Introduction players such as Apple, Samsung, BMW and Microsoft

Introduction

Amnesty International (2017) has reported that several global players such as Apple, Samsung, BMW and Microsoft are using child labour in favour to mine cobalt in the Democratic Republic of Congo. The increased demand for electronic devices such as smartphones and tablets, as well as for cars, lead to an increased demand for cobalt, which is needed to produce batteries. This is not the first time that multinational companies get accused for supporting child labour. Child labour is just one example of how companies abuse human rights to maximize their profits. This paper will focus on whether markets based on captive employees are morally legitimate and to what extent global players have influenced the working conditions for child labour during the 21st century. To answer these questions, it is needed to first define what captive employees are.

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Captive employees are limited in choosing on how they want to earn their money for living (e.g. prisoners, children that must do child labour, forced prostitutes). In the United States for example, prison labour is prescribed by the law (The Economist, 2017). There are different jobs that inmates can choose from and some of them are more profitable than others, but the result is the same: low wages and moral hazard. While the state and owners of private prisons make millions of dollars, prisoners are getting exploited. Arguments in favour of prison labour are that it would cut backsliding, defeat laziness and it would improve the inmates’ abilities which they can use for their future, even though some people disagree on whether simple manufacturing jobs will expand their abilities or not. Also, important to note is, that the number of these basic jobs is decreasing in the U.S. One approach to answer this question is the increasing globalization.

Free trade has opened the borders worldwide and makes it easier to specialize on your own comparative advantages while sourcing other jobs out. It is no secret that most basic manufacturing jobs are being offered in poor countries. This does not only not solve the problem of the limited of choice captive employees have but it also increases it. Families with no access to higher education in poor countries have no other choice than working under poor conditions for low wages. In Bangladesh for example, the police charged workers of manufacturing factories (Abrams & Sattar, 2017). The reason behind this is, that they want to scare them and avoid protests by workers. Global brands like H and Gap act concerned and contacted the government with the request to stop threatening their workers. On the other hand, wages in Bangladesh have gone up only twice during the last 10 years, while the inflation has gone up by approximately 10% a year. This raises the question whether global players, who are supposed to have a lot of bargaining power, do care about their workers’ conditions and whether or not they do have an influence on working conditions such as physical (e.g. overpopulated buildings, safety during emergencies) and political conditions (such as a threatening government) have changed.
Based on these statements, the following text will focus on the central question ”To what extent global players have influenced the working conditions for child labour during the 21st century?”. This question will be answered by doing a literature review. In the beginning, this paper will focus on a report by the International Labour Organization to show what the current situation is looking like and to see if there is an ongoing trend. By applying Satz’s theoretical framework of noxious markets, the moral acceptance of child labour will be discussed. Following, the paper discusses 3 global players (Nike, Apple & Samsung) and how they are using child labour and if they have made any changes regarding the issue. Based on the shareholder theory by Sundaram and Inkpen, this essay will then discuss why child labour is still present and what incentives global players have got to support it. Finally, this paper will look at different policy changes and what the future of child labour might look like.

Theoretical Framework

As reported by the International Labour Organisation (ILO, 2017) 151.622.000 children were a part of the child labour industry in 2016, meaning that almost every tenth child (9,6%) is a victim of child labour, showing a net decline of 94.000.000 since 2000.72.525.000 of those in child labour are defined to be under hazardous conditions, which is described as being part of a harmful environment for both their physical and mental health, as well as their evolution. Even though the total number of children in child labour has declined since the millennium year, the progress has slowed down in the period of 2012-2016 with a reduction of 1%-point only. If this trend continues, the number of underaged children working is estimated to be at 121.000.000, of which 52.000.000 are to be listed as being affected by hazardous work. Of these almost 152.000.000 approximately 72.000.000 are from Africa and 62.000.000 from Asia and the Pacific, which adds up to a total of 134.000.000 children being listed as performing child labour. This means that around 88,5% of child labour is being held in these regions. The Sub-Saharan region is the only one were child labour has increased since 2000. One possible way of answering this, is by the increased demand of rare resources, which are needed for new technologies and devices as mentioned in the introduction. Another approach to answer the rise is that more than 66% of children in child labour are working inside their family environment. Most poor families in Africa need their children to help them out in the agricultural sector, which emphasizes the informational asymmetry and the weak agency. Around 4.300.000 children are considered to be working in forced child labour. Forced child labour is defined as having the same harms as hazardous working conditions as well as trauma of coercion, threats of penalty and lack of freedom. Of these 4.300.000 children, an estimate of 1.000.000 are suffering under commercial sexual exploitation, another 3.000.000 under other forms of labour exploitation and 300.000 more are forced to labour by state authorities.

