More 'globalised' countries have less, not more child labour

Submitted by crinadmin on Tue, 07/02/2006 - 05:22

Summary: Critics of globalisation argue that developing countries may seek to attract foreign direct investment by keeping their labour costs low. One way of doing this is by allowing child labour. Globalisation is often blamed for increased levels of child labour, but the reality is not so simple. Trade openness may actually have the opposite effect.

Critics of globalisation argue that developing countries may seek to attract foreign direct investment by keeping their labour costs low. One way of doing this is by allowing child labour. Globalisation is often blamed for increased levels of child labour, but the reality is not so simple. Trade openness may actually have the opposite effect.

In 2000, about 211 million children between the ages of five and fourteen were engaged in some form of economic activity. Developing countries with low labour standards and wages, along with an abundant supply of cheap, unskilled labour - including children - are seen as attractive for foreign investors. High-profile cases involving Nike, Reebok and Adidas show that multinational corporations do at times subcontract to companies that employ children.

Research from the London School of Economics and Political Science, UK and the Norwegian University of Science and Technology, Norway attempts to see if globalisation, particularly in the form of foreign direct investment and trade openness, has a positive or negative effect on levels of child labour in developing countries.

Trade liberalisation in countries with a large supply of unskilled labour could improve immediate economic benefits and thereby increase the incentives to send children to work rather than to school. However, some developing countries do recognise the importance of education and skills for their long-term trade competitiveness and economic development. In this case, increased trade openness could reduce levels of child labour. A more open economy is less likely to continue old practices and institutions that promote child labour. Also, foreign investors might be less interested in exploiting cheap labour, including child labour, than is assumed. Market size and market growth, political stability, infrastructure and highly skilled labour are often as important, if not more important, than cheap labour.

The research finds that:

There is some evidence to suggest that countries that are more open to trade and more penetrated by foreign direct investment have relatively low levels of child labour.
Reduced child labour levels are associated with actual trade openness (as measured by the sum of imports and exports divided by Gross Domestic Product), rather than a liberal trade policy regime.
The benefits of globalisation, through raising incomes, would further reduce the need for child labour.

The authors point out that while they show that increased trade openness is correlated with reduced levels of child labour, they cannot demonstrate that one leads directly to another. They recommend:

further research to examine the exact mechanisms by which trade and foreign direct investment affect child labour
not using trade or investment restrictions as a sanction against countries that export the products of child labour: banning child labour in export industries, for example, could push children out of relatively well-paid jobs (though this is not always the case) and into the informal economy.

Instead of sanctions, the researchers argue for a greater integration of developing country economies into the world economy. Globalisation is likely to represent a promise, not a threat, for the eradication of child labour across the globe.

Source: Trade Openness, Foreign Direct Investment and Child Labour, World Development Vol. 33 (1) pages 43-53, by Eric Neumayer and Indra de Soysa, 2005

id21 Research Highlight: 20 January 2006