The use of child labour to maximise profits

Many companies agree that maximising profit is a key aspect of their business objectives. To what extent, then, is it justifiable for them to utilise child labour in carrying out this goal? (3153 words). In this paper, the main focus will be on child labour and the issues surrounding the topic. I will consider how businesses behave in regards to child labour, both from a business and an ethical point of view. There are two key arguments; should businesses utilise cheap labour to lower production costs? Or do they have a duty of care in order to prevent children being exploited within their business?

For the purpose of this essay I will examine various theories in conjunction with how businesses apply them. For example, I will analyse the Milton Friedman theory of business, in regards to multinational companies, and how it affects their behaviour towards child labour. Other theories to be considered include Marxism, Egoism and Ethics of Right.

In conclusion I will assess how companies behave towards the issue of child labour; as an ethical and financial advantage, or as an unethical view. I will also give contemporary examples of child employment.

Often child labour is confused with child work but Whittaker claims that there is a clear distinction. For example, a child performing a newspaper delivery before going to school is a child worker:

“This is because there is no economic compulsion forcing the child into employment. Rather the child ‘keeps his wages and spends them on such peer group “necessities” as the latest style jeans, records or, increasingly, videos and home computers. By and large nobody forces him to go to work. (1986, p20)” Lavalette (1994, p.8)

However, child labour is defined as:

“Work which does not take place under such relatively idyllic conditions. It is defined as having an element of economic compulsion associated with it and, according to Fyfe, involves time and energy commitment which affects children’s ability to participate in leisure, play and educational activities. Finally, child labour is “work which impairs the health and development of children” (Fyfe 1989, p4)” Lavalette (1994, p.8)

Michael Lavalette (1994) explains that child labour exists because of two reasons:

“Children are an example of a “reserve army of labour”, drawn into the labour market when it is “tight” to provide extra labour power.” Lavalette (1994, p.2)

This suggests that when labour is in high demand and there are insufficient adult workers, businesses tend to use children as a back up.

Secondly,

“Children work in backward regions of the economy where unemployment is highest and poverty most severe. In these circumstances children work to alleviate their family’s hardship.” Lavalette (1994, p.2)

This means that child employment occurs mainly in poverty and where the children have to support their family financially.

Many people frown upon this exploitation of children. But one must consider to what extent is child employment justified?

Many children in poverty try to avoid stressors such as violence, sexual or emotional abuse. One of the easiest ways for children to avoid these stressors is by engaging in active labour. Thus, from a child’s point of view, it can be justified for children should work to in order to avoid being emotionally, sexually or violently abused.

Consideration must be given to the employer’s view. Due to globalisation, outsourcing has become a trend in businesses. By outsourcing, it is possible for firms to exploit wage differentials around the world. This then allows for production at a much lower cost, and therefore maximises business profit. However, this approach is argued to be very unethical and shows how profit driven business objectives relate to the the Milton Friedman concept:

“Friedman argued that the social responsibility of business is to seek profits for the stockholders” Bowie (2002, p.2)

This indirectly suggests that in order to lower costs and to promote profit maximising prospects that arise with globalisation, businesses need to take advantage of these global opportunities, otherwise they may be forced out of the market by other competitive firms,

“Globalization and liberalization of markets and intensifying competition in commodity markets have increased demand for labour in developing countries. There has been a significant outsourcing of economic production from the developed countries to the developing countries due to globalization.” Anon (1982, p.5)

This further supports that

“The successful quest for cheaper labour implies child labour.” Rahikainen (2004, p.210)

This gives further weight to the argument that

“Children are the most subordinate and cheapest form of labour, thus highly attractive to some types of employer” Fyfe (1989, p. 17)

All of the quotes above interlink with each other to explain why companies use children as a cheap form of labour.

“The levels of child exploitation and oppression are significantly higher where there is no, or limited, regulation for children’s labour market activities, where legal requirements are easily and consistently ignored” Lavalette (1994, p.13)

The majority of companies believe survival is essential in a globalised economy and therefore they exploit these conditions to fulfil outsourcing opportunities, because they. The majority of child labour is said to occur in Asia.

“Save The Children estimates that 61% of working children live in Asia” Youth Information (accessed 25 April 2009)
“Labour-intensive consumer-goods industries increased productivity by pressing the advantages of the division of labour, and cut wage costs by the extensive employment of women and children.” Rahikainen (2004, p. 32)

Some children are exploited to do certain adult jobs because they can perform the task more effectively and efficiently

“In certain industries like copper making and electronic assembly, children are more skilful because of the dexterity of their small fingers. But children, because of their dependent position, are the most easily exploited of all workers” Fyfe (1989, p.32)
“The world of work (employers and other unscrupulous people) seems to pull children because they are very cheap and obedient, can be easily exploited, do certain things more efficiently and effectively which adults fail to do (e.g. Nimble Fingers).” Herath and Sharma (2007, p.56)

This is a way of decreasing wage costs because children are doing adult work, but are not being paid the adult wage. The managers are able to exert more control and authority over children, because they are less likely to retaliate in comparison to adult workers who are aware of their employment rights.

