2000-2500 economic essay

Questions to focus on:1. Which economic concepts can be used to better understand sweatshops and manufacturing in the developing world?2. How could domestic policy improve outcomes for workers in sweatshops?3. How could domestic policy harm workers in sweatshops?4. Do international protests help or harm sweatshop workers? Your response should not exceed 2500 words, and should be at least 2000 words.


Don't use plagiarized sources. Get Your Custom Essay on
2000-2500 economic essay
Just from $13/Page
Order Essay

Unformatted Attachment Preview

Sweatshops, Opportunity Costs, and
Non-Monetary Compensation: Evidence
from El Salvador1
ABSTRACT. Using evidence from field interviews, this article examines
the alternative employment opportunities of thirty-one sweatshop
factory workers in El Salvador and their perceptions about what types
of non-monetary benefits they receive in their current employment.
Interview subjects provide insights into the benefits of their own and
peers’ employments, their next-best alternative employment, and
other aspects of total compensation. We find that workers perceive
factory employment to provide more desirable compensation along
several margins.
To better understand the role of “sweatshop” factories in developing
countries, this article investigates how sweatshop employment compares to employees’ alternative employment opportunities and examines the non-monetary aspects of their compensation.2 Economists
argue or assume that people reveal their preferences through their
choices, suggesting that voluntary employment in a sweatshop indicates that it is the worker’s best available option given those available.3
This article examines the question for a small group of workers in El
Salvador. We identify how favorably workers perceive their alternative
employment opportunities and what role factory jobs play in their
lives. The economic analysis of sweatshop factories usually refers only
to contexts in which workers voluntarily choose their employment.
*Duke University, Department of Political Science, david.skarbek@duke.edu
†San Jose State University, Department of Economics, emilyskarbek@gmail.com
‡Skarbek Law Firm, brianskarbek@gmail.com
**Pierce & Shearer LLP, erin@pierceshearer.com
American Journal of Economics and Sociology, Vol. 71, No. 3 (July, 2012).
© 2012 American Journal of Economics and Sociology, Inc.
The American Journal of Economics and Sociology
Slavery, human trafficking, and employer theft of passports, for
example, are a distinctly different issue and outside of the scope of
this article.4
A worker’s productivity determines the upper bound on total compensation, and sweatshops often provide capital and technology that
make workers more productive than they would be in other local jobs.
In fact, sweatshop pay often compares favorably with the country’s
standard of living. Powell and Skarbek (2006) examine wage estimates
given by sweatshop critics and find that in nine out of eleven
countries, sweatshop wages equal or exceed the country’s average
income. For seventy-hour workweeks in Cambodia, Haiti, Nicaragua,
and Honduras, sweatshop wages are double the national average
income. In nine out of ten countries for which apparel-related sweatshop wages were available, employees earned wages equal to or
greater than the country’s average national income by working fifty
hour workweeks. Brown, Deardorff, and Stern (2003) document that
multinational firms regularly pay higher wages and provide better
working conditions than local firms. Aitken, Harrison, and Lipsey
(1996) find that higher levels of foreign investment are associated with
higher wages. Lipsey and Sjoholm (2001) find that foreign-owned
firms pay higher wages than local firms do and that wages at local
firms rise when foreign-owned firms are present. Apparel manufacturers and foreign employers often compensate their employees favorably compared to others’ earnings within their own country.
Workers’ next best alternative employment opportunities determine
the lower bound on wages. If strong competition for labor exists, there
will be upward pressure on wages.5 Many critics decry large, international corporations opening up third-world factories or relatively
wealthy Westerners purchasing products from these factories.
However, as available alternatives increase in amount and quality,
factory owners will pay their workers higher wages to retain them.
