
Cheap labor is good for a society and helps nations develop.  According to Pew research 71% of the population works on 10 dollars or less a day.  This may seem shocking but as the years go on an increasing amount of people come out of poverty.  Cheap labor may be why people are in poverty but it has improved their lives and their families’ lives. Cheap labor is a necessity for nations to develop and phases itself out in time.  There are 3 stages of cheap labor that a nation goes through to develop.  It will usually start with a wealthy country investing in another country though cheap labor.  Then through protests and strikes workers gain rights and the nation will become developed.  Cheap labor then phases out and become low-wage labor.

Cheap labor sounds and is to a certain extent is a terrible thing.  People stuck in it have to grind through long hours of harsh work for very little pay compared to people in first world countries.  To say that cheap labor is a good thing made me feel like I was very apathetic initially. For example, Chandran Nair a business man who wrote an article for Time Magazine on cheap labor claims that it is modern day slavery but that the people are not kept in it by slave masters but by the fear of “grinding poverty”. People are unable to leave it because the alternative is worse or there is none.  He claims to fix this people just need to pay more for products.  

Keeping in mind that Chandran Noir’s argument has good intensions it is still very naïve.  His argument is flawed for Consumers always want to pay the lowest price for products; This is one of the reasons why cheap labor exists.  When prices go up demand goes down.  This will cause a large dead-weight loss on an economic graph.  Consumers and Firms are unwilling to pay more for labor so cheap labor exists for this reason.  Moreover, People have always criticized cheap labor because it puts workers in bad working environments and pays nowhere near the amount a person in the west would ever make.  I do not think this is a fair criticism however.  People chose to work in poor living conditions and have a low wage because it is better than the alternative.  The alternative is usually farming which is the pinnacle of a poor 3rd world person.  If a corporation like Nike was forced to shut down all of its cheap labor factories it would result in being detrimental to the people who worked there and for their families. Multi-national corporations’ investment in cheap labor is what creates infrastructure in developing countries.

Modern Cheap labor starts when a Multi-national corporation comes to the third world for cheap labor but with that they also come with wealth and investment.  China investing in Africa is a great example of the first phase.  China employs many people in Africa for their natural resources.  (vice) A common criticism of the Chinese doing this is that they are stealing all of Africa’s natural resources.  I however do not see this as a valid criticism because the resources would not have been being used unless for Chinese investment. According to the 2015 Pew Global Attitudes Survey 70% of Africans have a favorable opinion about the Chinese.  This is due to the investment and employment opportunities that China has been able to give to them.

Since 2000 China has become Africa’s biggest trading partner.  (Chen, Dollar, Tang) The per capita growth rate in Africa is much higher now than it was in the 90’s.  In the 90’s the per capita growth rate was only .6 percent.  In the 2000’s it is now at 2.8 percent.  China does not discriminate when investing in Africa.  When a Western country like the US invests in Africa it will only usually invest in a country that has a well-established rule of law and property rights.  Moreover, Investment from the west also only comes in the form of direct investment.  Instead of having US companies opening factories or businesses in Africa, they simply just give the government money.  The money can only to be used on what the US sees fit.  China invests with their businesses and gives money to the governments.  However, China does not put stipulations on what it should be used for.  Since China is doing this,  Africa is developing at a much faster rate than ever.  The  hands-off approach in which China gives their governments money and the infrastructure and jobs created by the Chinese mining natural resources has brought Africa in to the first phase of cheap labor and on its way to developing much faster.

Another example of first phase cheap labor helping a country develop is in Honduras. A study done by Powell and Starbeck found that multi-national corporations in Honduras improve their standard of life because People in cheap labor make 800% of what the national income is.  (Powell and Skarbeck) All the countries that were in the study also had people in cheap labor making more than their country’s average.  Cheap labor does look bad but it usually improves people’s lives in 3rd world countries.

Sometimes instead of hindering cheap labor, governments stop it all together.  Most economists believe cheap labor is a good thing. Paul Krugman, a left leaning Keynesian economist has written an article about how people in the Philippines who salvaged metal at a garbage dump were forcibly removed due to humanitarian outrage.  What the humanitarian outrage did though was counterproductive.  These people lived on the garbage dump because it is how they made their living.  They were not forced to salvage metal but they were forcibly removed.  This is how they were able to make a living. They are now jobless.  Krugman also states that they will probably have to resort to farming which will make them even less money than salvaging for metal.  Furthermore, Krugman argues that the people responsible for them to be removed were very selfish.  They made themselves feel like they were helping but at the expense of doing the opposite.  This is one of the many dangers of stopping cheap labor because it is detrimental to the people in it and leaves them jobless.  

While premature government intervention makes living conditions worse, cheap labor solves itself in time.  For example, the US used to use cheap labor.  Indeed, our infrastructure today could not exist without cheap labor that was used in the earlier part of the 20th century.     Additionally, developing countries do not have the infrastructure, money, or education that we have. Before a country can enter the second phase of cheap labor they need infrastructure. 

