Child Labour Policies in Business

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Introduction

Many European nations and the US are putting measures in place to ban the importation of goods produced with child labour to their territories.

In particular, in the US, through TVPRA (trafficking victims protection and reauthorisation act) of 2005, the US labour secretary coupled with other agencies and other departments are required to ensure that goods that are produced in violation to the set international labour standards are not sold in the United States of America.

Following the enactments made in 2008 to TVPRA, the labour secretary was required to compile a list of all goods produced through the inputs of child labour. In the year 2010, Hilda Solis compiled and forwarded the list.

Various US agencies and departments have also issued their guidelines on abolition of the importation of goods produced with child labour based on the list issued by the US labour secretary.

While the US and many other European nations accept that the banning of any illegal form of child labour is vital for enhancing observance of the rights for children, some nations, especially in the developing world, perceive child labour as one of the sources of economical sources of labour.

According to the statistics released by ILO (International Labour Organisation), approximately 18 percent of children falling in the age of 5 years to 14 years across the globe are active economically (International Labour office, 2002, p.43).

Thus, about 211 million children engage in works that earn wages in familys farms and production process of primary products in firms. They also engage in family-oriented enterprises established to make primary products, which are offered in the market for sale besides engaging in barter.

Therefore, they are in a state of unemployment though they continuously search for these types of chores. The statistics are worrying amid the intense focus of the US and many European nations on the need to curtail the exploitation of children.

In this paper, the focus is on how the increasingly strict child labour policies affect children in the developing countries such as the Indonesia, India, Thailand, and Pakistan in which companies such as Addidas and Nike base their production.

These two brands have been heavily accused of child labour over the past decade. This paper will show how this has affected children in these developing countries. These companies are located in Asia where child labour, according to ILO, is most prevalent: it stands at 60 percent.

In India, for instance, Burke (2000) claims, children as young as seven, were regularly used in the production of wide range of sports goods in which about 13 million pounds worth of these goods were meant for British markets (Para.7).

The paper also focuses on the question of how the policies on child labour have influenced the GPD of developing nations due to lack of education and labour opportunities for the newly unemployed children.

Finally, this paper will investigate how Addidas tried to compensate this cheap and available labour after the enactment of even stricter child labour policies.

Impacts of Restrictions on the Import of Goods produced with Child Labour on Children Living in the Developing Countries

The policies banning the importation of goods made with child labour are attributed to the need of preventing children from being worked under dehumanising conditions for low incomes.

Brown (2002) appreciates that children have been worked throughout history by asserting, the fact of children working and the difficult conditions under which children work occasionally become more evident&because of the increasing the number of children producing goods for export (p.3).

From this perspective, two questions are worth giving some thorough treatment:

Why do children work?
Why do companys such as Nike claim that they have shunned from employing children in Pakistan, Bangladesh, and Cambodia and other nations and yet they are caught up in the accusation for employing children?

Many theories have been put forward to explain the circumstances under which children work. Some of these theories are discussed by Brown (2002) in his work entitled determinants of child labour: theory and evidence (pp 1-83).

This work comprises of theories of labour markets, which can be grouped into two: demand side and supply side determinants (Burke, 2000, p.23).

Children may engage in paid labour for a number of factors such as budget constraits for households, failure of bargaining power, and where children act as complementary inputs to household production (Brown , 2002, p.22) amongst others.

Budget constraints in households hinder the parents capacity to ensure equalisation of expenditure on edcuation across all their children. This occurs especially when parents possess minimal information on the value of borrowing for the sake of bettter income in some future time.

In such a situation, the level of spending on the first child and last born will be higher than family average (Brown , 2002, p.6). This disparity is explained by the relationship between constraints of family liquidity and investiments on children.

Where families are liquidity-constrained, they cannot utilise the returns earned on investiments in bettering the life of children until they enter into the labour force (Brown , 2002, p.6). On the other hand, upon the entry into the labour force of the oldest child in a family constrained by budgets liquidity, the family budget is relieved.

Consequently, it bceomes feasible and possible to invest in the other siblings. Therefore, it is more likely that first borns in a family that is liquidity costrained would venture into child labour since a direct correlation exists between child labour and educational attainement among children: child labour being also in a direct correlation with budget liquidity constraints.

