesh garment factory worker earn in average ? 2) What is the minimum wage in the US? 3) How much does the Walmart CEO earn?

4. Responsibility: Should Walmart be held responsible for the losses of lives there? (If yes, what exactly are those responsibilities?)

5. Criteria: What should be the criteria for Walmart to determine workers’ wages and their working condition in Bangladesh?

Low Price Products

Walmart Index (5 Yrs)

Walt Disney

Nike

Pfizer

Starbucks

An Investigation from Aljazeera  3/09/ html 3/09/ html

What are fair wages?

6. Baseline: What are the baseline to compare wage level? 1) Home Country Standard 2) Host Country Standard 3) Market Standard 4) Absolute Standard 5) Golden Rule

A. Home Country Standard  Thomas Donaldson: “By arbitrarily establishing U.S. wages levels as the bench mark for fairness one eliminates the role of the international market in establishing salary levels, and this in turn eliminates the incentive US corps have to hire foreign workers.”

B. Living Wage Standard  De George: “a living wage should allow the worker to live in dignity as a human being… corporations must pay at least subsistence wages and as much above that as workers and their dependents need to live with reasonable dignity, given the general state of development of the society.”

C. Golden Rule  A practice is permissible if and only if the members of the home country would, under conditions of economic development relevantly similar to those of the host country, regard the practice as permissible. (Donaldson)

Criticism of the Sweatshops

1. Income Disparity © He et al. U.S. CEO’s Pay versus Worker’s Pay (Average hourly worker to CEO pay ratios)

2. Impoverishment Former Labor Secretary Robert Reich:  “Free trade is not an end in itself, but a means to rising living standards worldwide, more jobs and better jobs. But if a country pursues policies that hold down living standards and limit to a narrow elite the benefits of trade and development, the promise of open commerce is perverted and drained of its rationale.”

 “Low-wage workers should become better off, not worse off, as trade and investment boost national income. The gap between rich and poor within a nation should tend to narrow with development, not widen.”

3. Collusion with Repressive Regimes  The developing countries may use military and police to break strikes and repress independent unions. As a result, companies such as Nike are profiting from political repression.

Cambodia Garment Workers  pacific/2014/01/cambodia-blocks-garment- workers-protest html pacific/2014/01/cambodia-blocks-garment- workers-protest html In Chinese  E6%9F%AC%E5%B7%A5%E4%BA%BA%E7% A4%BA%E5%A8%81&sm=3 E6%9F%AC%E5%B7%A5%E4%BA%BA%E7% A4%BA%E5%A8%81&sm=3

Are these criticisms fair?

1. How to set the Baseline?  Horizontal Comparison: Compare the difference between labor’s payment in the MNCs’ home country and that in the host country  Opportunity Costs for the Workers: Should we ALSO compare the difference of payment between factory work and rural work in the host country as well?

Alternatives to working in Sweatshops  1997 UNICEF studyUNICEF  5,000 to 7,000 Nepalese children turned to prostitution after the US banned that country's carpet exports in the 1990s

Wage level in Indonesia 1996  Minimum wage is USD 2.28 (5200 rupiahs) per day, which is what the Nike suppliers provide to their labor.  But half of the adult population in Indonesia is earning only 2000 rupiahs per day.

2. Impoverishment?  What have been the growth rates of GDP for Vietnam and China in the last decade?  What have been the growth rates of GDP for Taiwan, Korea, Singapore, and Hong Kong three decades ago?

 The ILO (International Labor Organization) recently noted that the most successful developing economies, in terms of output and employment growth, have been those who best “exploited emerging opportunities in the global economy.”  The successful attraction of foreign investment in plant and equipment can be a powerful spur to rapid industrialization and employment creation.

3. The Painful Trade-offs  Imposing higher wages may deprive these countries of the one comparative advantage they enjoy, namely low-cost labor.  The high wages come at the expense of the job opportunities of much poorer workers.

 If the higher standards advocated by critics retard the growth of formal sector jobs, then that will trap more informal and rural workers in jobs that are far more hazardous and insecure than those of their formal sector counterparts.

Possible Consequences of “high wages”:  Reduced employment in the formal sector of the economy  Less investment and slower economic growth  Greater inequality and poverty

Never Again?

在中國的民工荒  Improved labor condition 招工難  民工荒 6/news/ec_eca1.htm