Trade and child labour

Eric Edmonds, Nina Pavcnik, 19 July 2007

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Iqbal Masih was born in 1982 near Lahore Pakistan. At age four, Iqbal began working a carpet loom for at least 12 hours a day, six days a week. His parents received an advance on his wages, so Iqbal was bonded to his employer. Iqbal could not leave, and his employer chained him to his loom in order to make sure he did not run away. At age 10, Iqbal escaped. His physical stature at age 10 was roughly that of a six year old boy, and he reported years of hunger and physical abuse.1

Understandably, consumers in wealthy countries are concerned about their own complicity in stories like that of Iqbal's and other children involved in the manufacture of carpets, surgical instruments, soccer balls, clothing, and other goods produced for export from low income countries. The pervasiveness of working children in poor countries magnifies these concerns. An estimated 191 million or 16 percent of children aged 5-14 in the world work today.2 Very few of these children work directly in the manufacture of products for export. Most are engaged in agriculture or their family business, often working by their parents' side. Does international trade influence whether these children work?

Our recent research shows that children are less likely to work in countries with more international trade.3 The negative association between trade and child labour holds even when considering only poor countries’ trade with high-income countries. It also holds up for trade in unskilled-labour intensive products. Quite simply, child labour is less prevalent in countries that trade more because countries that trade more are richer, and children work less in richer countries.

Why then is public perception so strongly titled in favour of the idea that international trade causes child labour in poor countries? The fact that some children are engaged in the production of exports leads many to conclude that the availability of work in export sectors induces children to work. Yet, child involvement in the production of products for export is not evidence that the export opportunity causes children to work. If the carpet sector job were not available to Iqbal, would Iqbal have gone to school and grown up to be a well educated, secure man?

Why are children working?

To consider whether international forces can cause children to work, one has to ask: why are these children working? Would removing one employment opportunity eliminate the factors that cause children to work in the first place? Our research has considered these questions in specific country contexts, using detailed survey data on the activities of individual children within the country.

Poor families must balance the child's potential economic contribution against alternative uses of the child's time. Thus, children work when their potential economic contribution is large, when alternative uses of their time are not valued or productive, or when their economic contribution is important to their family's welfare. Demand for low skill products from consumers in rich countries can raise the economic opportunities available in poor countries, increasing the child's potential economic contribution to the family. In a recent study, Diana Kruger finds that families in Nicaragua appear to take advantage of a temporary surge in coffee prices by having their children work more.4 Her finding highlights that labour demand can influence how children work. However, trade can also influence family living standards. In the Nicaragua case, this increase in family income was correctly perceived as short lived. In several studies, we have found that when the changes in family living standards are sustained, changes in living standards seem to have a bigger influence on whether children work than do changes in the employment opportunities available to children.

In a recent study with Petia Topalova, we shed some light on the question of why children work by examining how children in rural India were impacted by India's tariff reforms in the early 1990s.5 Since the 1950s, India imposed large, distortionary tariffs on imported goods. These tariffs protected some jobs and employment opportunities at the expense of other workers and higher prices. Concurrent with the phased in reduction in tariffs and other reforms that started in 1991, India's economy boomed. While much of India grew, rural areas with concentrations of pre-reform employment in industries that lost protection experienced smaller declines in poverty than the rest of India. We find that children living in these areas did not experience as large of an increase in school attendance or decline in work without school as children residing in areas with lower pre-reform employment in heavily protected industries.

The attenuation in schooling improvements and child labour declines in these rural areas appears attributable to smaller reductions in poverty in these areas than elsewhere in India. We find little evidence of other potential causes of these relative declines in schooling and increases in work such as declining returns to education or rising unskilled wages. Based on our estimates, we extrapolate that poverty declines can explain half of rural India's increase in schooling and a third of its fall in children that work without attending school during the 1990s.

