Child Labor and Globalization in Developing and Industrialized Countries - Coursework Example

Child labour and globalisation in developing and industrialised countries Student’s name Course Title Lecturer’s name Date of Submission Executive Summary There is no empirical evidence showing that globalisation increases child labour. As household economics and trade theory seems to give direction, the cross-country evidence tends to show that trade liberalisation reduces or does not significantly affect child labour. This report develops a discussion on the existing linkage between child labour and globalisation in both developing and developed countries based on the opinions of opponents and proponents of globalisation. The report is designed to start with an introduction to the discussion highlighting the concept of child labour and globalisation. The report proceeds to give the current trend on issue of child labour across the globe which reveals a reduction in incidences of child labour. Child labour under market forces across the globe has been discussed at length by drawing examples from different countries. The writer also developed arguments on the impact of globalisation to child labour. The first approach talked about how globalisation increased child labour while the second one indicated how globalisation reduces child labour in all countries. The review of empirical evidence shows opposing views between economists and anti-globalists. Ultimately, the report emphasizes the need to match various arguments on child labour and globalisation with empirical data that is consistent as well as comprehensive. All in all, the linkage between the two variables raises different opinions. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Effect of globalisation on child labour 8 Does globalisation increase child labour? 9 Does globalisation reduce child labour? 10 Bibliography 13 Introduction There is no specific answer to the question that seeks to establish the link between child labour and the concept of globalization in developing and industrialized countries. According to the International Labour Organization (ILO), child labour involves work that denies children their childhood, potential, and dignity endangering their physical and mental development1. The concept of globalisation is very elusive as it is understood in different contexts by different people. Usually, it means economy becoming more global as developing countries become part of the very world-wide economy2. As world economies go through the process of globalisation and trade liberalization, the issue of children involvement in employment continues to raise a lot of controversy. Child labour is a commonly discussed issue in present economic literature since it exposes children to socio-economic problems mental and physical health. However, understanding the link between child labour and globalisation is not an easy task because of cultural and societal differences across countries3. The arguments developed in this reports seek to establish the relationship between child labour and globalisation across economies. Trend of global child labour at present time Although there is a reduction in cases of child labour due to various pressures, the extent of global child labour is still disappointing. According to the ILO statistics, more than 306 million children aged between five and seven years were employed across the globe in 20084. Among the children employed in both developing and industrialized countries, most of them are boys5. Also, child labour among children aged between five and seventeen years reduced by 7 million between 2004 and 2008. The reduction was mostly evidenced in the number of girls aged five to fourteen years. However, there was an increase in the number children in employment for both boys and girls in the age bracket of fifteen to seventeen years, by over ten million6. There is increased prevalence in child labour in the Asian-Pacific region. It is estimated that over 215 million children are in employment worldwide, more so between the ages of five to seventeen years. Out of this number, 113.6 million children were reported to be working in Asian-Pacific region7. Most of the South Asian countries are seen to be responsible for increase in child labour across the world. Available statistics by ILO indicate that over 23.1 million children, out of 337.46 million with aged between five and fourteen years, work in South Asia (Nepal, Pakistan, Sri Lanka and Bangladesh). However, children performing domestic tasks are not part to the estimation8. African continent is documented to encounter highest incidence of child labour with over 25.3 percent of children having been reported to be in employment in 2008. Also, most girls employed at this period were exposed to hazardous work, and over twenty million were reported to be less than twelve years9. There is variation in employment of children in different sectors both in developing and industrialized countries across the world. According to ILO, 60 percent of children aged between five and seventeen years are employed in agricultural sector, 26 percent in services sector while only 7 percent are employed in industry. However, 7 percent are not represented. More boys are employed in agriculture and industry sector compared to girls. In addition, more girls work in service sector compared to boys10. Although child labour is seen to be decreasing according to world statistics, studies based on regions reveal increased participation of children in employment in various sectors as economies grow11. Child labour in respect to market forces There has been an increase inequality and poverty under globalisation. It