Since the US was gaining a lot of infrastructure at the time roots of the US labor movement started with people working in the artisan trade in 1768.  (History.com) They were having their wages reduced and protested by going on strike.  This led to the formation of one of the first unions.  Unfortunately, this cannot happen yet in 3rd world countries because of their lack of infrastructure.  It would be hard for workers to organize just yet. This was an example of the US going through the second phase of cheap labor. A modern example of Cheap Labor in the second phase is in China itself. (not their investment in Africa) Many multinational corporations complain that cost of doing business in China is rising because people are only willing to work for higher wages.  (The Economist) 

China, being in the second phase of cheap labor, is needing labor strikes to improve working conditions, hours, and quality of life.  China now has well developed infrastructure and supply chain.  Since 2011 labor protests in China have grown rapidly.  (Griffiths) In the Guangdong province in China labor strikes average out to be more than 1 a day.  The workers of China are standing up for their rights because they have progressed passed cheap labor.

China’s problem with progressing past cheap labor is that it is not a democratic country like ours.  Big business in the US was still able to call the government during workers’ rights movements but there was a lot of less risk then in the US.  In the Sichuan province in March 2016 eight workers were arrested and sentenced to several months in prison.  (Griffiths) This was for them protesting for unpaid wages.  Like the US the protesting workers did not have the support of the government at first.  The Chinese workers also do not have the support of the state-run news.  I think this was vital for workers’ rights movements in the US but with China’s lack of freedom of press, it will become much harder for workers to progress in the second phase of cheap labor.

Although, Chinese workers still have a long road ahead of them, I believe their workers’ rights will still come to them.Protest trends are rising throughout china and they can’t be ignored and settled with arrests forever.   The Chinese standard of life is improving and it will force in more workers’ rights.  Chinese people are already being paid much more than they used to and extreme poverty has fallen from 88 percent to only 6.5 percent in the last thirty years according to the world bank.  Although, China has their peoples’ wages increasing  corporations are still not leaving.  This is due to the fact that China has a very effective supply-chain.  (The Economist) This is caused by the cheaper labor that was done before them that created the infrastructure that allowed China to have such a well-developed supply-chain throughout its country.

When people who are in cheap labor are ready to enter the second phase of cheap labor and strike they will have to do it as a mass and about the whole 3rd world would have to be together on it.  If they were not to do it together the corporation employing them would simply move their business to a different country.  People in cheap labor can still strike and protest for higher wages however only if their country has the infrastructure.  

If workers were to organize to demand a higher wage for the work they have done, They would also have to be on their own terms.  If the U.N. demands it, multi-national corporations will always find a way to get out of it by using machines instead or shutting down completely. It is impossible to police corporations into benefiting society instead of themselves. This would leave the people with no jobs at all.  People in cheap labor would have to do it on their own terms because intervention would just do more harm than good.  Unfortunately, there is too great of a supply of people whom are willing to work in cheap labor.  People are not necessarily content with doing cheap labor but it is currently better than their alternatives.

It is important to note that Cheap labor doesn’t exist in 1st world countries anymore but it instead takes the form of low-wage labor.  This is the third and final stage of cheap labor.  It becomes Low-wage labor but is still good for a country even if it is a 1st world country.  In the US, low-wage labor is usually done by teenagers and foreigners.  Contrary to what many people believe raising the minimum wage would be hurtful.  In the 1980’s a study was conducted to determine the impact on raising the minimum wage for teenagers and the economy.  It found that raising the minimum wage had no economic consequences and had no impact on teenage school attendance and employment. (Card25) I think that studies like this no longer apply to the modern US because of immigration. The illegal immigrant population has grown from five million in 1986 to 11.1 million today.  (Plumer Washington Post) Illegal immigrants have taken many Low-wage work positions.  Most of the immigrants come from countries where their wage was less than the one they have in the US and are fine working for it.  This in turn has affected who would be most affected by a minimum wage increase

Low-wage labor does not go away but it would not be good if it did.  It would be harmful to the immigrants and others that are working low-wage jobs. According to Lopresti, John W. and Kevin J. Mumford. Raising the minimum wage by a small amount can actually have an opposite affect on raising wages.  If the wage was increased by a small amount it will cause slower wage growth.  This is based on a mathematical economic model they created.  The model did however claim that a large rise in the minimum wage can be beneficial.  The model however did not compensate for employment which is a large concern for raising the minimum wage. The authors of the model also claimed that the model proved the claim that the small increase to the minimum wage much more than a large increase was beneficial.

Cheap labor is good for a society and for the people that are engaged in it.    Cheap labor is good because it helps 3rd world countries develop though the three phases of cheap labor.  When multi-national corporations come into a third world country the investment and wealth that they bring along with them is beneficial to the country.  China’s investment in Africa is an example of nations going through the first phase of cheap labor.  People there and in other countries working for these multi-national usually make more than their national average.  China itself is going through the second phase of cheap labor.  Protests are springing up that are able to happen because of China’s infrastructure.   Eventually when cheap labor phases out like in the US and the west, it becomes low-wage labor.  Just like cheap labor, getting read of low-wage labor would be hurtful to all the parties involved.  Cheap Labor seems very bad but only through itself can it disappear.