This is very money driven based business and can be related to the ethical theory of consequnetialist, a consequence based approach, the egoism theory.

“Egoism refers, in terms of philosophy, to theories in which self-interest is regarded as the principal motivating factor” Encarta (2009)

Which in this case the self interest would be profit. This can relate to child labour as all they care about is lowering costs and increasing sales to increase profit not human rights of children. This deduces that they ARE self motivated by money (self interest) hence following the egoism theory.

However Lavalette stated that Fyfe and Whittaker suggested

“Child labour can be either good or bad depending on the context in which it takes place” Lavalette (1994, p. 8)

Businesses can see child labour to be an advantage not only because of lower costs, but as it is taking children off the streets. They support children by providing a job and maybe even benefits (depending on the company). This gives the company an ‘ethically moral image’ because they are seen to be providing child employees with basic needs. This helps the children lead a healthy life, which they may not receive by living on the streets.

“Where children are individually employed, they may be paid in kind, receiving board and lodging in the household of their employer” Anon (1982, p. 480)

Moreover, by companies not employing children, there is a danger that they could be out on the streets and involved in prostitution, drugs or crime.

“Those underage who would be ‘saved from child labour’ – for example, from working on carpets or footballs – could be driven into prostitution or destitution.” Munck (2002, p.130)

And as a result of employing children it is shown that

“Child labours are better off than a great number of children elsewhere who do not work, but who do not eat” Lavalette (1994, p.44)

However not all child employees live on the street, some also hold the responsibility of their family’s well being instead.

“Poverty forces families to send their children out to scratch whatever meagre living they can to help the family survive” Lavalette (1994, p.13)

Moreover, this supports that

“Children’s income is frequently far from ‘supplementary’: they may be de facto ‘breadwinners’, supporting other members of their family” Anon (1982, p. 487)

Furthermore, it gives the employer the image that they are helping children who have the burden of caring for their families. Furthermore, this extends the good corporate image, which, as a result could increase sales. This is because there is a greater awareness of this exploitation, but some see the advantages for the children and therefore promote the cause by purchasing the products to keep the children in a job and not in poverty or on the streets. However people’s perspective tends to differ.

“Proscribing child labour in the south without compensation would lower the living standards of those who are already desperately poor.” Munck (2002, p.130)

This give weight to the idea that all the advantages that both businesses and children gain from child labour, whether it keeps children off the streets or to support their family, or businesses gaining cheap labour would be removed by legislation to abolish child labour. This is not necessarily the right thing to do depending on what people’s perceptions are; whether children need to survive through active employment, or the fact that they are just children and that they should live like a child and not be required to undertake the stresses and physical damage working does to a child.

This leads onto the next argument, that companies should help abolish child exploitation and should hold ethical and social responsibilities.

Some companies avoid child labour because they want to be known as socially responsible. An example; GAP, in October 2007 a ten year old was found in the back streets in New Delhi the conditions were quoted by the Observer to be ‘close to slavery’, he was sold by his parents to the sweatshop making gap toddler clothing. But as Gap wants to be known as socially responsible their policy they enforced was:

“that if it discovers children being used by contractors to make its clothes that contractor must remove the child from the workplace, provide it with access to schooling and a wage, and guarantee the opportunity of work on reaching a legal working age.” McDougall (2007)

The only reason that this unethical employment of children wasn’t revealed any sooner to Gap was that they were subcontracting companies who hired child labour however they did say that they still hold fully responsible;

“After learning of this situation, we immediately took steps to stop this work order and to prevent the product from ever being sold in our stores.” McDougall (2007)
“In recent years Gap has made efforts to rebrand itself as a leader in ethical and socially responsible manufacturing, after previously being criticised for practices including the use of child labour.” McDougall (2007)

This is an example of taking corporate social responsibility which gives the company a better image.

Other revelations of companies associated with child labour include Primark – which took actions and decided not to trade with the suppliers anymore and took their clothing off the shelf. Nike also established rules to increase the minimum age workers to 18 in Asian footwear factories and to offer free educational classes and to improve the air quality of the plants.

However,

“There is ample evidence that child-wage labourers continue to work even when minimum age legislation exists.” Fyfe (1989, p.17)

This shows that some businesses are not socially responsible and breaching the Acts provided to protect the children from exploitation, and therefore should follow the steps to correct their actions. This could be what Karl Marx proposed in The Communist Manifesto:

“Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production, etc.” Marx (1884)

His view was simple in that all companies should abolish child labour and children should be entitled to have free education and by following and providing this, it would help offset the business’s image as child employers to an image of socially and ethically responsible.