can therefore be argued that globalisation increases child labour. In this case globalisation implies more poverty, increased sourcing of cheap labour for export, and increased decentralization of production by use of flexible labour. It also means more children would be involved in employment12. Currently, much of the paid work that was done outside home is now performed within the home. In deed, there has been a gradual rise in home-based work in the past years and jobs like match-making and carpet weaving which were initially done in factories are now performed by children within the homes. This is an indication that more than 100 million children in India not in school are used to perform these duties since they would be engaged in some kind of activity while at home13. Considering the carpet industry in India as an example, for the past ten years, around 100,000 children were employed in the industry. Within that time, the industry got revenue of $100 million. Currently, the industry is reported to have increased its revenue to more than $300 million, due to increase in child labour to more than 300,000 children14. Therefore, there is a clear relationship between increase in growth and child labour. The situation is not different in Pakistan where more than five hundred million children are employed in carpet industry. Thus, it is assumed that globalisation increases the demand for exports. Since there is increased need to make higher profits, adult workers are replaced by cheaper child labour. Also, industries tend to move to informal household sector15. However, the proponents of globalisation argue replacing the existing policies within a nation with old state-run economies, creates a situation that enhances more development for all. In this view, globalisation is assumed to free the production forces and at the same time increase the demand for skilled labour that is perceived to have higher productivity as well as attract high salaries. This eventually results to formation of human capital encouraging investment in education making child labour less attractive16. Usually, arguments concerning the importance of globalisation are not matched by comprehensive sets of data. Even when they are supported by econometric exercises, they tend to suggest globalisation enhances development as well as social justice across the globe. It is further argued by economists that child labour will be low in countries where many workers have completed primary education. This is because globalisation may be expected to increase the wage rate if this particular group compared to the group that comprise workers who are less educated17. Effect of globalisation on child labour The concept of globalisation is popular but remains an issue of controversy. As indicated earlier, globalisation concerns increased independence of world economies due to growth in the rate of cross-border trade of both services and commodities, flow of international capital, spread in technologies and increased movement in international labour18. In fact, growth and mutual integration of different markets are a result of economic globalisation. Most of the studies conducted on the impact of globalisation on child labour are founded on either global or country-specific data. In deed, researchers have different arguments over the impact of globalisation on child labour both in developing and industralised countries19. Globalisation may present both positive and negative impacts on child labour as discussed below. Does globalisation increase child labour? Unlike industralised countries, developing countries have more unskilled labour. Research indicates that globalisation and trade liberalization has the potential to increase the rate of return in unskilled labour, which reduces the motivation for countries to invest in skills as well as education. Since, child labour is categorized as unskilled labour, globalisation leads to increased returns to child labour and this stimulates the increased supply of child workers20. This kind of trend is economically referred to as substitution effect of trade liberalization. An argument may be easily made that trade openness is not likely to increase the demand for child labour based on the fact that these children are employed in non-tradable sector, and that the ration of children working in export sector is considerably small. In actual sense, child labour is likely to reduce if children are employed in competitive import sectors. However, we may not underestimate that fact that increased trade may still result to increase in incidence of child labour, provided that all sectors of the economy where children are employed as workers, contribute to inputs in export sector21. It is further argued that free trade introduces a country to lower costs of production making it price competitive in global markets over other countries. Thus, increased use of child labour may lead to reduction in costs, which makes it attractive to both developing and industralised countries to have a tendency to use children to achieve this objective. It is therefore clear that globalisation and trade liberalization may result to increased child labour across the world22. Does globalisation reduce child labour? As indicated earlier, globalisation and trade liberalisation leads to increase in the rate of return of unskilled labour or child labour. In case parents assume that child education and leisure are normal goods, there will be a positive income effect that reduces the incidence of child labour due to effects of globalisation23. Investment in skills and education must take place for economic prosperity and long-term competitiveness globally. This