NCPA - National Center for Policy Analysis

Child Labor

March 12, 2004

Child labor is one of the most reviled aspects of any economy, yet one in six of the world's children between the ages of 5 and 17 work. A new report from the International Labor Organization (ILO) argues that child labor is not only morally repugnant, but also economically counterproductive.

The report argues that ending child labor can be economically beneficial:

  • The cost of ending child labor worldwide, by creating sufficient schools and replacing lost income, would be around $760 billion over the next 20 years -- or about 7 percent of America's annual gross domestic product (GDP)
  • The ILO calculates that the benefits might be seven times as large, because the workforce would be better educated and generally healthier.

Skeptics of this calculation question where the money for the new schools and replacement income would come from. Even if the money would materialize, would it be well spent?

Most economists argue that child labor is the best of several terrible solutions. For most working children, the alternatives are not schools, but joining a militia or engaging in prostitution. They argue that poverty is the true cause of child labor, and point out that child labor only ended in the Western world when society became sufficiently wealthy to forgo the income provided by working children.

Research by the National Bureau of Economic Research adds evidence to their claim:

  • Between 1993 and 1997, Vietnam's GDP per head grew at an average rate of 6.5 percent per year.
  • Over the same period, the number of children in the workforce fell by 28 percent.
  • The author estimates that families' rising wealth was responsible for four-fifths of this fall.

Source: "Sickness or symptom? - Economic Focus - Child labor," Economist, February 7, 2004; "Investing in Every Child: An economic study of the costs and benefits of eliminating child labour," International Labour Organization, December 2003; and Eric Edmonds, "Does Child Labour Decline with Improving Economic Status?" National Bureau of Economic Research, Working Paper, No. 10134, December 2003.

For ILO report

For NBER text


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