Boycotts may block workers’ access to the productivity-enhancing
capital and technology that foreign investment brings. In a recent
interesting study, Harrison and Scorse (2010) find that anti-sweatshop
campaigns that led to increases in the Indonesian minimum wage
resulted in “large, negative effects . . . on aggregate manufacturing
employment.” They attempt to identify the effect of anti-sweatshop
Sweatshops, Opportunity Costs, and Compensation
activism on specific districts within Indonesia that produced textiles,
footwear, and apparel (TFA) in the early 1990s based, in part, on who
Nike employed as vendors in 2004. With this data, they find that
“while anti-sweatshop activism did not have additional adverse effects
on employment within the TFA sector, it did lead to falling profits,
reduced productivity growth, and plant closures for smaller exporters.”6 Basu and Zarghamee (2009) model consumers’ choices to
boycott products made by child labor and find that the boycott can
actually lead to a rise rather than fall in child labor because of a
backward bending household labor supply curve.
The relevant alternative employment opportunities to sweatshop
labor are often much worse. For example, journalist Nicholas Kristof
(2009) reports on children who survive by picking through a “vast
garbage dump” for plastic in Phnom Penh, Cambodia. These children,
he reports, hope to someday work in a sweatshop instead of scavenging through the dangerous, dirty trash heaps (see also Kristof
1998). After the introduction of U.S. anti-child labor legislation in
Congress in 1992, Bangladesh textile factories terminated the employment of an estimated fifty thousand illegal child laborers. UNICEF
(Bellamy 1997: 60) reports that the children had little to no access to
education and found employment in “stone-crushing, street hustling
and prostitution—all of them more hazardous and exploitative than
garment production.” For third-world workers, sweatshops often
provide much better employments than their available alternatives.
While Kristof (2009) provides useful anecdotal evidence, this article
seeks to provide a more systematic examination of the alternative
employment opportunities of sweatshop workers and factory compensation with evidence obtained through open-ended field interviews of thirty-one Salvadoran sweatshop workers.
Heterodox approaches, such as the Marxist and Old Institutionalist
literatures, provide alternative perspectives to mainstream economics
on scarcity, choice, and wage labor. They emphasize historic-empirical
analysis rather than formal modeling, dynamic and conflictual processes rather than static equilibrium, the possibility that economic
forces lead to domination and power relationships, methodological
collectivism, an interest in want-creation, and embrace a valuedirected inquiry (Dugger 1996). Feminist economics shares many of
The American Journal of Economics and Sociology
these tenets and emphasizes the importance of unpaid, household
labor and the role of race, gender, and class (Power 2004).
Like these heterodox approaches, our study emphasizes a rich
contextual analysis of social phenomena rather than a focus on formal
modeling, allowing for examination of out-of equilibrium states of the
social provisioning processes. Our study is an attempt to collect,
document, and understand the qualitative, historical accounts of
populations traditionally viewed as marginalized (low income earners
and females). The majority of workers that we interviewed are female
and all of them are low-skilled by developed country standards, and
as such, our study focuses on the context of decisions made by a
subordinated group and examines the interplay between market
exchange and household production activities (Power 2004). In addition, we examine how factory work relates to Amartya Sen’s (1999)
emphasis on the importance of obtaining “capabilities” such as education. All of the aforementioned factors typically occupy the forefront
of heterodox studies of labor and development and auxiliary positions
in similar mainstream studies.
Perhaps most clearly consistent with these heterodox approaches,
our research methodology explicitly recognizes that people give
meaning to their economic activities, and these provide a necessary
foundation for understanding the social provisioning process. As
Dugger (1996: 40) explains about the people engaged in the social
provisioning process, “[t]hose other people can talk. They can write.
They can tell their own stories. What economists need to do is learn
how to ask questions and learn how to listen to people’s stories.” By
adopting an open-ended interview research method, we attempt to
access the meanings that people give to their jobs and make these
central to understanding factory work and labor supply decisions.
