Want to improve the lives of poor workers in developing countries? Then rush out and buy a pair of Nikes or Levi Strauss jeans, says a new report by the National Bureau of Economic Research.
The authors decided to test the burgeoning anti-sweatshop movement's claims that multinational corporations oppress workers in developing countries. A recent Albany Times-Union column summarizes the familiar argument: "It's common knowledge [sweatshops] exist in Third World countries, and that much of the cheap labor that produces the most expensive sports apparel and sneakers are young children paid a substandard wage and working in horrendous conditions."
But when economists looked at reams of economic data on wages and workers' rights in developing countries, they found that multinationals generally paid more -- often a lot more -- than the wages offered by locally owned companies. The study cites evidence that affiliates of U.S. multinationals "pay a wage premium that ranges from 40 percent in high-income countries to 100 percent, or double the local average wage, in low-income countries."
Vietnamese workers in foreign-owned apparel and footwear factories rank in the top 20 percent of the population by household expenditure. Indonesian workers in Nike subcontractor factories earned $670 per year, compared to the average minimum wage of $134. In Mexico firms that exported more than 80 percent of their output paid wages that were 58 percent to 67 percent higher than wages paid by domestic firms.
The researchers point out that foreign direct investment is positively correlated with the number of International Labor Organization conventions ratified, and that multinational investment "is positively correlated with the right to establish free unions, the right to strike, the right to collective bargaining, and the protection of union members." The study concludes: "In short, there is no solid evidence that countries with poorly protected worker rights attract [multinational companies]." So you can shop at The Gap with a good conscience.