increases countries’ incentive to reduce use of child labour due to trade openness. It is also argued that the more open countries become, the more likely to get lower interest rates as well as better access to credit. Therefore, it means that the opportunity cost of education is really lower and is likely to reduce child labour24. In addition, open economies have a tendency not to strictly protect traditional culture as well as existing institutional framework that promote child labour. In case of foreign investors, some factors like market growth and size, political stability, high labour skills, law and order, honest and corruption-free government, good infrastructure, and transparent policy are considered important compared to low wages as concerns investment decision25. This could imply that foreign direct investment (FDI) does not lead to child labour. In other words, as foreign direct investment influences economic growth; it will in turn indirectly reduce the incidence of child labour. In addition, proponents of globalisation argue that multinational companies will ever employ highly skilled and experienced workers in developing countries, and pay them wages above average rates. In such situation, increase in FDI due to globalisation will always reduce the relative wage of unskilled workforce as well as child labour which then induces more schooling26. Industralised countries have the potential to influence the policies of poor countries. Globalisation enhances this ability since when developing countries join the world economy; they highly rely on industralised countries to sell their commodities. For instance, almost all garments from Bangladesh are exported to North America and European Union. Thus, developed countries may use trade sanctions to threaten developing countries to adopt and implement policies that would prevent child labour27. Empirical Evidence Analysis The empirical evidence on the link between child labour and globalisation in both developing and industralised countries in not uniform, resulting to two opposing views. Economists argue that there is a positive link between trade liberalisation and child labour. On the other hand, anti-globalists believe that globalisation increases incidences in child labour in all countries. In actual sense, the two claims may be right. The problem in both cases is that whereas one argument relies much on econometric models and macro-data that are manipulative to achieve the intend outcomes, the other argument relies more on anecdotic evidence as well as assumes that the logic of an inhuman, predatory capitalism and profit-hungry must be at work28. There is difficulty in getting comprehensive and highly reliable data on incidences of child labour in countries, based on the assumption that the data is founded on a common understanding of the concept of child labour. It therefore becomes hard to segregate the mechanism that encourages more or less incidences of child labour. Anecdotic evidence and econometric studies may be useful in this case, but the general opinion in the evolvement of social structures will have to be used as a basis of an explanatory model. The developed perception will have to engage an understanding of the existing environment and the historic circumstances29. Conclusion Although there is a decreasing trend of child labour in all both developing and developed countries, child labour is still significantly present in developing countries. The report clearly shows that both the opponents and proponents of globalisation have developed an argument based on logics. According to the opponents, hunt for cheap labour as well as rolling back of the country induces more poor children into the decentralized production framework of multinational firms. While the proponents hold that trade liberalisation reduces the need for child labour through increased incomes amidst economic growth. In respect to this, the writer has argued that the logic of the two arguments is no matched by empirical data that is consistent as well as comprehensive. Child labour has been on decline due to targeted government policies and international pressures. Therefore, the question to existence of a link between child labour and globalisation is either yes or no. Bibliography Acaroglu, Hakan, and Ozcan Dagdemir. "The effects of globalization on child labor in developing countries." Business and Economic Horizons 02 (2010): 37-47. Davies, R.B. and Voy, A. “The Effect of FDI on child labour.” Journal of Development Economics, 88 (2009): 59-66. Dinopoulos, E. and Zhao, L. “Child labour and globalisation.” Journal of labour Economics, Vol. 25 (2007): 553-79. ILO . “Global child labour developments: Measuring trends from 2004 to 2008.” Geneva. 2010. Jueterbock, Daniel Markus. Exists a linkage between the exploitation of children, as a source of labour, and globalisation in both developing and industrialised countries?. GRIN Verlag, 2012. Khanam, R. and Rahman M.M. “Child labour in developing countries: the role of education, poverty and birth Order.” Journal of Social and Economic Development, July-December, (2008): 173-95. Lieten, G. K. "Globalisation and child labour: Possible consequences." International Conference ‘‘Child Labour within the Context of Globalisation: Problem Outline and Action Points’’, Hattingen, Germany. 2003. Rahman, Mohammad Mafizur, and Rasheda Khanam. "Child labour: the effects of globalisation." Journal of Applied Business and Economics 13.4 (2012): 59-71. Went, Robert. “Less Growth, More Inequality: What’s Wrong With Globalisation.” The Indian Journal of Labour Economics. Special Issue on Globalisation and Social Exclusion, Volume 46, No 3. 2003. Read More