Despite the similarities with heterodox literatures, this article
remains primarily within the mainstream economics perspective. We
focus on the traditional neoclassical assumptions of preference revelation through choice and use methodological individualist economic
theory to inform our survey instrument and research design. Central to
our study is the continuance with the assumption that scarcity is “a
part of the human condition” rather than “part and parcel of life within
our advanced capitalist economy” because of want-creation by adver-
Sweatshops, Opportunity Costs, and Compensation
tisers and corporations (Matthaei 1984, 91). While we recognize that
heterodox theories of wages and labor may not agree with the
concept of scarcity as an ever-present relationship between desirability and availability within real resource constraints, we maintain that
the opportunity cost concept is important and fruitful for understanding sweatshop labor decisions.7
This research focuses on El Salvadoran factories because journalists and
social activists have frequently criticized its sweatshops and the
National Labor Committee has actively been involved in workers’ rights
issues there since the 1980s.8 At an Adidas shareholders meeting in
November 2008, Sonia Lara Campos (2008), an activist with the National
Labor Committee in Central America, criticizes Salvadoran apparel
manufacturers and asks, “[h]ow long do the workers of Adidas have to
wait until they receive a dignified wage?” Campos (2008) reports that
worker compensation barely provides for the food needs of a family of
four and is insufficient for a broader basket of necessities.
Through an in-depth examination of subjects’ alternatives to and
compensation in Salvadoran sweatshops, we bring evidence to bear
on these claims as well as provide evidence regarding the role of
sweatshops in the lives of El Salvadorian wage earners. We collected
these data in early 2009 from subjects employed in two factories in El
Salvador: the Partex Apparel Group and Royal Textiles. These factories
produce garments for organizations such as Adidas and the United
States military. Interviewing subjects at two factories is not necessarily
representative of factory work in general or representative of El
Salvadoran factories in particular, but this method provides two advantages. First, to the extent that this sample contradicts critics’ claims, it
reveals that there is greater heterogeneity in the welfare implications
of factory labor than is commonly implied in popular and public
policy discussions of sweatshops. Second, these interviews provide a
rich description of how factory employment affects a particular group
of subjects in a developing country, so they provide a more accurate
and complete depiction of sweatshop work than relying only on
wage data.9
The American Journal of Economics and Sociology
Our study focuses on the subjects’ perspectives of their environment, employment, and their relevant opportunities. In total, we
conducted and recorded thirty-one interviews with employees.10 The
sample consists of approximately fifty-five percent females, and subjects are, on average, twenty-nine years old. Interview subjects at both
factories work as either cutters of material or machinists who sew the
products. All potential interview subjects work in these same two jobs.
We used both purposive and random sampling methods for selecting
interview subjects; we asked for volunteers and we randomly selected
subjects from alternating project groups based on where they were
sitting in the factory. The only difference in responses between these
two groups is that a greater percentage of the subjects who volunteered rather than being randomly selected reported payment related
problems, thirty-eight percent versus seventeen percent. This may
reflect a greater desire to voice concerns on the part of volunteers than
randomly selected subjects. Recognizing that the views of employers
may also be of interest, we conducted interviews with managers of
each factory. We conducted all interviews in private and with strict
confidentiality. We communicated the confidentiality protocol to the
subjects both verbally and in writing in both English and Spanish. We
conducted the interviews with a local Spanish interpreter and
recorded the entire process. A transcription service in the United States
then retranslated and transcribed the recordings. This ensures that no
miscommunications or incorrect translations might have occurred
between the interviewer, subject, and translator. These measures
provide assurance to interview subjects and help to elicit truthful
responses and ensure accurate communication.
Given that our central question concerns why subjects choose
their current employment, how they value the non-monetary components of compensation, and how they perceive their relevant
alternatives, qualitative research methods offer several advantages.
First, in seeking to understand the non-monetary components of
compensation, we necessarily are dealing with few quantitative variables. A worker’s assessment of the various non-monetary aspects of
employment in a particular job is multifaceted. It is this diversity and
subjectivity of non-monetary compensation that makes generating
precise measurements of total compensation infeasible. As past
Sweatshops, Opportunity Costs, and Compensation
research has focused on quantitative variables, such as wages and
employment (Powell and Skarbek 2006; Harrison and Scorse 2010),
this article hopes to provide a richer (though admittedly still imperfect) depiction of compensation by focusing on the non-monetary
components. Second, the open-ended nature of an interview (as
opposed to a survey instrument) invites respondents to supply their
own interpretive framework to the question and have their perspective reflected in the answer. Survey instruments provide a list of
possible responses, which allows researchers to increase sample
size, but at the expense of restricting the set of responses to a range
selected by the researchers. Smaller sample sizes result from using
open-ended interviews, but this method provides more informative
results. The aim of the research, in fact, was to identify alternatives
that we as researchers do not know. Because of the open-ended
interview process, there are not thirty-one answers to all of the
questions. However, our data are consistent with the standards in
the literature when using this research method. For example, a
recent book (Esbenshade 2004) on sweatshops and monitoring in El
Salvador relies on one hundred thirty nine personal interviews, but
only eighteen of which are with Salvadoran factory workers. Given
that the aim of our research is substantially narrower, we feel that
thirty-one interviews is sufficiently large to provide evidence and is
consistent with the literature.
