How sweatshops help the poor — Adam Smith Institute (2024)

Recently, the President of the ASI Madsen Pirie wrote a blog telling of how we used to give out rubber wristbands to those who signed up to our mailing list. The wristbands boldly stated “I buy goods from poorer countries”. A rather ironic take on the famous “make poverty history” slogan.

But a common objection to buying from poorer countries is that in doing so, one might be complicit in supporting the atrocious working conditions many are forced into. This has led to various campaigns to boycott companies that don’t source labour responsibly. One source of labour viewed by many as irresponsible is sweatshops.

Sweatshops are frequently vilified, and rightfully so. They are often horrible places to work, with long hours and few workers’ rights. But though they may be awful, they should not be outlawed. They play an important role in the world economy and in bettering the lives of millions across the globe.

The first point to note is that more often than not, the alternative for those who work in sweatshops is much much worse. Yes, they may be blisteringly uncomfortable places to work with disease and abuse rife, but if people have chosen to work there, it must be better than their alternatives.

The danger posed to those unfortunate enough to consider them their best choice was shown by the horrific Rana Plaza collapse in 2013, where 1,129 people died. These included individuals making goods for high street names such as Matalan, Primark, Monsoon and Walmart. Given this, it is easy to see how sweatshops may be viewed as incredibly evil. But it is important to remember that for many of these people, the alternative is to work in agriculture, particularly subsistence farming, which is the most dangerous line of work in the world. If sweatshops were banned, then many of the people working there would be forced to move into far more dangerous, less desirable professions.

This point was illustrated well in 1993, when US Senator Tom Harkin proposed a ban on imports from countries that employed children in sweatshops — a measure that would seem to many both noble and just. But in response to the proposal, a factory in Bangladesh let 50,000 of its workers go. According to Oxfam, a significant number of children made unemployed as a result became prostitutes.

It is important to remember that conditions in sweatshops are awful to us by our own standards. By the standards of cripplingly poor rural Bangladeshis’, they might well be very attractive. Likewise, the pay that sweatshop workers receive would be seen as unimaginably meagre if we were to frame it in the context of the society in which we live. It would be impossible to exist in the UK on what they earn in sweatshops. But to them, sweatshops bring a pretty penny. Research by David Skarbek in 2006 found that wages from sweatshop work exceed national average income in eight out of ten countries surveyed. In paying more than the national average, it lifts people out of poverty and gives them money to spend and invest in things that improve not only their individual lives, but the condition of the nation as a whole.

Which bring me onto my next point. Sweatshops are great for the economic and social development of a nation. The extra money that can be earned can be taxed to provide basic infrastructure and sound governance. More importantly, the extra money earned can be spent by individuals on education, healthcare motorbikes and goats. If people wish to forgo pleasant working conditions (or escape worse working conditions) for these things, then who are we to stop them?

But I must not neglect the remarkable fact that sweatshops seem to be particularly good for women in the developing world. Rachel Heath and A. Mushfiq Mobarak, of Yale and Washington Universities wrote a paper in 2014 that took a look at the impact the garment industry had on young girls and women in Bangladesh. They found that girls who live in villages closest to garment factories (also known as sweatshops) had significant advantages compared to those who did not. Amongst the findings were that girls living near a factory were 28% less likely to get married in the school year than on average for a Bangladeshi girl, similarly, girls were 29% less likely to get pregnant in a school year. These findings were most pronounced amongst 12-18 year olds. Sam Bowman wrote a blogpost on this fascinating study a few years back.

Sweatshops are often seen as stepping stones on the path to economic development. When millions move away from subsistence living and produce a surplus that can be invested and spent, whole nations rise up out of poverty. This can be seen to have happened in Taiwan, South Korea, and Japan (to name but a few), where large scale cheap labour was instrumental in creating the developed nations that exist today.

So buying cheaper goods made in the developing world not only makes you richer by saving you money, but it also makes those in the developing world richer too. It doesn’t mean you are complicit in the abuse of factory workers, it means you are filling the coffers of those who are most in need of having their coffers filled. So next time you are torn between buying from two shops, just remember that to enrich the poorest and neediest in the world, sweatshops might just be your best bet.