The Case for Legalizing Child Labor

CHILD LABOR is one of the more controversial topics in economics. At face value, most people probably support restricting or banning it. Understandably, child labor evokes emotional responses and images of horrendous working conditions of the Industrial Revolution. Times have changed, however, and this discussion is worth revisiting.

First off, a little history on child labor. As it stands in the US, child labor is basically outlawed for anyone under the age of 14. There are exceptions, but generally a 12 year old cannot work for a for-profit company that is not owned by a parent. This was legislated under the Fair Labor Standards Act of 1938.

Prior to the federal ban, however, child labor (ages 10 to 14) precipitously declined from 6% of the workforce and 21% of child population in 1900 to 1.37% and 5.56% in 1930. The reason? It has little to do with state laws, as economist Carolyn Moehling found, and more with increasing incomes. In developing countries, as in the early 20th century, child labor becomes nonexistent as average per capita incomes approach $11,000. Families didn’t need children to work, so they did other things instead – mainly school.

Let’s put child labor in context to clarify the argument. I am not asserting that children be forced to work anywhere. No one should be compelled into any action, regardless of age. Additionally, it’s important to note that liability laws and work-safety regulations already exist. These apply to children just as they do adults and there is no reason to think otherwise. If anything, they would be more strictly monitored by parents and non-profits due to the natural sensitivity of the issue.

With legal protections already in place, sending a child to work isn’t much different than sending them to a summer camp. People have no problem with their child being supervised by strangers, why should an employer be any different? Speaking from personal experience, I attended (and enjoyed) an overnight camp filled with outdoorsy activities – whitewater rafting, rock climbing, mountain biking, etc. I was just as much at risk of injury or death during that time than if I was shoveling snow, delivering paper, or mopping floors. Hundreds of parents sent their kids to this camp without question. It shouldn’t be too difficult to comprehend sending them off to work under another’s supervision.

How do the economics work out?

Labor, in terms of child activities, is a substitute for leisure and school time. I will address the latter shortly. In terms of leisure, however, children could work for a few hours per day when not in school. This means that children in blighted urban areas would not be unsupervised on the streets and instead develop a sense of responsibility to earn a living. This does not mean children should be slaving every hour they’re not in school, but that a few hours on the weekend and over the summer can be beneficial.

Assuming no child labor restrictions, child labor would only be in demand insofar as their skills are in demand. For example, no one would let a 12 year old operate heavy equipment – if only because of the liability costs imposed from high probability of accidents. As stated previously, we already have these legal structures in place.

In developing countries, however, child labor is more necessary (and more controversial) because poorer households need the added income and school may not be as beneficial at the time. A ban on child labor, commonly pushed as a benefit, has unintended consequences worth considering.

For example, in India, child labor bans may have done more harm than benefit. In an empirical analysis of child labor before and after the ban, economists found that, not only did child wages fall, but that a child under the age of 14 became more likely to work after the ban relative to someone over 14.

Poor families in 3rd world countries are willing to do what it takes to increase their income, but businesses aren’t willing to accept the risk of criminal behavior except for at lower wages. Additionally, the post-ban increase in child labor results in lost school time and reduces human capital.

In Bangladesh, the child labor ban created a black market that incidentally led to dangerous jobs becoming more appealing because of the higher wages in said markets. Paul Krugman summarizes what happened: “The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets—and that a significant number were forced into prostitution.” Even the 1997 UNICEF report on the State of the World’s Children supports this assertion.

In developed countries, like the US, research focuses on how child labor affects human capital development. Since days have finite hours, child labor becomes a trade-off with school past a certain point. In other words, do children receive greater net benefit from school or labor?

The answer is “it depends on a lot”. After surveying 143 research papers, the conclusion was that children who forego lesser quality schools in favor of work will gain human capital, but that decision may not be the same or as beneficial for those who would forego higher quality schools. The outcome really boils down to individual circumstances. Most research on the matter fails to address important variables and outcomes – such as lifetime income accumulation and domestic labor demand (i.e. chores).

Since child labor bans already exist in most developed countries, it is difficult to ascertain exactly how labor versus school would impact child development and standards of living. Just as there is no collective agreement on the benefits of child labor in developed economies; there is no collective agreement on the costs of it as well.

CONCLUSION: Child labor should be considered in terms of cost-benefit and existing substitutes. Outright bans, especially in developing countries, are only beneficial at face value and often have even worse unintended consequences. If anything, these bans in developed countries are not necessary because of existing legal and regulatory structures.

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