Wednesday, October 7, 2009

Defending "Sweat Shops?"

An episode of "Penn and Teller: Bullshit" on Walmart covers some very interesting and intriguing issues. Watch this clip, and if you have time watch the whole episode.

Clip Here

My Perspective:

Companies that outsource their work to third world countries, like walmart does for some of its products, are not exploiting the people of those nations. In fact, those companies are raising the standard of living in those nations.

If you look at the basics of economics, wages are set by what the workers are willing to accept as compensation for their time and labor. If the compensation is not as good as or better than other alternatives, then those workers will seek work elsewhere. Just think of your own experiences. If you were a high school graduate looking for a job and you had opportunities to work at Mcdonald's for 7.15 an hour or being a cashier at Walmart for 10.25 an hour you would obviously pick the Walmart job—unless the work was something you refused to do or was not worth the extra money.

The case is the same in foreigners who work in “sweat shops.” In countries like India or Vietnam, the average wage a worker can receive from a domestic job is usually far less than the wages they can receive from working in a so called “sweat shop.” It seems inhuman to let people work for such a numerically small amount, but when compared to the standard of living of the workers country, they are almost always benefiting from the jobs our companies provide. If that wasn't true, then those workers would simply not apply to work in those locations. Either they leave a worse job for the job at the “sweat shop” or the could not find a job at all except at the “sweat shop.” Either way, they made a free choice to start working and continue working for an American company.

If we were to disallow American companies to outsource their labor to these countries then not only would it hurt the American consumer, but worse, it would also destroy the livelihood of thousands in the third world. These corporations are responsible for raising the base line of human existence in these countries, just as capitalism always does.

It's a simple yet easily missed utility of the free market that a free person would not choose to work a job that would make their situation worse than it already is. American companies must offer those workers a wage and working conditions that are acceptable by the workers they are trying to attract, otherwise they would not have anyone to run their overseas operations. The reason why they can do this is because Americans expect much more than what they are offering, but just because their wages and conditions don't appeal to us, it doesn't hold true that no one would agree to them. Since the same work would cost far more to be completed in America, companies outsource the labor to areas where the expectations are far less and the standard of living is drastically lower. This is smart business and it saves us money and gives the employees a better life.

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