Labour Markets

Lidl is doing sweatshop workers a favour

By employing them of course. Look, sweatshops are not places that we would like to work. The dimly lit, poorly maintained rooms where workers produce the clothes of the west are places which we would probably baulk at before stepping in, never mind working in, but these are the conditions of what many of the (mostly female) poor workers face up to and around 12 hours a day.

Therefore is is an outrage that the German owned supermarket, Lidl, is selling jeans at £5.99 for a pair, highlighted here by the Guardian. They could have only been produced by ruthless capitalist exploitation, and the pittance that the workers receive in return (“as little as 2p”) is of course an offence to all right minded people, i.e. Guardian readers.

Now, despite the fact that Guardian readers wouldn’t be seen dead in Lidl, and that they have forgotten about the UK’s poor who probably wouldn’t be all too squiffy about being offered lower priced goods, is this claim of exploitation true?

The notorious right wing, free market absolutist Paul Krugman once wrote an article “In praise of Cheap Labour” with the subtitle “Bad jobs at bad wages are better than no jobs at all.” Now, Krugman may have since called for better working conditions (globally, so unrealistically) after a garment factory in Bangladesh collapsed and killed around 1200 people, but the economic evidence is on Krugman’s original position.

There is plenty of evidence that ‘sweatshops’ benefit workers and local industries. To quote John Miller “Not to believe that demand curves are negatively sloped would be tantamount to declaring yourself an economic illiterate.” The demand here, being that of labour. If as many calls to raise wages are heeded, then workers loose their jobs. This is really bad when we consider “We find that workers perceive factory employment to provide more desirable compensation along several margins.” If sweatshops are so bad, then why are people so willing to work in them?

One reason might be that the wages are much better than they would be getting elsewhere. Foreign owned firms in particular pay higher wages (here and here) than the domestic competition, and the wages are higher than the national average in the majority of countries. Even the protested wages, which are deemed the worst of the worst by anti-sweatshop campaigners are generally above the national average, and in some countries are multiples of the averages. The wages then, are pretty good.

In the case of Bangladesh, which the article is attacking, protested wages at a 40 hour week are near 100% of the average earnings. In the UK, this is around £28,000; these people are doing well by comparison.

There is also the compensation packages that many firms offer their workers. They might seem like small things to us, but providing shoes for children, or a lift to work is a big thing. Since the workers tend to be women, getting them out of the house and gaining skills is crucial for them and the longer term health of the economy.

So, the Guardian may well be outraged that Lidl is offering poor people a good product made by poorer people who are earning good wages by comparison, but I’m afraid that for me it is pretty hard to be offended. We might not like sweatshops, but they are much better than the alternatives, and are making those who make our clothes better off too.



Well it’s probably got nothing to do with gender then, does it?

“Women working for the Conservative minister responsible for closing the pay gap are paid an average of almost £2 per hour less than men, it has been revealed.”

So, the Indy has it that Nicky Morgan’s Department of Education (who has a dual brief as an education and equalities minister) is paying women £3000 a year less than men. Except, as usual, this is is wrong. Grouping the pay of all women vs the pay of all men doesn’t tell you anything in particular, but it does bore most people because they know that it will lead to a pointless discussion about sexism that doesn’t exist. (I am also not so sure why they are attacking Morgan when it is the responsibility of the Treasury to administer pay.)

As with all of these things, it is illegal to pay men and women differently because of their sex. It is entirely legal to pay people differently based on experience, years worked, etc. This is what we find whenever we look behind the headlines on this issue.

What we really see is that there is a motherhood pay gap, because of the enormous amount of time and effort it takes to raise a child, particularly in the early years (there is also the interesting fact that fathers earn more than non fathers). This is also compounded by having multiple children (obviously). Not to say that having children isn’t a joyous experience for many, but it is a simple fact that women will have to take time off to have children.

Shouting sexism or racism all the time doesn’t help anyone at all (tagged by the Indy under sexism), so get onto the point and for crying out loud, have a debate about compensating mothers for having children, because that is what is really about.

Remittances in China aren’t all they are cracked up to be


There are huge amount’s of people moving around in China, and moving around for work; up to 274 million people. Like most migrants, they tend to go to earn higher wages, and this add’s up to a lot of money, with estimates of to 300 billion yuan being sent back by economic migrants to their families. A presumption that can and is made is these higher wages are beneficial for the children left behind because they are being sent back, and then have more money spent on their education. This however, might not be the case..

“When it comes to budget components, we find that remittance-recipient households allocate a smaller share of their budget to education than non-recipients do, and we thus add evidence to the possible negative effect of migration on education outcomes of children who stay behind.”

The households with migrants leaving spent on average 325 yuan per child, whereas households where the parents stayed spent nearly 500 yuan per child. Although households which are receiving remittences are spending more, this is going on consumption and not being invested in human capital. Now while we may well enjoy the increased consumption, we would probably enjoy the benefits of more education and therefore more wealth in the future a great deal more.

“The ones left behind are less likely to value education, and therefore less likely to spend on this particular expenditure component. This could be the case when migrants are parents who leave their children behind, under the care of (less educated) grand-parents.”

It is also strange that result isn’t repeated in other countries which have large recipient communities, such as Ghana, Guatemala, Ecuador, Colombia, Mexico, the Philippines, Nigeria and Eritrea. This may well be that the benefits of education are touted more often in these countries, it might be because of the effect that motivated and skilled parents can have on their children (influencing them to do better but having lower wages themselves as a result) or might be because the returns to higher levels of education are not so easily recognised by the carers for the children. This is an important point to think about as we usually tout the benefits of remittences, and see them as generally quite effective in promoting growth.