A look at how children work is especially informative. Children are working more in areas that have lost protection relative to the national trend, but most of this work involves girls working around their family. Moreover, relatively more children are neither working as a principal activity nor attending school. For these children, their primary economic contribution to their family appears to be the avoidance of schooling costs, which can be considerable for a poor family. In fact, we find that the attenuation of schooling improvements associated with the loss of protection is smaller in parts of rural India where schooling is less costly. Our analysis illustrates that it is especially important to pay attention to the motives for why children work or why children do not attend school, and one should not be quick to assign blame solely to a specific employment opportunity open to children.

Our findings from India mirror the findings from a recent study of ours in Vietnam.6 For a number of years, Vietnam used an export quota to suppress rice exports out of a concern for domestic food security. In the 1990s, Vietnam liberalised its rice trade and allowed rice farmers to take advantage of higher international prices. The rice sector boomed and living standards of rice producing households improved substantively. Despite greater employment opportunities, children in households that benefited from higher rice prices became much less likely to work. Altogether, it appears that roughly 1 million fewer children worked as a result of rising rice prices in Vietnam despite potentially more lucrative employment opportunities.

These findings illustrate that when it comes to working children, one has to carefully consider why children work. Differences in living standards explain three-fourths of the variation in the incidence of child labour across countries.7 Our studies from Vietnam and India provide further support that this association is not coincidence. Poverty is a key motive for why children work. There is little evidence that suggests that export opportunities cause children to work who would otherwise attend school or live a more carefree childhood.

Where does this research leave the concerned consumer? Stories of children engaged in export industries should be met with concern about why children hold those jobs. Before one boycotts a product with child labour content or supports punitive trade sanctions, one should ask whether these measures will make the child better off. Will boycotts or sanctions eliminate the reasons why children work? Thus far, most of the existing evidence suggests that eliminating sources of income will not make poor families better off. It will not change the circumstances that cause children to work.

What can be done for working children? Taking positive steps towards eliminating the motives for work by ameliorating poverty, reducing schooling costs, and improving schools and subsequent economic opportunities hold great potential in reducing child labour. If motives for work can be eliminated, then there is an additional issue of how to help children who have been working. Iqbal found a non-governmental organisation that supported him and paid for his education until his untimely death at age 15. Unfortunately, there is little existing scientific research on the best ways to help children like Iqbal who have spent most of their young lives at work. Concerned individuals should demand that the organisations they fund or support contribute towards careful scientific evaluation of measures aimed at helping the millions of children that work around the world.


1 Iqbal's story is famous. In our description of Iqbal's life, we draw from A Bullet Can't Kill a Dream (http://www.mirrorimage.com/iqbal/who/who.html) and his Wikipedia entry (http://en.wikipedia.org/wiki/Iqbal_Masih).
2 International Labour Organization. 2006. The End of Child Labor: Within Reach. (ILO, Geneva).
3 Edmonds, Eric and Nina Pavcnik. 2006. “International trade and child labor: Cross-country evidence.” Journal of International Economics 68: 115-140
4 Kruger, Diane. 2. 2007. “Coffee production effects on child labor and schooling in rural Brazil.” Journal of Development Economics 82: 448-463.
5 Edmonds, Eric, Nina Pavcnik, and Petia Topalova, 2007, "Trade adjustment and human capital investments: Evidence from Indian tariff reform", Working paper no. 12884 (National Bureau of Economic Research, Inc, USA).
6 Edmonds, Eric and Nina Pavcnik. 2005. “The effect of trade liberalization on child labor.” Journal of International Economics 65: 401-419.
7 Edmonds, E. and N. Pavcnik. 2005, “Child labor in the global economy”, Journal of Economic Perspectives 19: 199-220.

