NCPA - National Center for Policy Analysis

THE "PAUPER LABOR" ARGUMENT

September 9, 2004

Anti-globalization groups made their way to this year's Summer Olympics to protest the alleged sweatshop conditions of sports apparel factories. Indeed, Nike, Puma and others were the target of a "Fair Play at the Olympics" campaign.

But the accusation that multinational corporations exploit the citizens of developing countries is simply false, according to empirical data.

A study by Robert Lipsey and Frederik Sjoholm examined data for Indonesian manufacturing plants employing more than 20 workers between 1975 and 1999. Their research revealed:

  • Foreign-owned plants paid 44 percent above the average wage for blue-collar workers; white collar workers were paid 68 percent more than average.
  • Wages in plants that were domestically owned but then taken over by multinational corporations increased far more than domestic plants -- about 17 percent for blue-collar workers and 33 percent for white-collar workers.
  • Plants owned by multinational corporations employed more blue-collar workers than domestic plants.

In a separate study, Dani Rodrik found that developing countries have trended toward higher labor standards, and multinational corporations view them as an attraction, not a hindrance.

Moreover, the Organization for Economic Co-Operation and Development (OECD) reveals that none of the 75 most important trading nations have curtailed union rights since the early 1980s, and in fact, 17 countries have actually improved union rights.

Source: Jan Arlid Snoen, "Sweatshops and the Olympics," Tech Central Station, August 30, 2004; and Robert E. Lipsey and Frederick Sjoholm, "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," National Bureau of Economic Research no. W9417, January 2003.

For study text http://www.nber.org/papers/W9417

 

Browse more articles on Economic Issues