Business Society Policy Triangle - GAP - Case Study Example

Running Head: Business Society Policy Triangle Student’s Name: Instructor’s Name: Course Code and Name: University: Date Submitted: Business Society Policy Triangle Abstract Disagreements relating to global labor practices are at the center of modern debates with regards to globalization. Critics advocate for regulations limiting the use of sweatshop labor. On the other hand, economists argue that the imposition of such regulations will have an adverse impact on the poor nations of the world. Nevertheless, enough attention has not been given to corporations that global labor practices such as sweatshops. This paper aims at establishing why companies continue to use sweatshops and the impacts of this for society and business. Next the paper discusses a case study on the use of sweatshops and how this has had an impact on the business, society, and government sectors. Introduction Sweatshop refers to a working environment where workers are exposed to unhealthy conditions which are considered dangerous or difficult by many individuals of developed nations, normally in a situation where the employees have fewer avenues to address their problems. The unhealthy conditions may include hazardous situations, abuse from employers, extreme temperatures, or exposure to dangerous materials. Sweatshop employers regularly work for long hours with very little pay, irrespective of any labor laws that advocate for minimum wage or overtime pay. Even though, sweatshops are often linked to poor, developing nations, they can exist in any country. They have existed in numerous different cultures and countries, including Europe and United States. In the meantime, economists and advocates of sweat shops such as Johan Norberg, Nicholas Kristof, and Paul Krugman, argue that individuals opt to work in sweatshops as they offer better working conditions and higher wages as compared to manual farm labor. They also propose that sweatshops are the beginning of economic and technological advancement and are a process of turning a poor country to a rich one. Economists argue from a trade-off perspective where by they ask whether it is better being unemployed or be employed in unhealthy conditions. Why companies continue to use sweatshops and its impact on business and society. Arguments for the use of sweatshops Companies that continue to use sweatshops argue that sweatshops provide the best alternative available for individuals living in developing nations. The wages paid to such workers might seem low by developed nation’s standards, but these wages are actually high by the local economy’s standards (WuDunn & Kristol 2000, p. 26). These companies also argue that shutting down their businesses will not only harm the individuals who lose their jobs, but this would also result in slowed development of the economy. According to an economist, Paul Krugman, the utilization of labor as a national resource enables developing nations to improve their economies and export activities. Growth in an economy results, in increased job opportunities and this will cause the market for labor to tighten. When the labor market tightens, it forces corporations to improve its working conditions so as to attract more workers. Even though, this is an unpopular view with the general public, Krugman argues that the use of sweat shops is advocated for by economic theory. The massive support of this view by most economists is because this form of employment has the potential to improve the economy of poor nations (Aisner 2002, p. 58). Another economist, Jeffrey Sachs argues that free trade without any restrictions in terms of labor results in better working conditions and future prosperity for the host country. This is achieved through access to cheaper goods by the developing nations and the chance to exploit cost savings in export markets. Empirical and theoretical studies propose that one of the most appropriate ways of raising competitiveness of a developing nation, and to enhance job prospects is to produce a better work force through training and work experience (Norman & Bowie 2003, p.226). Regardless of working conditions, jobs result in a positive externality for a given society. Jobs also result in benefits that others receive even if they are not parties to the transaction between an employer and a laborer. Skills that are job-related, and the capability of people to work as elements of a global economy, result in benefits to the society of a host nation even though they might not be a party to the contractual agreement between an employer and a laborer. From this viewpoint, the use of sweatshops is justifiable and that for workers, better conditions will only be achieved from improved social, and economic conditions that come with economic growth. Additionally, lasting economic growth can only be attained if the developing countries concentrate on the low-cost advantage so as to attract foreign investment (Arnold & Hartman 2003, p. 428). Arguments against the use of sweatshops Free markets, either in products or labor, produce numerous benefits. However, the ability to produce these benefits is on the assumption that certain conditions are fulfilled. For instance, transactions between employers and workers should satisfy the interests of both which can only be achieved where there is unlimited flow of information. This means that employees should be aware of the occupational risks of a job, a transaction should be voluntary, workers should be allowed to make rational decisions, and there should be many buyers, and sellers to avoid exploitative monopoly (Lombardi & Wilson 2001, p. 75). Critics of sweatshops argue that sweatshops contravene some of these conditions. This results in market failure as the expected benefits of a free market are not realized. For instance, workers may take up jobs under poor conditions because they have no alternatives of getting income (Wilson 2001, p. 25). Alternatively, workers may not be in a position to make informed choices as a result of lack of information about the job that they want to take up. In addition, some decisions are hard to undo, and this means that it will be difficult to exit from a labor agreement. (Arnold 2003, p.18) Case study: GAP Inc. Gap Inc. owns a number of subsidiary companies such as GapKids, Banana Republic, Old Navy, and babyGap. In the US, the company is one of the largest clothing companies, and most of its profits come from its global sweatshop system as compared to other clothing companies. Gap Inc. became a leader in the apparel industry by selling its products entirely in its stores, as opposed to using larger departmental stores. The company has over 1000 sites that it uses in producing its apparel throughout Africa, Latin America and Asia. A number of Gap sweatshops have been investigated in sites such as Saipan, Cambodia, El-Salvador, and