Failure of bargaining power is a significant contributor to child labour.Quoting Robinson (2000), Brown argues, non-altruistic parents fail to invest in an efficient level of human capital in their children because the child cannot precommit to repay the loan made by the parent to the child while in school (2002, p.12).

On the other hand, in case of a purely artruistic parent, chances of the emergece of child labour cannot be rulled out since any bargaining with people employing the parents results into child labour.

This argument is evidenced by a case whereby an empoyee earns a suboptimal income, and the employer engages in bargaining with him or her in the attempt to increase the productivity of that employee through the increment of wages.

While this extra earnings may be meant for increasing the buying ability of the employee, in case he or she has a family, the range of commodities that the employee can buy may not increase, as it may be offset by increased consumption by his or her family.

Theoritically, to seal off this gap, the employer may consider hiring even the spouse and the children. This way, child labour results.

Where chidren serve as complementary sources of inputs for increasing household prodcutivity, child labour comes in. The figures released by ILO indicate that the prevalence of child labour is highest in developing economies.

However, this does not imply that, in such nations, all the children involved in child labour come from poor families since, according to Brown (2002), there are a number of assets that require a complementary input of labour, and families may expect to get that labour from their children (Connor, 2001, p.21).

Thus, putting in place measures to curtail accessibility to capital markets may not reduce child labour in the short run. For instance, in a family, irrespective of the the available wealth, the chances of eangagement of younger chidren in labour are reduced by the presence of older children within the family.

Also crucial to note is that, other than reasons pegged on inputs of education attaiment on the productivity of the parents, edcaution is a significant asset that may reduce child labour.

Demand is a subtle factor that contributes to the maganitutes of child labour in different nations. This factor is critical especially in the developing world in which industries have not mechanised fully.

In economic terms, the demand for child labour can be explained from the perspectives of demand for unskilled labour in comparison to skilled labour.

For the production technolologies, which require high levels of skilled labour, child labour is minimal. On the other hand, in production technologies that require unskilled labour, immense opportunities exist for meanial chores.

The correlation between the state of technology of a production system and child labour is evidenced by Admassie who argues, there is a strong correlation between the incidences of child labour and agriculturals share of GDP Ethiopia (Brown, 2002, p.25).

The more technology systems are backward, the greater the magnitude of child labour. The prevalence of child labour in such production systems does not imply that children are more precise in their work than adults. Rather, children can work for lesser wages in comparison to adults.

For instance, Nike has been accussed over several years that it employs children in its Cambodia plants. He argues, fake evidence of age could be bought in Cambodia for as little as $5 ( Boggan, 2001, Para 8).

While the stalemate of the companys accusation for employment of children remains unresolved, according to Boggan (2001), there are immense concerns that the company will make use of a very minimal portion of the cost of production of its pair of shoes (70 pounds) in the payment of labour.

Nevertheless, amid the high call for Nike to ensure that workers within its Asian production plant are remunerated accordingly, the company treated sweatshop allegations as an issue of public relations rather than an issue of human rights (Boggan, 2001, Para. 21).

Measures to provide good working conditions at the Nike plants in the Asian countries face challenges both emanating from the managers and the employees. For instance, When the Jobs Inspector Calls (2012) claims that managers bribe auditor so that they can report on lesser working hours and higher pay rates (Para.9).

On the other hand, workers, particularly the immigrants, are normally willing to work longer hours so that they can maximise their savings. However, When the Jobs Inspector Calls (2012) does not report any issues related to employment of children and or factors that may make the company tolerate child labour within its factories.

Through the companys watch, Tom Connor, the company holds, finishing work in a Nike contract factory, the great majority of Nike workers will go back to rural areas marked by extreme poverty ( Boggan, 2001, Para 10.). Due to this poverty, employees have a little bargaining power with the employers.

Their budgets are thus likely to be liquidity-constrained. Stemming from the earlier discussions, these constraints lead to an increase in child labour atleast for the first child in a family. For the Cambodias Nike plants, this may happen in the attempt to garner more financial security in case the contracts are over.

Indeed, according to Boggan (2001), the company accepts this arguement when it argues that employees future economic security is very much tied up with what they earn now (Para.11).

