The Economics of Sweatshop and Slave Labour Use

In recent years, our global economy is seeing a growth in the use of unethical labour practices. These practices include sweatshop use. According to the International Labour Organisation, child labour engages around 170 million children in the world. The ILO also states that the most popular form of employment is the clothing and textiles industry. Unethical labour practices in these areas are subjecting many people in developing economies to poor quality lives. This is in order to satisfy a growing demand for textiles and garments from consumers in Europe and the US. So why do so many Transnational Corporations (TNCs) use slave labour, and what are the impacts of this?

The Forces Behind Sweatshop Use

The main factor responsible for unethical labour practices is the global shift in manufacturing. This can be described as the movement of industry from developed economies to developing countries. It has happened because often in less developed countries, there are less restricting labour laws. In the UK, there is a minimum wage of £7.83 per hour; in countries such as Sierra Leone, this wage is lower than £0.03 (from ConvergEx strategists). Minimum wages are one example of the differences in labour laws between different economies. Less developed nations are less likely to protect worker’s rights, so it is easy for TNCs to take advantage. Corporations, finding relaxed labour laws attractive, are off-shoring production. It is cheaper to house manufacturing in Cambodia or Bangladesh than in Britain, so companies are off-shoring to these countries. This is the global shift in manufacturing, and it is responsible for the increase of sweatshop use.

The Winners

Unethical labour practices can have economic benefits; often the main reason TNCs in the clothing industry use sweatshops is because they are cheaper than using labour in developed countries. Production in most developing countries is a cheaper substitute for production in developed economies because of relaxed labour laws. The growth in global demand of cloth and textiles has only increased the use of sweatshops, and TNCs and famous clothing retailers became desperate to increase production. This has resulted in turning to developing economies where there are large potential workforces. One could also argue that these workforces in developing countries also see economic benefits, as they gain wages for their work. Moreover, developing economies benefit from the rise of sweatshops within their industry. This is because the money being given to workers and being invested in industry helps stimulate their economy.

The Losers

However, a key trademark of slave labour and sweatshop use is that they take advantage of the locals. They give employees very low wages or do not pay them at all. Furthermore, very little money goes into the developing country’s economy. This is due to extremely low wages and production costs. Neither developing countries nor the people living in those countries benefit from sweatshops and slave labour at all.

So who benefits from the use of sweatshops?

TNCs and large clothing retailers are reaping the advantages of unethical labour practices through cheaper costs of production and larger profit margins. However, they create this profit by taking advantage of other people and societies. Nowadays, it is a rare occurrence to see transparent clothing companies who ensure all of their products are created ethically: companies who put other people’s livelihoods first.

Read about the politics of slave labour use

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