Indonesia (Rosen 2002, p. 76). In 2000, approximately 160 employees working at Yung Wah industrial company were short-circuited by powerful electric charges from the sewing machine and became unconscious. This is despite Gap having employed three compliance officers in Cambodia. The company was accused of exposing workers to dangerous industrial conditions like this. In another case involving the company, the BBC revealed that Gap was employing child laborers who were as young as 12 years old. In an interview done on these children, some said that they had not visited their homes for over six months. It was also revealed that employees were living in dormitories that were infested by rats and lacked running water. The workers were also forced to work overtime and others were abused physically. A worker reported that her hair was pulled by a supervisor for refusing to work overtime. Nevertheless, instead of finding a solution to this issue, Gap chose to stop its business in the factory. This was in violation of desire by anti-sweatshop campaign to continue its stay in the factory and enhance the working conditions (Pollin, Burns & Heintz 2004, p. 156). A critical view of the issue in Gap Inc The are numerous organizations that deal with the issue of sweatshops such as international labor rights fund, Reason foundation, free the children, national labor committee, and clean clothes foundation. By and large, Most of these anti-sweatshop organizations are not asking companies to shut down their operations in developing nations. They are simply asking companies such as Gap Inc to improve working conditions in these countries. United students against sweatshops, an anti-sweatshop organization advocate for a code of conduct (Liza 2002, p. 32). This code will compel companies to make sure that they companies they subcontract provide sanitary and safe conditions for workers; they pay a living wage, and respect the basic human rights of workers. This organization simply demands that Gap Inc. should ensure that jobs are provided in such a way that the basic ethical guidelines are met (Bonacich & Appelbaum 2000, p.121). Nevertheless, the matter on what regulations international organizations, consumers, and companies should enforce on sweatshops is still a complex issue. Just like in the case of Gap. Inc. the idea to regulate sweatshops encounters similar obstacles to the proposals to abolish them. For instance, in 1992, the child labor deterrence act was proposed by the US congress. This act sought to ban the importation of goods that have been manufacture by children under the age of 15 years. However, such proposals seem not to take into account that in developing nations, child labor is crucial. For families living in such countries, nearly all income is used in meeting the basic needs such as clothing, shelter, medicine, and food. In these families when parents become sick or too old to work, the children become the family’s bread winners (Rogers & Cohen 2001, p. 126). Therefore, in the case of Gap a ban on goods from Cambodia would render the children jobless. Consequently, this will have a devastating impact on the families of such children. In the end, the shutting down of operations of Gap in Cambodia would slow down economic development as a whole, and this will hinder the development of superior options for generations in the future. As economists point out, sweatshops do not dominate an economy for a long time. In most cases, they are an initial step in the path of economic growth, injecting management and capital training into an economy. This will act as the foundation for the establishment of new industries (Hartman, Wokutch & Arnold 2003, p.165). Good intentions in dealing with sweatshops are simply not sufficient. More should be done in an effort to provide employees with maternity and health benefits, and a living wage (Moran, 2002 p.48). This might lead to an increase, in the amount of money spent by companies on workers, and this might result in pressures to lay off employees, but this will be essential. As some economists argue, raising wages might in some situations lead to lower costs. Employees who are not well paid might lack enough money to get sufficient nutritional needs, and this might lead to reduced productivity. However, the considerations above do not justify the use of sweatshops; they merely indicate that proper empirical studies need to be carried out before arriving on any conclusion. The critics of sweatshops are quick to refute the arguments for sweatshops, they point out that they are not fair. For instance, for a $ 100 shirt only 6% of the proceeds from the shirt actually go to the maker of this shirt. 25% goes to overhead and profit for the manufacturing company, while the 50% is taken by the retailer, and the remainder goes to raw materials (Cowe 2002, p.98). Conclusion As discussed in this paper, there are individuals who support sweatshops, and there are those criticizing this practice. Those who support this practice argue that sweatshops provide the best alternative available for individuals living in developing nations. Those opposed to this practice argue that sweatshops do not comply with the conditions of efficient markets, and thus they are unfair on this basis. There is no single solution that can be considered the best for a labor challenge created by modern corporate globalization. Also, there is no comprehensive solution that can be formulated to take care of the complex issue of sweatshops. Therefore, it is not easy to come up with an acceptable conclusion on the unfairness of sweatshops or desirability of any form of consumer-driven or regulatory alternative. In general terms, the only solution lies in the development of a reasonable policy which will focus on the ways in which alternative views towards sweatshops impact the individuals that they are intended to assist. By just investigating on what is of help and what is not, is simply applying ideology such as anti-sweatshop or fee-market that is prepackaged. Nevertheless, careful research needs to be done into the exclusive local conditions of specific sweatshops, and their economic and political contexts. References Aisner, J 2002, ‘Competing in the global economy; an interview with Michael E. Porter’ Leading research, Vol. 2, no. 4. Viewed May 24, 2010 Arnold, D 2003, ‘Exploitation and the sweatshop quandary,’ Business ethics quarterly, Vol. 13, no. 2, pp. 16-20. Arnold, D & Hartman, L 2003, ‘Moral imagination and the future of sweatshops, Business and society review, vol. 108, no.4, pp. 426-458. Bonacich, E & Appelbaum, R 2000, Behind the label; inequality in Los Angeles apparel industry. University of California press, Berkeley. Cowe, R 2002, Developing value; the business case for sustainability in emerging markets, Sustainability, London. 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