A survey results of three factories based in Philippines, Indonesia, and Srilanka amplify this arguement in the sense, not one of them paid living wages to their combined 100,000 strong workforce (Bunting, 2008, Para. 5), and yet people reported to work on a daily basis.

In Indonesia, about 25 percent of all the workers were placed on temporary contracts while, in Philippines, the number hiked to 85 percent. Worse still, the emplopyees who were subjected to a compulsory overtime were supposed to meet high production targets only to recieve low wages later (Bunting, 2008, Para.7).

In Indonesia, at the Sukabuni factory that makes converse shoes, workers complained that they had experienced encouters of direct abuse from the supervisors, something that Nike does not deny. However, the company is quick to argue that it can only do little to stop it (Daily Mail Reporter, 2011, Para. 2).

All these have the capacity to subject employees to budget liquidity constraits thus giving rise to instances of child labour to increase household incomes.

Arguably, instances of families willigly permiting their children to engage in paid labour are an attempt to maximise the familys wealth before Nikes constracted factotries are closed often making the employees to go back to their poor rural areas. This phenomenon is an exemplification of the supply side factors that may contribute to child labour.

The supply side factors for increased child labour may be explained in three models. The first model is based on the argument that parents settle on decisions on child education and or labour through the consideration of the need to maximise the wealth of their families.

Accodring to this model, child labour arises when the rate of return on an education falls below the market rate of interest (Brown, 2002, p.41). Such families are essentially constrained by credit. In model two, child labour surfaces to enhance transferability of household assets into the present from the future.

Cosequently, child labour occurs in situations where the assets of the household are zero. Lastly, according to the third model, parents are selfish but cannot control the incomes of their children once they become adults ( Brown, 2002, p.41).

Therefore, parents would place their children for labour in the desire to ensure that they are able to control their incomes at an age when it is possible to control them. Over the years, scholarly evidence has resulted into rejection of the first and the second models.

The supply side and demand side factors that attract opportunities for children to work pose immense impacts on the measures to boycott the consumption of products produced with child labour on children in the developing countries.

In the first place, restricting the importation of Nike and Addidas products on the basis that they are produced with child labour input will result to laying off all chldren labourers in the attempt to retain the market share of these two global bands within the European nations and the US markets.

Third-world nations have been depending on donors aid to fund their budgets due to the low productivity levels. This implies that third-world nations are consumer markets. For the citizens to satisfy their demands, they have to operate under the constraints of budgets liquidity.

Restricting the selling of goods produced with child labour would imply that, in such nations, families and households would even suffer more budget liquidity since the portion of household incomes generated by children will be shut off.

Even though the main goal of boycotting the consumption of products produced with child labour is to increase the levels of educational attainment among third-world children, such a measure may not ammount to the realisation of this endevour.

This is because, by simply laying off the children labourers, it does not outlightly mean that companies such as Addidas and Nike, which base their production in the third-world nations, especially Asia (Burke, 2000, para. 11), would increase the incomes earned by their parents.

However, restriction of the sale of products that are produced with child labour would truncate into a reduction of the output capacity of many companies whose labour markets are open to hiring children.

In the nations where many of the factories are operated by contractors who, upon making products, are supplied to the European markets and the US such as Nike products, a total restriction of the importation of products that are produced with child labour implies that the nations would have a reduced flow of money within their territorie.

This translates to a slowed economic growth. According to Dagdemir (2010), economic growth increases the demand for child labour, especially during the lack of goverment intervention, labour markets becomes open to child labour (p.1).

From this position, it is essential to note then that economic growth in nations that exploit children to provide labour is in a direct proportion with child labour. Slowing econimc growth by restricting the importation of products produced with child labour would result to a reduction of child labour globally.

Families that rely on these children to generate incomes would suffer from reduced buying power atleast in the short run.

However, in the end, in an economic sense, the families would gain since the reduction in child labour translates to an increase in education attainement and hence the availability of a more skilled labour, which is remunerated better than the unskilled labour because educational attainement is negatively correalted with child labour.

Many of the economic researches that look into the causes of child labour in the developing nations cite poverty among households and government polices as the main factors that fuel the increase of incidences of child labour.

Boycotting products that are produced with child labour translates to sanctioning of governments whose production plants hire children to alter their policies if they have to participate in international trades.

