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Thursday, July 19, 2007

"Trade and Child Labor"

Does increased international trade with low-income countries influence how much work is performed by children living in those countries?:

Trade and child labour, by Eric Edmonds Nina Pavcnik, Vox EU: Iqbal Masih was born in 1982 near Lahore Pakistan. At age four, Iqbal began working a carpet loom for at least 12 hours a day, six days a week. His parents received an advance on his wages, so Iqbal was bonded to his employer. Iqbal could not leave, and his employer chained him to his loom in order to make sure he did not run away. At age 10, Iqbal escaped. His physical stature at age 10 was roughly that of a six year old boy, and he reported years of hunger and physical abuse.1

Understandably, consumers in wealthy countries are concerned about their own complicity in stories like that of Iqbal's and other children involved in the manufacture of carpets, surgical instruments, soccer balls, clothing, and other goods produced for export from low income countries. The pervasiveness of working children in poor countries magnifies these concerns. An estimated 191 million or 16 percent of children aged 5-14 in the world work today.2 Very few of these children work directly in the manufacture of products for export. Most are engaged in agriculture or their family business, often working by their parents' side. Does international trade influence whether these children work?

Our recent research shows that children are less likely to work in countries with more international trade.3 The negative association between trade and child labour holds even when considering only poor countries’ trade with high-income countries. It also holds up for trade in unskilled-labour intensive products. Quite simply, child labour is less prevalent in countries that trade more because countries that trade more are richer, and children work less in richer countries.

Why then is public perception so strongly titled in favour of the idea that international trade causes child labour in poor countries? The fact that some children are engaged in the production of exports leads many to conclude that the availability of work in export sectors induces children to work. Yet, child involvement in the production of products for export is not evidence that the export opportunity causes children to work. If the carpet sector job were not available to Iqbal, would Iqbal have gone to school and grown up to be a well educated, secure man?

Why are children working?

To consider whether international forces can cause children to work, one has to ask: why are these children working? Would removing one employment opportunity eliminate the factors that cause children to work in the first place? Our research has considered these questions in specific country contexts, using detailed survey data on the activities of individual children within the country.

Poor families must balance the child's potential economic contribution against alternative uses of the child's time. Thus, children work when their potential economic contribution is large, when alternative uses of their time are not valued or productive, or when their economic contribution is important to their family's welfare. Demand for low skill products from consumers in rich countries can raise the economic opportunities available in poor countries, increasing the child's potential economic contribution to the family. In a recent study, Diana Kruger finds that families in Nicaragua appear to take advantage of a temporary surge in coffee prices by having their children work more.4 Her finding highlights that labour demand can influence how children work. However, trade can also influence family living standards. In the Nicaragua case, this increase in family income was correctly perceived as short lived. In several studies, we have found that when the changes in family living standards are sustained, changes in living standards seem to have a bigger influence on whether children work than do changes in the employment opportunities available to children.

In a recent study with Petia Topalova, we shed some light on the question of why children work by examining how children in rural India were impacted by India's tariff reforms in the early 1990s.5 Since the 1950s, India imposed large, distortionary tariffs on imported goods. These tariffs protected some jobs and employment opportunities at the expense of other workers and higher prices. Concurrent with the phased in reduction in tariffs and other reforms that started in 1991, India's economy boomed. While much of India grew, rural areas with concentrations of pre-reform employment in industries that lost protection experienced smaller declines in poverty than the rest of India. We find that children living in these areas did not experience as large of an increase in school attendance or decline in work without school as children residing in areas with lower pre-reform employment in heavily protected industries.

The attenuation in schooling improvements and child labour declines in these rural areas appears attributable to smaller reductions in poverty in these areas than elsewhere in India. We find little evidence of other potential causes of these relative declines in schooling and increases in work such as declining returns to education or rising unskilled wages. Based on our estimates, we extrapolate that poverty declines can explain half of rural India's increase in schooling and a third of its fall in children that work without attending school during the 1990s.