Additionally the company should take care when sub-contracting to make sure that no child labour is associated with them and not just within its own business.

“It is small scale enterprises or ‘sweatshops’, often operating as subcontractors to larger enterprises, that are most adept at avoiding the usually inadequate factory inspectorate” Fyfe (1989, p. 17)

Even though large companies are against breaching human rights they still need to look carefully at who they are contracting.

An ethical policy that should be pursued by companies is ethics of rights, which states that every human being has basic rights and freedoms that they are entitled to from birth and should be respected by others in every way.

“If an individual has a moral right, then it is morally wrong to interfere with that right even if large numbers of people would benefit from such interference.” Velasquez et all (1990)

By exploiting human rights, the corporate image perceived by potential customers would be lacking of corporate social responsibilities. This can have an adverse effect in the number of sales. Moreover, in the short term by exploiting human rights and employing children could lower costs, but the longer term consequence of this approach could lowers sales figures. This could be that customers disregard any product that hasn’t been fairly made or is unethical. Therefore, by employing children, it does not give a large margin of advantages.

This matter of exploitation could also attract protestors or agencies that are all about protecting children, for example UNICEF. They can create a bad image for the business. This can attract the media and possibly authorities leading to fines and prosecution of breaching Acts. For example, the Children and Young Persons Act 1933.

On another point, employing children is cheap but the efficiency and quality of the work is sometimes not up to the minimum standard depending on the work so technically the company loses out by quality hence sales figures are affected.

“Children who undertake adult work tasks: “do not possess the physical and mental capacity that these jobs call for, and their work is usually done less efficiently than if it were performed by an adult” Lavalette (1994, p.44)

This depends on the jobs but in this case I refer to the job being hard manual work.

There are many disadvantages for a child starting work at an early age

“Child labourers are usually dismissed once they become adults, forcing them to join ranks of the unemployed. The low-level skills they have gained are often insufficient to allow them to obtain further paid employment” Herath and Sharma (2007, p. 39)

Even though the children are being fed it does not mean that they are living a healthy life.

“In 28 countries, the average per capita intake of calories is 73 to 89 per cent of what is required but it is lower for the poorer segment of the population, from which most working children come, even though their work raises their nutritional requirements. Working children also become more susceptible to infectious diseases including tuberculosis, if they suffer from malnutrition, anaemia, fatigue and inadequate sleep.” Fyfe (1989, p. 21)
“Child labour causes not only loss of formal education and human capital but also the lack of social and cognitive skills and increased health hazards” Herath and Sharma (2007, p. 18)

It is argued that every child should have a childhood where they play and to be educated to better their future.

“Children are not little adults – their fundamental right is to childhood itself” Fyfe (1993, p. 5)

Businesses should help their child employees found within the business to clear their name and their image that are perceived to be by the public. This should include free education and any other actions to correct this exploitation this will in the long run help with the corporate image and sales and potential employees in the future.

In conclusion

“children are among the most vulnerable and powerless and continue to be exploited as part of a downward push on costs and a rapid withering of decent, formal employment.” Solidarity Center (2008)

There seems to be ample evidence to support the school of thought that child employment is acceptable, because companies are keeping children off the streets, prostitution etc. Some businesses try to be labelled as socially responsible instead of child labourers as they strive to give good benefits such as the right health and safety measures, schooling, food and shelter and many others. However 2 questions that I find myself to ask:

Does giving benefits make them socially respectable for still employing young children? Just because they are giving them benefits does that mean that it counteracts that children at a young age are being worked? Is this still ethically right that they have to work for education? (a basic right for any child). Does this remove the idea that they are child labours just because they give the children benefits?

Another argument is that the businesses may claim they are giving all these benefits, but how do we know as part of the public that the businesses are carrying out these promises as we do not have an insight within the business?

Overall, if companies argue that they are helping the children but are infringing on human rights in order to stay in the market with other competitors, it shows clearly that their aim is to compete with other companies and to gain maximum profit which shows how egoism theory of self interest (in this case profit) and Milton Friedman’s theory of businesses work for profit only. This relates to the money driven mind and a lack of respect for human rights whatever the age. Such companies and should follow Karl Marx’ proposal and respect human rights. The loss in profits from abandoning child labour will be offset by an image of social responsibility which has a positive impact on sales.

By giving benefits I don’t believe that this makes the business socially acceptable, because children shouldn’t have to work for basic entitlements. This is where the government should be involved and help to provide with these entitlements.

In conclusion of the essay I have found that child labour effects business’ image mainly and which way it is perceived by the public in their own views of what is justifiable and what is not, is what affects sales which hence affects profits.

Majority of the public think that child labour was abolished in 1989 but it is still continued to be found in the 21st century today in large multinational companies mainly and needs to be intervened by more enforcements by the government.