CHILD LABOR: GOOD OR BAD?

Most people wouldn't bat an eye at the notion that societies would want to limit the exploitation of children as laborers. Not The Economist.

The International Labor Organization, and multilateral institution under the auspices of the UN, has outlined four core labor standards: prohibition of forced (slave or prison) labor, the right to free association and collective bargaining, prohibition of discrimination in pay and employment, minimum ages for work and protections against "the worst forms of child labor." These have been recognized in the UN's Universal Declaration of Human Rights some fifty years ago. Note that the United States even today has failed to ratify some of these rights.

While most see child labor as abjectly abhorrent, The Economist (and many neoclassical economists) are more sanguine on the topic:

"Child labour, of course, is as old as human history. Until relatively recently, parents viewed children as economically useful and, especially in farm-based economies, had them milking cows or sowing seeds as soon as they were old enough to do so."

Yes, but today's child laborer is not Ragged Dick shining shoes on the streets of New York. Milking the cows is markedly different than say operating industrial machinery in the manufacture of consumer electronics or Kate Spade hand bags (both of which rely on small, nimble fingers).

"Should rich countries attempt to enforce a ban in poorer countries as well? On the face of it, no."

The Economist argues that child labor is the best of a bad situation. Parents send their children to work to augment household income--it is an act of desparation. without work, children would be (and are) at risk of other forms of exploitation: prostitution, drug trafficking, military conscription, etc. While these are all prohibited by the ILO core labor rights with regards to child labor, the sad reality is that exploitation of children in all its forms still continue.

The question of whether to force a ban or not, then, is somewhat of a false dichotomy (though it fits quite nicely into their editorial agenda of unregulated globalization quite nicely--they would like to see all labor standards kept out of international economic agreements). Poverty and child labor are (in economic terms) endogenous--that is poverty is associated with child labor AND child labor is associated with poverty with mutual causality. Since economic theory sees child labor as retarding long term economic growth by impeding large sections of the child population from gaining the education (aka human capital accumulation) necessary to fuel innovation and increasing incomes, poverty and child labor create a viscious cycle.

The answer then is to end poverty, for which The Economist has a neat solution: more deregulation of international trade and capital flows, which have been so successful in ending poverty. Oh wait, no they haven't. This recommendation is based on the findings of a recent study out of Dartmouth University attempting to test the relation between trade and child labor. While the paper, I think, makes some promising headway in the empirics of measuring this relationship, it also has some problems with how it measures countries' "openness" to trade (see a longer discussion on this issue here) and the data it uses for child labor, which are rather unreliable measures (surprise, countries tend to lie about their incidence of child labor and therefore it must be measured by proxy through such things as primary school enrollment rates, etc.).

(Stay tuned for more on the openness issue later. It's a commonly misunderstood notion that is used indiscriminately in public and technical commentary on globalization to the advantage of pro-deregulation advocates).