Sweatshops may drive the financial prosperity of developing countries.
According to a recent U.S. National Bureau of Economics Research study, garment factories were found to have unsafe conditions, pay lower than informal sector jobs and be the least-preferred career choice of citizens. Although garment factory jobs possessed negative qualities, the study found that sweatshops were highly beneficial to poorer nations’ economies.
For well-off nations, future economic growth will be in the formal sector with large firms. This isn’t the case for developing nations though. The study says poorer countries have experienced economic growth in low-skill, labor intensive sectors, including apparel and textiles.
While enduring the beginning stages of industrialization, these developing nations utilize low-skill industrialization to foster large-scale job creation. Sweatshops could eventually raise citizen’s wages, since apparel factories would have ample workers and not have to compete to fill in positions. Although this may benefit poorer countries’ economies, the study concluded citizens preferred entrepreneurial jobs to industrial labor when self-employment barriers were relieved.
In order to understand the benefits and drawbacks of sweatshop jobs in the early stages of industrialization, the study organized a panel of 1,000 entry-level job applicants in five industrial firms throughout Ethiopia. The study assigned applicants into three separate groups; a third of the applicants were provided a job offer at factories, a third went to a control group that didn’t receive anything and another third were designated to an entrepreneurship program, which would provide them with business training and a $300 grant. Participating industrial firms included a textile and garment factory, a water bottling plant, a vegetable farm, a flower farm, a shoe manufacturer and a textile and garment factory.
Recruited Ethiopian applicants in each of the three groups agreed to share their wages and health conditions over a 13-month period. The study found that a majority of these workers used low-skill industrial employment as a safety net, instead of a long-term job. Furthermore, industrial job turnover was high. Nearly a third of applicants offered a factory job left the first month and 77 percent left their jobs within 12 months, due to better high-wage informal job opportunities.
“The firms reported that they found the higher levels of turnover inconvenient, but were generally able to fill the positions with other low-skill workers since, given the style of production, these workers required virtually no training,” the study said. “The firms were reluctant to raise wages in order to reduce turnover.”
Despite the fact that sweatshops may help many developing nations boost their economies, including Ethiopia, industrial labor may not be the best choice for its workforce. Although the turnout for garment factory jobs is high, Ethiopians are on the hunt for safer and higher paying positions as the country endures its early stages of industrialization.