Our central research question is explicitly concerned with privileging the respondents’ narratives over the researcher’s prior understanding of possible responses (Weiss 1994). This technique attempts to
overcome for the imposition of Western standards on the opportunity
sets of workers in developing countries. For example, Bhagwati (2004)
has argued that policymakers often develop advice and standards
based on the tradeoffs faced by Westerners, not by the individuals
living within developing economies (see also Hall and Leeson 2007).
By allowing the interview subjects to frame and inform their responses
with personal experience, the subjects provide greater insight about
what perspectives and beliefs guide their action, and thereby avoid to
some extent the preconceived reference points of the researcher
(Denzau and North 1994) and provide evidence for policymakers
about their actual tradeoffs.
The American Journal of Economics and Sociology
Alternative Opportunities for Sweatshop Workers
We designed our interview instrument to elicit responses about what
subjects perceive to be their alternative employment opportunities and
how they value non-monetary aspects of their employment. This
might not always be obvious to an individual, so we asked a variety
of questions about subjects’ previous employment, pay and working
conditions, peers’ employment situations, and alternative opportunities. By examining together the answers from these various questions,
the interviews provide a strong indication of how subjects perceive
their employment relative to their alternatives.
To begin, we report on a formal policy that affects compensation:
El Salvador’s minimum wage. Table 1 identifies the governmentmandated daily minimum wage in different industries.
Compared to other industries, clothing and manufacturing factory
work has the third highest minimum wage. The subjects in these jobs
benefit from the higher wage relative to workers in other industries.
We asked subjects if pay at their current employment was sufficient
to provide for their needs. Forty-eight percent of respondents
answered in the affirmative with no qualifications (see Table 2).
Forty-one percent answered in the affirmative, but noted hardships in
Table 1
Salvadoran Daily Minimum Wage by Industry
Business and Service Industry
Industry (not clothing and manufacturing)
Clothing and Manufacturing Factories
Seasonal Agriculture/Coffee
Harvesting Coffee
Seasonal Agriculture/Sugar Mills
Agriculture and Livestock Industry
Harvesting Sugar Cane
Harvesting Cotton
Source: El Salvadorian Labor Code, Edition 62a, July 2008.
Sweatshops, Opportunity Costs, and Compensation
Table 2
Are you able to manage financially with what you earn?
(n = 27)
Yes, unqualified
Yes, qualified
Managed with the assistance of family
Source: Interviews.
doing so. One subject answered that her current pay was insufficient
to meet her needs, and two subjects noted that they also rely on the
contributions of family members.
One subject explains that sweatshops provide important nonmonetary compensation:
I do like to work here. I don’t like working in the fields anymore. I make
more money here so it’s better here. There are also other benefits the
company provides and that help us at home and with the family. . . . I think
that working in a factory you have the benefit of having medical insurance,
medicine, and benefits such as now they are providing school packages for
our children who go to school. They give us vouchers for shoes. Those are
benefits you can have at a company. In a job as a housekeeper, you don’t
get any of that. It does have its advantages sometimes because you don’t
have to pay for transportation or food but you don’t get any other benefits.
While here at the factory, you do have some things. You can go to them
for assistance and if they can help you, they do (Subject 10).
Past research that examines only monetary compensation of factory
workers will underestimate the benefits of factory employment by
ignoring these many additional forms of compe …
Purchase answer to see full

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.

Order your essay today and save 15% with the discount code DISCOUNT15