 

 

Topics: Labour markets
Tags: child labour, family economics, trade

Comments

Trade, developmeny and child labour, increasing inequality

Report of Child Labour makes Garment Retailers Reconsider Sourcing from Indian Manufacturers: A Response

The above article by Eric and Nina made me highlight a similar paradox of trade and development in India in the light of the prevalence of child labour in a garment supplying firm in Delhi which supplies to brands like GAP. It is also a response to the action taken by the state, GAP and civil society organisations to the specific issue. Reports of child labour from a garment production unit in Delhi by The Observer, a British Daily, on 28 October 2007, may put the expanding garment export industry of India into serious troubles. Many retailing companies are now vigilant in their sourcing practices to India subsequent to the reports of prevalence of child labour in the sector. This of course is a counter punch to this sunshine export sector in the country, which is all prepared for a big leap. “Around 14 child workers, some as young as 10, have been found working in a textile factory in conditions close to slavery to produce clothes for GAP, a giant retailer with mass sourcing from India”, as reported by the Observer. The incident evidences that despite the efforts to do away with child labour in the sector through government interventions and ethical trading practices by initiatives like ETI, the problem is persisting with an alarming toll.

Garment export industry is one of the main foreign currency export-earning sectors in the country and India has reiterated its comparative advantage in the sector remarkably after the regime of Multi Fibre Agreement (MFA). However, the industry is not yet free from the traditional cost reduction strategies of production such as deployment of child labour, keeping of wages below minimum wage etc. As reported by The Observer, workers, including children are labouring under filthy living conditions for long hours. The report also revealed that children are not either paid or inadequately paid in the factory. The case report points to two pertinent aspects. One is the harsh reality of children being employed in sweatshops at the cost of their childhood and education. Child labour is a reality in India and it has been part of economic production, largely in the informal sector. According to one estimate, more than 20 per cent of India's economy is dependent on children, the equivalent of 55 million youngsters under 14. Second is the possible impact on employment due to non-compliance with ethical business practices that many retailers follow now. Such practices take thousands of employment away along with substantial business opportunities. It is reported that the finding of children working in filthy conditions in the Shahpur Jat area of Delhi has renewed apprehensions about outsourcing by large retail chains of their garment production to India. The present report on child labour made the retailer company GAP to stop contracts with the supplier. Likewise in the last year GAP severed contracts with around 23 suppliers for workplace abuses.

It is important at this juncture to note that, action taken by GAP on the supplier is barely a reaction to the issue. GAP, being the sourcing company cannot take such decisions blindly rather it would adequately address the issue of child labour in a holistic way. It is the responsibility of the retailer (here, GAP) to ensure observance of standards along the entire value chain of production. Child labour is not an issue in isolation, but it is intertwined with the issues of wages and the optimum income level of the family, which enables them to send children to school. Therefore, we feel that, as a proactive approach, it is the responsibility of GAP and its actors in the entire production chain till subcontractors to ensure adequate wages so as the family can send their children to school. Other approach such as motivating family, running school alone will not work unless the core issue of wages is addressed. Therefore, we feel that severance of contract with suppliers can not help workers, children or GAP and it can only push thousands of families to poverty and to the vicious circle of poverty and child labour.

The role of Government is also extremely important here. It is the responsibility of the state to implement and ensure minimum living wages. Therefore, the State cannot blame GAP alone for their decision to severe the contract with the suppliers. Sate, while ensuring the investment and business climate in the country with tax exemptions and incentives, it should also take adequate steps to ensure labour rights, decent living conditions as well as education of workers’ children.

It is time for the state, various actors of industry, trade unions and civil society to wake up and respond. Requirement of the situation now is a multi pronged strategy to deal with the issue of child labour on one hand and protection of the industry on the other. It calls for the importance to have honest efforts to eliminate child labour by ensuring living wages and adequate living arrangements for the families of the children.

Sobin George
Research Scholar,
Centre of Social Medicine and Community Health,
JNU, New Delhi,
Email: sobing@gmail.com
Ph: 91-9868343106

Associate Professor of Economics at Dartmouth College and Director of the Child Labor Network at IZA.
Associate Professor at Dartmouth College and CEPR Research Affiliate