This leads to an increase in the rate of economic development in such nations since, according to Dagdemir (2010), use of child labour is negatively related to economic development (p.39). In the developed world, there are standardised labour laws, which are strictly adhered.

This makes workers in the developed world to have better working conditions. Boycotting the consumption of products made with child labour would result to a reduction of the incidences of mistreatment of workers in general.

This follows because, when the developed nations sanction trades with developing nations, a mechanism for enforcing labour policies may be obtained, which, according to Dagdemir (2010), governments in developing countries often lack resources to enforce child labour claims (p.39).

In the attempt to comply with requirement for non-engagement of children to supply labour in factories imposed on plants situated in the developing world, governments may opt for a compulsory placement for children in schools.

They may also result to subsidising education through programs such as the stipend programs deployed by the Brazilian government to reduce child labour to boost school enrollment (Vawda, n.d, pp.1-3).

While this measure may help the developing worlds governments to ensure compliance with the imposed trade sanctions seeking to curtail the importation of products produced with child labour, the measure may make many children have accessibility to education and hence better jobs in future.

In the deployment of measures to fight against child labour through the restriction of importation of products produced with inputs of child labour, the assumption is that adult labour may replace child labour.

In this dimension, child labour may be argued to create unemployment to adults. Indeed, child labour deterrence act of the US states, the employment of children under the age of 15 years&ignores the importance of increasing jobs, aggregate demand, and purchasing power among adults as catalyst to development in many developing countries (Doran, 2010, p.2).

This argument is consistent with the ILO that holds that incidences of child labour result to low job accessibility rates to adults coupled with poor wages (Doran, 2010, p.2).

Essentially, then, restricting the importation of products that are produced with child labour would not only make parents seek for alternative ways of keeping their children busy but also protect the children from exploitation by capitalistic companies seeking optimal profits.

This impact of restriction of importation of products produced with child labour is enhanced by Doran (2010) who, through the utilisation of data generated from a schooling experiment in Mexico, finds out, decreasing child farm work is accompanied by increasing adult labour demand (p.1).

This means that a decrease in the supply of child labour leads to an increase in demand for adult labourers.

Arguably, therefore, by imposing sanction on products that are produced with child labour, a decrease in supply of child labour would result to an increase in demand for adults labour accompanied by an increment in the provisions of better working conditions, reduction in working hours, and even an increase in the wages paid to adults.

This way, the loss in welfare incurred by laying off children workers is offset by this increase of household incomes earned by adults.

Impacts of Increasing Strict Child Labour Policy on Children Living in Developing Countries

Many of the laws that necessarily help in elimination of child labour are enormously borrowed from the developed nations experience with child labour during their industrialisation age. Great Britain was transformed into the present-day industrial state from an agricultural nation.

In this process, Great Britain underwent immense social and economic changes. Amongst the most regretted experience is employment followed by the overworking of children in textile factories.

Nardinelli (1980) is also inclined to this line of thought by supporting Edward Thompsons argument, the exploitation of little children, on this scale and with this intensity, was one of the most shameful events in our history (p.739).

Tantamount to the situations faced by workers in the Sukunami plant in Indonesia, the great Britain textile factories masters (supervisors) were brutal and often garnered effort to oppress children working in industries in a manner that was comparable to that of west Indian slaves (Nardinelli, 1980, p.739).

Arguably, even without the imposition of any rules to curb child labour, the Great Britains industries evolved through the development process to appreciate and respect the rights of children. For the case of the developing nations, they are in a similar stage experienced by the developed world in their industrialisation age.

Thus, it is possible for the developing world to arrive to the same state as the Great Britain, the US, and the European nations at some time in the future to respect the rights of children.

There is the need to utilising the experiences of the developed worlds instances of the abuse of the child right through overworking them in industries coupled with the set out rules and principles to guide in the embracement of policies subtle for protection of children rights.

Therefore, with globalisation, developing nations may take lesser time to refrain from employing children as a cheap source of labour.

Advocating for stricter child labour laws to control child labour produces myriads of impacts on children living in the developing world. Consistent with the argument of the previous section, a total restriction of children from participating in paid labour may increase the school enrolment rates.

Oonk (2008) supports this argument. He further argues that an increase in child labour impairs the acquisition of human capital (Oonk, 2008, p.7). What this statement means is that education attainment is inversely proportion to child labour.