 

Whether or not these numbers are morally acceptable, will be answered by reviewing Satz’ definition of noxious markets.According to Satz (2010) a noxious market is defined as a market that is meeting the four parameters extreme harm for the individual and society respectively, weak agency and vulnerability. While the first two are defined as consequences, the latter are described as sources. All these parameters can be applied on child labour. First, children cannot be considered to have full control of their decision making due to scarcity of capacities compared to full-grown human beings which leads to their legal guardians being the ones who determine on what activities their children perform, which means that the children’s interests get disregarded. This does not only imply weak agency but also results to ever-lasting negative impacts. The second source relates to vulnerability. Children in less economically developed countries are more prone to be victims of child labour because they do not have a lot of other opportunities and rely on working either by being forced or by feeling the need to help their family out. Children would not have to work if they would be wealthy. The consequences of noxious markets imply that child labour harms both individuals and the society. Child labour damages the society by lowering wages for adults. The reason for this phenomenon is that due to the existing possibility of hiring a child, which is willing to work for less money, companies would rather let children work than paying higher wages for adults. Adults then must lower their wage expectations to be able to compete with the cheaper child labour force.

Discussion
There are many reasons as to why child labour occurs often in developing countries. The technology of production influences the degree to which children can be substitutes for adults (Grootaert & Kanbur, 1995). This leads to an increased demand for child labour in hazardous jobs such as mining, as adults are too big to fit through the tunnels, or weaving carpets, because kids have smaller fingers which allows them to tie smaller knots than adults. Grootaert and Kanbur think that especially because of the miniaturization process in the electronical industry, the demand for child labour will increase. Furthermore, each household is trying to assign the children’s time to the activity which provides the highest private return. White (1996) offers a new perspective on why child labour exists. The basic idea is the same as before, but the angle is different. Globalization has changed the lifestyle of children all around the world. He states that both the rich and the poor children have an impact on child labour. Because of globalization, poor children get aware of the new trends and products. They want to be able to consume these goods too, so they decide to earn money on their own without the consent of their parents in most cases.

One reason why banning child labour is problematic is because there are interest groups who do not support it (Grootaert & Kanbur, 1995). The government does not want to ban something that according to them does not even exist. Also, the employers do not support banning it because in most cases they are the parents of the working children and they rely on the children’s income. The remaining employers are companies.

We will take a closer look on Nike, Apple and Samsung. The reasons for choosing these companies is because they have often been involved in scandals regarding child labour and poor working conditions. Also, these three companies are one of the biggest names in their market industry. While Nike is dominating the athletic shoe market (Locke, Qin & Brause, 2007), Apple and Samsung are in a big rivalry regarding who the worlds largest smartphone producer is. Besides this industry, Samsung also plays an important role in the market of other electronic devices.

Beginning with the globalization, Nike shut most of its U.S. factories down and allocated their production to Asia (mainly Korea and Taiwan) (Locke et al., 2007). As these countries stared to become wealthier and the demand for higher wages increased, Nike shifted the production to even cheaper countries such as Indonesia, China and Vietnam. In 2004, their goods were produced in over 800 factories in 51 countries. Even though they employed over 600.000 workers, only 24,291 of these were defined as direct employees and most of them worked in the United States. This means that they subcontracted multiple suppliers to be able to keep up with the ever-shifting trends and to stay flexible. On the other hand, this leads to short-term agreements with their suppliers, which influences their possibilities to observe the production process as well as the working conditions negatively. Their strategy of profit-maximizing caused other problems that they have not been dealing with before. In the early 1980s, Nike was accused for producing goods for low wages under poor working conditions as well as for violating human rights. Following, over the 1990s, reports of child labour in Cambodia and Pakistan have harmed their reputation. Nike did not feel responsible in the beginning, arguing that the employees were not direct ones. With increasing pressure, Nike created a Code of Conduct in 1992, which stated that their suppliers would be required to make sure that the working conditions are morally acceptable. Another measure taken by Nike, was to increase the minimum age for footwear factory workers to 18 and for other workers to 16. Besides that, all footwear suppliers must be in accordance with the U.S. Occupational Safety and Health Administration. This makes the society feel that Nike is doing something against child labour, but on the other hand they leave some of their industries exploitable.

