Sweatshop

In the case “NIKE’s defense of its Vietnamese sweatshop”, NIKE faces the accusation that it exploits Vietnamese workers by providing bad working environment and infinitesimal wages. Some social groups and activists applaud Vietnamese government’s protection like minimum wage laws for domestic workers. They also call for American government to force NIKE and other multinational corporations to give workers higher wages and better welfare.
In my opinion, these arguments are wrong. One principle I learned from college is that good intentions can lead to bad consequences, and this motto can be applied in this case. Government’s protection is inefficient in enhancing workers’ well-being; it causes more inequality by creating favored groups and depriving people of rights to choose what they desire. Besides, those fervent humanists impose their own value upon those Vietnamese workers.
Consequentialism contends that we should judge one action in virtue of its outcomes. Minimum wage law is probably one of the worst laws ever designed and implemented because it causes huge loss to every group in society. When the Vietnamese government mandates minimum wage upon NIKE, it increases cost for NIKE to do business in Vietnam. NIKE, as a result, has to do something to cut the cost. In labor market, the demand for labor is highly sensitive to the change of price. Empirical researches show that on average when the price of labor increases by 1 percent, the demand of labor will fall by 3 percent. So it means that NIKE will have to hire fewer workers because of the minimum wages.
This is only part of the story. Minimum wage not only hurts employers, but also impairs the well-being of workers, whom the laws are targeted to protect. Welfare consists of wages and other subtle things like working atmosphere and health care. Now the wages are higher, it’s thus not unusual that workers will receive relatively less good working environment and health care coverage. In addition, more people will compete for fewer jobs because of the higher nominal wages, and the result will be that people bear more cost to get the jobs and less people get employed. The reasons are straightforward: now that there are more applicants than job spots, people have to use other ways to get the job, either by waiting or bribing, but time and energy are wasted for these unnecessary competition.
So the minimum wage law is efficient because employers hire fewer workers, workers bear most costs to get the job and enjoy less welfare, and more people are rejected.
Some people may still argue that government is justified do something to protect domestic workers regardless of the potential social cost, but from my perspective, government’s intervention deprives people of free rights to choose jobs.
There are two possible reasons why these Vietnamese workers continue to work for NIKE even though they complain that they can barely make ends meet. The first is that NIKE forces workers to work for it. But that’s not plausible in this case because of the very presence of minimum wage law, one of whose outcomes is that more people compete for fewer jobs. So company doesn’t have to stick to one particular worker: it has too many options. The second reason is that working for NIKE is the BEST option for these Vietnamese workers. For these workers, the alternative jobs may be prostitution, scavenging and smuggling. Compared with these jobs, making shoes in NIKE is less humiliating and more tolerable to Vietnamese workers. If the government allows its citizens to choose their jobs freely, these workers can decide whether to quit the job based on their own judgment of his situation. But with the government’s intervention, more people get unemployed, and thus they lose the chance to make comparison between different jobs. In addition, with the implement of protection laws, NIKE will find it harder to fire workers, and the bad side will be that NIKE workers are now the favored group of Vietnamese government: they get the job, and they aren’t easy to lose jobs. The irony will be that government intends to ask for benefit for its people, but it eventually creates more inequality than before.
At this point those compassionate social activists may step out, “Your argument is totally unethical! These Vietnamese people are living miserably without recreation and education. Isn’t it corporations’ social responsibility to enhance their well-being and make the world a better place? NIKE and other multinational enterprises must pay them higher salaries. If they don’t show social responsibility, we will boycott their products.” I admit that these arguments are charming, but I have to say these humanists have narrowed understanding about ethics and economics.
There is no company that is too big to fail, or there would not be drastic changes in ranking of profitable corporations every year. I agree with Milton Friedman that company’s priority is profit maximization and it’s important to minimize the cost. In the case of Vietnam sweatshop, NIKE seems to account for 5 percent of the Vietnam export, but it doesn’t mean NIKE dominates the market. Adidas, Reebok are all competitors of NIKE, and when they learn that NIKE earns great profit in Vietnam, they will invest in Vietnam and compete with NIKE. As long as the market is free, competition will force NIKE to give more attractive offers to hire Vietnamese workers, and thus Vietnam economy will develop. If we care too much about current benefit, the strict protection law may force companies to leave Vietnam. Similarly, boycott in the end impairs the benefit of third-world workers. Without enough work, these people will have no wages to support their families.
What about the ethics issues? Well, I think some of the Westerns are imposing their own values upon others, totally neglecting the difference in economy situations. Sure not very many people desire working hard in suffocating environment to make ends meet, but if we look back at how our ancestors survived by hunting and gathering, we can hardly believe that they had to worry about whether they could survive the winter. Third-world countries like Vietnam is poor, and it is even poorer when compared with developed countries like America. The difference of living standard will inevitably lead to different ranking of goods and services. What average Westerners take for granted, such as clean air, good education, may not be pivotal considerations of Vietnamese people. What they desire is food and less risky jobs. It’s unfair to force these people to judge things like Westerners do. Money is neutral and functions as medium of exchanges. It is physical goods and services that counts. And where do goods and services come from?
In conclusion, the condemnation of sweatshop is not convincing.