In the developing world, apart from the challenges of poverty, which have been often associated with an increase in child labour (Edmonds & Pavcnik, 2005, p.199), imposing strict laws on child labour so that parents can only choose to send their children to school as opposed to work faces some challenges associated with the quality of learning provided in schools.

The argument here is that, declining child labour may only lead to an increase in human capital acquisition if schools are available and parents consider the available schools as affordable and accessible coupled with having a paramount quality of learning such that parents consider such schools as useful.

Increment in child labour is viewed to influence trade from the contexts of the increment of availability of unskilled labour. The more the unskilled labour, the more the shift of the production systems deployed towards being labour intensive.

Therefore, even with sophistication of production systems, lesser opportunities are created for skilled labourers.

Imposing stricter laws on child labour may thus help in shifting this pattern so that, for companies such Nike and Addidas, which rely on easily available labour in the Asian nations to make mega profit margins (Marks, 2012, Para. 8), may focus more on automation of plants so that more skilled labour may be required to run the factories.

Creating a no room for unskilled labour will make parents consider looking for mechanisms of giving their children the capacity to work in factories requiring higher levels of skilled labour. This can only be achieved through an increased enrollment of children in schools.

In the short run, households that depend on the incomes earned by children to boost their budgets would suffer budgetary.

However, the improved remuneration accompanied by the possession of higher skills levels may account for these deficits in the end so that imposition of stricter laws on child labour may raise the living standards of household, which is an indicator of the GDP of the nations, in the end.

Apart from violation of children rights, child labour results to various damages on the growth and development of children.

For instance, the International Labour Office informs, child labour is clearly detrimental to individual children preventing them from enjoying their childhood, hampering their development and sometimes causing lifelong physical or psychological damage (2002, p. 2).

Apart from individual detriments, child labour is also a problem to various communities and societies as a whole in places where it is prevalent. It leads to the exaggeration of the magnitudes of poverty, although poverty is amongst its causes, besides fostering social exclusion of children.

Child labour also slows national developments through denying children an opportunity to attend schools to gain education, which helps them garner skills, which lead to higher economic growths while fully utilised in adulthood and hence the GDP of the nations.

It is for this purpose that it is necessary to abolish child labour to ensure the availability of both skilled and high quality labour in the future. However, not all forms of works performed by children need to be abolished.

ILO sets out three groups of works that are worth abolishing so that children may become more productive in the future. The first group comprises of works that are executed by children who are below the minimum age that is stipulated under the national legislation through agreements with the international standards of labour.

Such works impede the development and child education (International Labour Office, 2002, p.9). The second group is called hazardous works, which include all works that jeopardise moral, mental, and physical well-being of children.

This category comprises of the worst forms of child labour, and takes into account tasks such as trafficking, slavery, and debt bondage coupled with other forms of forced works including engagement of children in prostitution, armed conflict, and even pornography amongst others (International Labour Office, 2002, p.9).

From the perspective of the works that are declared by ILO as worth abolishing, imposition of stricter laws on children labour particularly where children engage in the third group of works will have an overall effect of creating an educationally fit workforce.

These personnel will be more moral, ethical, and industrious in the future of the developing nations (Zagel, 2005, p.1). This workforce would be more cognisant of its rights and ways of claiming for the children so that the situations involving overworking of employees, denial of good pays among other negative treatments claimed by Nike workers in Sukunami factories in Indonesia are not experienced.

In Bangalore, India, not just general employees of all ages who are subjected to negative wok experience such as working extra time with no pay: children have to endure this challenge also. According to Ullas (2012), Bangalore has an approximately 14,980 child labourers (Para. 1).

Of this figure, boys account for 11,267. 90 percent of these boys engage in hazardous jobs, which includes construction, garage mechanics, hotel and bar boys, butchers, scavenging, granite works, blacksmiths and agarbatti manufacturing (Ullas, 2012, Para. 4).

When a sample of 1,594 boys was picked in an attempt to study the gravity of the challenge, it emerged that 67 percent were between 13-14 years old while 10 percent were between 9 to 10 years old. On the other hand, girls began to work at a lesser age compared to boys.

All these age groups fit into the definition of child labour offered by ILO. In the major-cited reasons for engagement in these jobs, poverty took an immense share while parents decision to withdraw them from school to help in supplementing households incomes was the second (Ullas, 2012, para.5).

