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.