While the main concept of trading and outsourcing has not changed, the demands and trends have evolved. Today most people are looking at high-technology industries. Like Nike, Apple has outsourced its production to Asia and has over 600 manufacturing locations there (Myers & Fellow, 2014). By producing iPhones in China, Apple has reduced the cost of each device to 47% of how much it would cost to be produced in the United States. Besides their outsourcing strategy, they also share the same reputation harms as Nike did. In 2002, Apple’s supplier Foxconn confessed using child labour. Underaged students were required to intern at the factory to be eligible to graduate. They were paid $244 a month and they could not leave the factory unless they have completed all their tasks. Like Nike, Apple has formulated a Code of Conduct which states that workers must be at least as old as required by the country’s law they work in. Since then, Apple has been proactive to eliminate any child labour from their supply chain. In 2007, Apple started conducting audits at the factories. The company is providing trainings to prevent underage labour, by teaching effective methods of age verification and fraud prevention. The smartphone giant is following a zero-tolerance policy regarding child labour. If child labour gets detected, the children are send back to school, and they receive reimbursements for the lost time and harms. Criticizers blame Apple for acting as if they were fighting child labour, only to avoid their reputation to be harmed. Regarding the accusations by Amnesty International, Apple is aware of the child labour problem in the cobalt mines of the Democratic Republic of Congo and they are working on a solution (Apple Inc., 2017). Apple wants to verify that the mines are in accordance with their protection plan. Besides building a program to support children to stay in school, they have also made a grant to the Fund for Global Human Rights which is giving aid to organizations working at the mines.

China Labor Watch (2012) has conducted a research at Samsung’s supplier HEG Electronics to find out they are also using child labour. During school vacations the number of student workers rises by approximately 20% which adds up to a total of 80% of the work force being underaged students. This happens because the supervisors are not checking the student ID’s on a consistent level. Also, teachers are handing out fake IDs to their students and they use them to open an illegal flow of underaged workers to the factory. The contracts are not signed with the working children, but with the teachers. Even though the factory noticed child labour, it started supporting it by helping to prevent the children being detected, instead of terminating the contracts immediately.

These three cases show that global players do in fact indirectly support child labour by subcontracting these factories. One approach to understand the behaviour of global players is the shareholder theory by Sundaram and Inkpen (2004). They say that maximizing the shareholder’s value, which child labour does increase by cutting down the wage costs, should be the highest priority because shareholders bear the highest risk and therefore their needs should be valued the most. Also, other stakeholders are in conflict to each other even within their own stakeholder group, such as different consumers giving precedence to different aspects, while shareholders all share the same intention. They want to receive higher returns than their investments.

As stated by Satz (2010) only because a market is noxious, it does not mean that it must be shut down immediately, because it might have negative impacts in the long run. While markets like the forced and hazardous labour should be terminated without any exceptions, the regular child labour market should be strictly regulated so the problem can be solved in the long run. Solutions provided by ILO (2017) are for example cash transfers to cut down the direct costs such as education fees as well as for study materials, school uniforms and transits. Besides that, families should receive aid for indirect matters such as helping out to get access to documents that are needed for being eligible to attend school. Also, the teachers’ working conditions should be on a high level to ensure a high-quality education and a safe environment. Additionally, children who have not had the chance to visit school before, should receive corrective education so they can keep up with the other students. To prevent further child labour, students must be alerted what the consequences of child labour are, and it has to be made clear how important education is. Other than undertaking educational measures, the government should work on a social threshold to avoid defenceless families from being forced to support child labour as their last solution. As stated by (Grootaert & Kanbur, 1995), the government could offer working children something to eat. Furthermore, health care workers could be constructed to watch out for working children to not exceed a workday of five or six hours, so they can visit school. These actions can assist poor families, since their economic situation is unlikely to change in the short-term. On the other hand, poor households could see these welfares as an incentive to expand the children’s private return and this leads to an increased child labour supply.

Hypothesis

Globalization is an ever-evolving process and while old reasons for child labour slowly distinguish, new demands for child labour occur and therefore cause new problems. Therefore, it can be assumed that the developing technology market which is caused by globalization, is positively correlated to an increased demand for child labour. To be able to either confirm or reject this hypothesis, further research is required. One potential approach to come to an answer is to look at the specific jobs that are associated to new technologies. For example, if resource X is needed for the new product Y, does child labour in the supply of resource X increase as soon as product Y is getting started to be produced?

Conclusion

Regarding the results of this literature review, any form of forced labour should become banned from the market. The question whether child labour is morally acceptable depends on the perspective that the viewer is looking from. A profit-maximizing company is likely to support it as long as it does not harm their reputation. Also, it is important to define what the reason behind the child labour in each case is. Child labour can be divided in 2 groups. First, there is child labour that is a result of poverty and family-based decisions. This kind of child labour can be solved by countries becoming wealthier as stated by Locke et al. (2007) when Nike first outsourced to Taiwan and Korea but then these regions developed further, and the supply of child labour decreased. On the other hand, there is child labour which is created by an increased demand in specifically work done by children because of their advantages compared to adults as in the cobalt mines. With the development of new technologies, the demand for rare resources increases and so does the demand for child labour.

 

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