More ‘globalised’ countries have less, not more child labour

Critics of globalisation argue that developing countries may seek to attract foreign direct investment by keeping their labour costs low. One way of doing this is by allowing child labour. Globalisation is often blamed for increased levels of child labour, but the reality is not so simple. Trade openness may actually have the opposite effect.

In 2000, about 211 million children between the ages of fiveand fourteen were engaged in some form of economic activity. Developingcountries with low labour standards and wages, along with an abundant supply ofcheap, unskilled labour – including children – are seen as attractive forforeign investors. High-profile cases involving Nike, Reebok and Adidas showthat multinational corporations do at times subcontract to companies thatemploy children.

Research from the London School of Economics and PoliticalScience, UKand the Norwegian Universityof Science and Technology, Norwayattempts to see if globalisation, particularly in the form of foreign directinvestment and trade openness, has a positive or negative effect on levels ofchild labour in developing countries.

Trade liberalisation in countries with a large supply ofunskilled labour could improve immediate economic benefits and thereby increasethe incentives to send children to work rather than to school. However, some developingcountries do recognise the importance of education and skills for theirlong-term trade competitiveness and economic development. In this case,increased trade openness could reduce levels of child labour. A more openeconomy is less likely to continue old practices and institutions thatpromote child labour. Also, foreign investors might be less interested inexploiting cheap labour, including child labour, than is assumed. Market sizeand market growth, political stability, infrastructure and highly skilledlabour are often as important, if not more important, than cheap labour.

The research finds that:

• There is some evidence to suggest that countriesthat are more open to trade and more penetrated by foreign direct investmenthave relatively low levels of child labour.
• Reduced child labour levels are associated withactual trade openness (as measured by the sum of imports and exports divided byGross Domestic Product), rather than a liberal trade policy regime.
• The benefits of globalisation, through raisingincomes, would further reduce the need for child labour.

The authors point out that while they show that increasedtrade openness is correlated with reduced levels of child labour, they cannotdemonstrate that one leads directly to another. They recommend:

• further research to examine the exact mechanismsby which trade and foreign direct investment affect child labour
• not using trade orinvestment restrictions as a sanction against countries that export theproducts of child labour: banning child labour in export industries, forexample, could push children out of relatively well-paid jobs (though this isnot always the case) and into the informal economy.

Instead of sanctions, the researchers argue for a greaterintegration of developing country economies into the world economy.Globalisation is likely to represent a promise, not a threat, for the eradicationof child labour across the globe.