A look at how children work is especially informative. Children are working more in areas that have lost protection relative to the national trend, but most of this work involves girls working around their family. Moreover, relatively more children are neither working as a principal activity nor attending school. For these children, their primary economic contribution to their family appears to be the avoidance of schooling costs, which can be considerable for a poor family. In fact, we find that the attenuation of schooling improvements associated with the loss of protection is smaller in parts of rural India where schooling is less costly. Our analysis illustrates that it is especially important to pay attention to the motives for why children work or why children do not attend school, and one should not be quick to assign blame solely to a specific employment opportunity open to children.

Our findings from India mirror the findings from a recent study of ours in Vietnam.6 For a number of years, Vietnam used an export quota to suppress rice exports out of a concern for domestic food security. In the 1990s, Vietnam liberalised its rice trade and allowed rice farmers to take advantage of higher international prices. The rice sector boomed and living standards of rice producing households improved substantively. Despite greater employment opportunities, children in households that benefited from higher rice prices became much less likely to work. Altogether, it appears that roughly 1 million fewer children worked as a result of rising rice prices in Vietnam despite potentially more lucrative employment opportunities.

These findings illustrate that when it comes to working children, one has to carefully consider why children work. Differences in living standards explain three-fourths of the variation in the incidence of child labour across countries.7 Our studies from Vietnam and India provide further support that this association is not coincidence. Poverty is a key motive for why children work. There is little evidence that suggests that export opportunities cause children to work who would otherwise attend school or live a more carefree childhood.

Where does this research leave the concerned consumer? Stories of children engaged in export industries should be met with concern about why children hold those jobs. Before one boycotts a product with child labour content or supports punitive trade sanctions, one should ask whether these measures will make the child better off. Will boycotts or sanctions eliminate the reasons why children work? Thus far, most of the existing evidence suggests that eliminating sources of income will not make poor families better off. It will not change the circumstances that cause children to work.

What can be done for working children? Taking positive steps towards eliminating the motives for work by ameliorating poverty, reducing schooling costs, and improving schools and subsequent economic opportunities hold great potential in reducing child labour. If motives for work can be eliminated, then there is an additional issue of how to help children who have been working. Iqbal found a non-governmental organisation that supported him and paid for his education until his untimely death at age 15. Unfortunately, there is little existing scientific research on the best ways to help children like Iqbal who have spent most of their young lives at work. Concerned individuals should demand that the organisations they fund or support contribute towards careful scientific evaluation of measures aimed at helping the millions of children that work around the world.


1 Iqbal's story is famous. In our description of Iqbal's life, we draw from A Bullet Can't Kill a Dream (http://www.mirrorimage.com/iqbal/who/who.html) and his Wikipedia entry (http://en.wikipedia.org/wiki/Iqbal_Masih).
2 International Labour Organization. 2006. The End of Child Labor: Within Reach. (ILO, Geneva).
3 Edmonds, Eric and Nina Pavcnik. 2006. “International trade and child labor: Cross-country evidence.” Journal of International Economics 68: 115-140
4 Kruger, Diane. 2. 2007. “Coffee production effects on child labor and schooling in rural Brazil.” Journal of Development Economics 82: 448-463.
5 Edmonds, Eric, Nina Pavcnik, and Petia Topalova, 2007, "Trade adjustment and human capital investments: Evidence from Indian tariff reform", Working paper no. 12884 (National Bureau of Economic Research, Inc, USA).
6 Edmonds, Eric and Nina Pavcnik. 2005. “The effect of trade liberalization on child labor.” Journal of International Economics 65: 401-419.
7 Edmonds, E. and N. Pavcnik. 2005, “Child labor in the global economy”, Journal of Economic Perspectives 19: 199-220.

    Posted by on Thursday, July 19, 2007 at 03:24 AM in Economics, International Trade | Permalink  TrackBack (0)  Comments (11)

          

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