Minimum Wage Debate: How Sweatshops Are Actually Good for the Poor


In a recent video posted by the Institute for Humane Studies’ LearnLiberty project, Dr. Matt Zwolinski provides 3 reasons why sweatshop labor does more to benefit the poor than we might normally think.

It is a hard subject, but Dr. Zwolinski raises some great points about how we should approach the issue. See a breakdown of his three major points after the video. 

1. The exchange between the worker and employer is mutually beneficial, even when it’s unfair. 

The New York Times ran a story some time ago about a South African woman named Nokuthula Masango. She was the victim of long-term levels of high unemployment – a fact that drove her to accept a low-wage position (below the minimum wage) with an admittedly exploitative clothing company. 

Yet when the government passed a law shutting down factories in violation of the country’s minimum wage, she was not alone in raising up her voice in protest.

Why did this happen? As it turns out, while the country’s government failed to come up with a solution and families were in need of some sort of work, that clothing company stepped in to fill the void. 

The article mentions another woman, 52-year-old Emily Mbongwa, who lost her job in 2004 and has yet to find a replacement. She was another victim of a factory that was forced to close for its “unfair” treatment of employees.

We can have our high ideals in the West about what constitutes a “fair labor” practice, but we also tend to forget the harsh conditions that exist in other countries. In the absence of physical coercion, these decisions are always going to be made when the benefit is mutually experienced by both the employer and the employee.

2. It is a bad idea to prohibit sweatshop labor.  

Even if we agree that non-coercive labor is mutually beneficial, then we must also agree that trying to prohibit these shops is a bad idea.

Dr. Zwolinski adds another caveat: even if you’re simply trying to “improve conditions,” there are often unintended consequences. Remember, Masango’s factory did not close because it was simply “prohibited,” it closed because it refused to cooperate with the higher wages being demanded of it. 

What this means is that our good intentions, often focused on trying to improve conditions rather than shut down factories, could just as easily result in poor people being unable to provide for themselves or their families. 

In the area of wages, we might even consider the fact that sweatshop workers often make more than the national average in otherwise extremely poor areas. They are certainly hard and long hours, but, again, we have to view them in light of the alternatives.  Here's a graph comparing some of the "protested" wages relative to national averages:


3. Something is almost always better than nothing.  

We all know that sweatshops are, at least in our definition, “unfair” to their workers. Yet the point that Dr. Zwolinski makes here is a bit more substantial: at least the corporation is bringing some form of wealth to these poorer areas.  

Indeed, consider it from the perspective of the impoverished who cannot otherwise provide for their families – would you rather have a low wage, or nothing at all?

While we in the West are able to enjoy a relative deal of comfort – Occupy protests start their days with cups of Starbucks coffee – others in the world face legitimate hardship. If we make a legitimate effort to see things from the other side, perhaps we would be more sympathetic to these workers and those who employ them.