Improving the conditions of workers? Minimum wage legislation and anti-sweatshop activism

California Management Review

Volumn 48, Issue 2, 2006, Pages

  Harrison, Ann ^a,b   Scorse, Jason ^c  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c MONTEREY INSTITUTE OF INTERNATIONAL STUDIES   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33645513462     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166342     Document Type: Conference Paper

References (16)

1. For another view that suggests that anti-sweatshop activism is bad for workers, see the work by the Academic Consortium on International Trade (ACIT) at 〈www.fordschool.umich.edu/rsie/acit〉.
2. Ten L. Caraway, "Solidarity across Borders: Transnational Labor Activism and Empowering Workers in Indonesia," prepared for the 2001 Annual Meeting of the American Political Science Association, San Francisco, CA, 2001.
3. B.J. Bullert, "Strategic Public Relations, Sweatshops, and the Making of a Global Movement," Working Paper #2000-14, The Joan Shorenstein Center on the Press, Politics and Public Policy, Harvard University, 1999.
4. Richard M. Locke, "The Promise and Perils of Globalization: The Case of Nike," working paper, MIT, 2003.
5. The data for all of the analysis that follows comes from the annual manufacturing survey of Indonesia collected and compiled by the Indonesian government's statistical agency BPS (Badan Pusat Statistik). The completion of this survey is mandatory under Indonesian law and therefore the data captures almost the entire population of Indonesian manufacturing firms, which ranged from approximately 13,000 in 1990 to over 18,000 in 1999. The survey includes over 400 questions in any given year, the large majority of which remain constant although in certain periods additional questions are included and others removed. Over the ten-year period there is an average of 4.5 observations per firm, reflecting the fact that some firms go out of business while others enter.
6. The term "production worker" refers to unskilled workers, and "non-production" to skilled workers.
7. Given that Indonesia has minimum wage laws there would appear to be an incentive for firms to exaggerate wages in order to feign compliance. However, whether due to ignorance of these laws or a lack of enforcement a very large percentage of firms reported wages significantly below the minimum for a number of years. These estimates of compliance are consistent with other studies that examine compliance with the minimum wage in Indonesia, including a study by the Indonesian SMERU Research Institute and by Alatas and Cameron. SMERU Research Report, "Wage and Employment Effects of Minimum Wage Policy in the Indonesian Urban Labor Market," SMERU Research Report, SMERU Research Institute, Indonesia, October 2001;
8. Vivi Alatas and Lisa Cameron, "The Impact of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in- Differences Approach," World Bank Policy Research Working Paper 2985, March 2003.
9. Ann Harrison and Jason Scorse, "The Impact of Globalization on Compliance with Labor Standards: A Plant-Level Study," in Susan Collins and Dani Rodrik, eds., Breakings Trade Forum 2003 (Washington D.C.: Brookings Institution Press, 2004).
10. The stronger wage increases documented for foreign plants and exporters in districts with anti-sweatshop activity did not, however, carry through to exiting plants. Plants that exit the sample were less likely to respond to both minimum wage pressures and to anti-sweatshop activism. Entrants suggest a mixed story. While exporters in districts with anti-sweatshop activity systematically increased wages across all specifications, increasing wages for foreign TFA plants is confined to the balanced panel.
11. For alternative theories on employment responses to minimum wage increases, see David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton, NJ: Princeton University Press, 1995).
12. We repeated all of the regression specifications that we used to identify the sources of wage increases and substituted the change in employment as the dependent variable in order to analyze the specifics sources of employment changes. With or without control variables, the results are largely consistent across specifications: there is no evidence that the differential wage increases among TFA foreign-owned firms and exporters led to employment declines. In fact, it is clear from Figure 9 that employment growth was generally higher for exporters and foreign enterprises, including those operating in districts where anti-sweatshop activists targeted Nike, Reebok, and Adidas subcontractors.
13. The left Y-axis is for all firms and the right Y-axis is for TFA firms only.
14. Locke, Myth and Measurement: The New Economics of the Minimum Wage op. cit.
15. It is important to keep in mind that for a well-known brand name such as Nike, labor costs from developing country factories in 1998 only accounted for about 4 percent of the total cost of a ninety-dollar shoe. The Internet link is 〈http://cbae.nmsu.edu/~dboje/NlKfaqcompensation.html〉. This interview with Nike is from 1998, but is no longer part of Nike's "official" website.
16. One only needs to witness the many millions of dollars Nike has spent on trying to improve worker conditions as well as the money it has spent on public relations campaigns to improve its image. Nike employs 85 people full-time to maintain Nike's compliance with environmental and labor standards in the countries where Nike operates and Nike workers inspect apparel and footwear factories on a daily or weekly basis. Locke, Myth and Measurement: The New Economics of the Minimum Wage op. cit.