Additionally, about a third of the children surveyed worked for 8 hours in daily with no extra wage given. This example depicts the impacts that stricter laws on child labour would have on children in the developing countries since its abolishing could lead to all these children being placed in schools.

Attempts by Addidas to Compensate for Cheap Labour

Addidas is a big brand that represents a sports peoples status. However, amid its recognition and brand equity, the company faced a mega controversy in the year 2000 related to mistreatment of employees in the Indonesian factories, which supplied conglomerates to Germany (Burke, 2000, Para.1).

The European parliament heard that the company made clothes that had child labour inputs. These children were in some instances forced to work overtime without extra pay. At times, they were sexually harassed.

The Indonesian workers representatives testified before the European parliament that, in Tuntex and the Nikoma Gemilang factories situated in the capital of Jakarta, children of 15 years and below worked for 15 hours in a day and 70 hours within a week for only $60 in a month besides being punished for failing to work overtime.

These wages were much below the par value set by the international labour organisations wage levels that are necessary to make workers live a decent life (International Labour Office, 2002, p.67).

Furthermore, according to Burke (2000), the workers representatives also alleged that these young children were penalised for taking leave during medical difficulties and had illegal deductions taken from wages as punishments for minor misdemeanors (Para.5).

These accusations were seen as a fresh re-emergence of the 1998 claims that the company produced footballs that contained the crest of Manchester United through child labour in India with the children labourers earning as little as 6p in an hour.

Most of the goods manufactured by Addidas are made through tenders that are awarded to factories located in the developing nations where labour is cheap, and where the company faces milder workers relation regulations in comparison to the US.

In Thailand, a woman in the Addidas factory who was later sacked in 1998 claimed that the company, through its management, deployed brutality to ensure that orders were finished within minimal time and cost of labour.

Workers were denied their rights such as sick pays and even statutory holidays to meet factory targets (Burke, 2000, Para.9).

In the light of the above accusations, the company maintained that it had strict labour codes of conduct that were adhered to in a bid to ensure that such oppressions of workers did not occur while also ensuring that labour wages were constantly monitored (Burke, 2000, Para.13).

Peter Csanandi, the Addidas spokesperson, reinforces this companys stand by stating that the company had very good factories characterised by good working conditions. Hence, the management of the company was incredibly serious about the issue of workers complains.

He further defended the company by claiming, we work closely with factory management and demand that they ensure good working conditions for workers and we also have a team of our own people who go to factories to sort out problem (Burke, 2000, Para.15).

However, the company accepted that, in some situations, the claimed complains may occur with the company having a little control over them especially in the locally contracted factories. In particular, in Britain, Addidas admitted having problems with the shoe factories located in Indonesia.

However, the company never stated the problems it faced with the two factories: it was quick to note that it had embarked on increasing workers pays besides taking pragmatic strategies to settle the overtime demand coupled with holding identity cards for labourers within the Nikomas factory to ensure that no person under the age of 18 years worked there.

This last defense measure indicated the likelihood of the company to have been making use of child labour in the two Indonesian factories.

Conclusion

The US, many European nations, and many other countries that are signatories of the international labour standards set out by the international labour organisation seek to restrict the importation of goods produced with child labour into their territories.

In Economic terms, this amounts to boycotting the consumption of such products. Should such sanctions be imposed, companies such as Nike and Addidas would suffer since they have been accused of selling goods with inputs from child labour in their third-world locally contracted factories.

In the paper, it was argued that these companies might not be willing to give up on the European and the US markets. Hence, they would embark on putting in mechanisms of ensuring that ILO provides good working conditions to the employees who meet the accepted working age.

Consequently, if children work in their factories, as stated, the companies would consider laying them off. Such children would be incapacitated to supplement household incomes. The likelihood is that parents would send these children to school, something that would increase the availability of skilled human capital.

Education attained is directly correlated with higher economic growth. Therefore, restriction of importation of goods produced with child labour and putting in place stricter rules on child labour, the developing nations would experience a growth of their GDP.

These two aspects that help in reducing child labour would boost the enrolment of children in schools. This outcome relates to economic growth, which raises any nations gross domestic product (GDP).

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