3 - The Economics of Sweatshop Wage Determination

Summary

This chapter explains the process that determines wages paid to sweatshop workers. It explains the consequences of imposing minimum wage laws and boycotting sweatshops. The chapter articulates the basic economic reasoning that leads many of the demands of anti-sweatshop activists to harm worker welfare. It then considers objections made to this basically economic case that include the necessity of competitive markets; efficiency wages; passing costs on to consumers; cost cutting in other areas; accepting a lower rate of return; and how elasticity impacts overall worker welfare. An appendix to the chapter considers philosophical aspects of how to think about worker welfare. This core chapter outlines the main lesson of the book.