The Economics of Child Labor

1

• The Economics of Child Labor
• (Analysis based on a paper by Basu and Van,
  American Economic Review, June 1998)
• (http//ideas.repec.org/a/aea/aecrev/v88y1998i3p4
  12-27.html)
• Child labor Children, 14 or younger, working
  regular jobs in manufacturing, agriculture,
  mining, etc.
• Some facts from
• By the Sweat and Toil of Children - Efforts to
  Eliminate Child Labor
• U.S. Department of Labor Bureau of
  International Labor Affairs, 1998.
• (http//www.dol.gov/ilab/media/reports/iclp/swea
  t5)

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• At least 250 million working children (between 5
  and 14) in developing countries -- half work full
  time.
• Majority (61) are in Asia.
• Africa has highest proportion of children working
  (41 of children between 5 and 14).
• Many work in hazardous conditions where they are
  . . .
• . . . exposed to harmful pesticides, toxic
  or carcinogenic substances or
• . . . required to do things beyond
  their physical capabilities.

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• On rice plantations in Kenya, children make up
  as much as 90 of the work force during periods
  of rice transplanting, an activity involving long
  hours of walking backward and bending to pick and
  replant rice. Working in rice fields, children
  are bitten by snakes and exposed to diseases such
  as malaria.
• In the production of firecrackers in Guatemala,
  children as young as 7 insert fuses into
  firecrackers. The work is highly dangerous.
  Children risk burns, amputations, and even death
  in accidental explosions. Exposure to gunpowder
  leads to respiratory illness and eye
  irritations.
• Child labor perpetuates poverty.
• A working child often becomes an adult limited
  to unskilled, poorly paid jobs.

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Some data from the Sweat and Toil report
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• One of the leaders of the worldwide movement to
  end abusive child labor
• Iowas Senator Tom Harkin
• From Harkins webpage (http//harkin.senate.gov/)
  
• (Search on Child labor)
• Tom Harkin is a leader in the growing movement
  to end abusive child labor around the globe . . .
  (He) has introduced several bills to combat the
  worst forms of child labor . . . including the
  Child Labor Deterrence Act.

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• Child Labor Deterrence Act
• (First introduced in 1992. Reintroduced a
  number of times since. Not yet passed.)
• (http//www.mirrorimage . . .)
• Would prohibit the importation of manufactured
  and mined goods into the U.S. that are produced
  by children under the age of 15.
• A good idea? . . .
• Well see.

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• Reasons for child labor
• One popular explanation
• Greedy, lazy, selfish parents who dont care
  about childrens welfare force children to work
  so that the parents can enjoy leisure.
• (The child labor child abuse explanation.)
• Evidence contradicts this view
• Even in countries with a lot of child labor . .
  .
• . . . children of non-poor families rarely
  work,
• . . . and working children tend to blame
  poverty, not their parents.

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• More likely explanation
• Parents of working children care about childrens
  welfare.
• They send children to work out of desperation, .
  . .
• . . . only when absolutely necessary to
  support family.
• A (very!) simple model of child labor
• Assumptions
• 1. Same productivity for adult and child worker.
• So adult wage child wage.

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• 2. Parents care about childrens welfare.
• Will send them to work only if adults
  cant earn enough to support family.
• In particular, assume there is some wage level,
  wmin, such that
• If wage gt wmin, only adults will work.
• If wage lt wmin, adults and children will work.
• 3. Assume no other wage effects on labor supply.

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Market supply of labor
At wages above wmin, only adults will work.
(Lets say there are L1 of them.)
When the wage falls below wmin, children must
enter labor force too. (Lets say there
are L2 adults and children combined.)
When the wage is less than wmin, adult earnings
are insufficient to support family -- children
must work too.
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Labor market equilibrium . . .
in a developed country.
In a developed country, theres lots of capital.
So MPL is high . . .
. . . so demand for labor is high.
(Remember connection between MPL and labor
demand.)
L
is above wmin.
The equilibrium wage, w, . . .
Only adults have to work, so equilibrium
employment, L, . . .
is L1.
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Labor market equilibrium . . .
in a developing country.
In a developing country, theres very little
capital.
So MPL is low . . .
. . . so demand for labor is low.
Two possible equilibria
good equilibrium w1 and L L1 . . .
only adults work.
bad equilibrium w2 and L L2 . . .
adults and children work.
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Labor market equilibrium . . .
in a developing country.
Both equilibria are stable.
(If there is a small movement away from
equilibrium, . . .
w1
. . . market forces will move wage back toward
equilibrium.)
w2
Demand
Two possible equilibria
good equilibrium w1 and L L1 . . .
only adults work.
bad equilibrium w2 and L L2 . . .
adults and children work.
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Labor market equilibrium . . .
in a developing country.
wage (/hr.)
Many developing countries appear to be stuck in
the bad labor market equilibrium.
w1
A national ban on child labor could bump
the market from a bad equilibrium . . .
w2
Demand
workers
L1
L2
Good equilibrium would then be self-sustaining.
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• In many developing countries, the government has
  a hard time enacting and enforcing a ban on child
  labor because of political pressure.
• (The bad labor market equilibrium is bad for
  the workers, but good for business.)
• Is there anything that developed countries can
  do?
• Senator Harkins Child Labor Deterrence Act would
  ban imports (into the U.S.) of goods made (in
  developing countries) using child labor.

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• Child Labor Deterrence Act would result in a
  partial ban on child labor in developing
  countries
• Firms in export sector (firms producing goods
  mainly for export) couldnt afford to use child
  labor, . . .
• . . . firms in non-export sector (firms
  producing goods mainly for domestic consumption)
  could.
• Effects of a partial ban?
• Look at two cases
• Export sector is small or . . .
• . . . export sector is big relative
  to non-export sector.

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If export sector is small . . .
18
Labor market stays in bad equilibrium child
workers just shift from one sector to the other.
Child Labor Deterrence Act wouldnt
eliminate child labor.
Non-export sector
Export sector
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If export sector is big . . .
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Result Excess demand for adult workers
and excess supply of child workers.
?
?
Non-export sector
Export sector
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• Excess demand for adult workers means
  adult wage increases.
• Excess supply of child workers means
  child wage decreases.
• If adult wage lt wmin, still have bad
  equilibrium. All children working but earning
  less. Families better off?
• If adult wage gt wmin, get good equilibrium. In
  this case, CLDA would eliminate child labor.
• Is Child Labor Deterrence Act a good idea? . . .
• It depends.