I actually think Kernaghan is making a good point and you’ve failed to appreciate his logic in full. Third world country businesses should not be able compete by having lower safety standards. Kernaghan is right, that creates a moral hazard, it pressures jurisdictions with high standards to lower them. It rewards bad behaviour here and there. We don’t want that surely. No one wants that.
But third world country businesses should be able compete by having lower wages for their workers, operating in a low cost environment etc. That does accurately capture the relative economic advantage.
I’m somewhere in the middle. I would probably enforce certain minimum safety standards, but they wouldn’t be full-strength developed country standards.
I can’t see a compelling reason to impose the specific safety standards of (e.g.) the United States on factories in developing countries. Regulators consider the value of a statistical life in deciding whether to impose a specific requirement—and at least one federal agency has that value pegged at over $13MM. The underlying methodology reflects the economic situation in the United States—e.g., by asking people how much they would be willing to pay to reduce their risk of death (or demand in order to increase their risk of death), by looking at how much higher pay is in high-risk occupations like mining, by looking at lost earnings, and so on. There is no reason to believe those views are universally correct or wise in other contexts.
Employers in societies that do not agree with American sensibilities are not engaging in “bad behaviour” merely because they follow local norms rather than American ones. At least for countries with reasonably functioning democratic systems (or which we otherwise think are doing a respectable job governing in the interests of their citizens), it’s not clear to me why we shouldn’t usually defer to the level of safety that the society has determined to be generally appropriate. (By generally appropriate, I mean across the society as a whole—I would not defer to regulations for industries that were more permissive than what was required in other regulatory domains).
There is no reason to believe those views are universally correct or wise in other contexts.
Not only this, but there is also reason to believe people in lower income countries will be less willing to pay for safety because they have less money. Someone spending 100 $/d can afford 2 $/d to decrease their risk of death by e.g. 1 %. However, someone spending 2 $/d (close to the maximum income of people living in extreme poverty of 2.15 $/d) cannot afford 2 $/d because this would decrease their available spending to 0, which could lead to death from starvation without the support of others.
Thanks for the comment! Could you clarify why you think paying less is fine, but having lower safety standards is not? Increasing safety standards increases the cost of hiring workers, and therefore increases unemployment. Assuming a prospective worker is aware of the risks of the job, and still thinks the job is worth it, would you oppose the worker taking the job?
One needs to consider the harmful effects on other workers—allowing goods to come into your market that were produced with abysmal safety standards puts pressure on other employers and their regulators to cut corners on safety. Pro-sweatshop logic is stronger at establishing that the sweatshop is not worse than the alternatives for the workers than at establishing its superiority to those alternatives. So the harms to non-sweatshop workers could outweigh any possible minor gains to the sweatshop workers.
I suspect most people are more sympathetic to developed-country workers who object to being undercut by unsafe labor than by inexpensive labor. There’s an understanding that there are certain things you shouldn’t be expected to do to keep your job—agreeing to work in unsafe conditions, sleeping with the boss, voting a specific way—and that society is going to enforce those boundaries. The right to safe working conditions may not mean very much in practice if you can get run out of business by factories outcompeting your employer because they use unsafe labor.
That’s the way our economic system works. Competing on the price of labour is fine and desirable—that helps sends signals to the global economy on how to order itself for optimal output.
But competing on safety is like a negative externality, like companies emitting pollution.
Safety is not an onerous cost either. As a cost, it would be in line with doing business in the jurisdiction. If the cost of labour is low in a poor country, so too is the lower cost of implementing safety.
Is there a specific country or example you would like to see safety standards held back on the grounds of higher employment? I’ve never heard of onerous safety standards being a cited as a reason for suppressed economic development. The Rana plaza fire safety reforms were widely lauded.
The Indian state of Kerala is widely recognised as having high living standards relative to the rest of India due to the strong presence of militant unions and labour standards.
Maybe there’s a theoretic economic argument but it seems very edge-casey in the real world.
<<If the cost of labour is low in a poor country, so too is the lower cost of implementing safety.>>
That makes sense for some safety measures, but not all. If the cost is borne in terms of lost worker productivity, then it makes sense—a safety measure resulting in a 5 percent productivity loss costs 1⁄10 as much where the cost of labor is 1⁄10 as expensive. But there are other kinds of safety costs as well—imagine a requirement that a factory have one automated external defibrillator (AED) on site for every X workers. That isn’t going to be meaningfully cheaper for the factory in the developing country.
Completely agree with Jason—its just not realistic.
Even simple things like metal Scaffolding and complicated harness/pully systems to protect from falls aren’t meaningfully cheaper here (sometimes might even be more expensive), so people often use bamboo scaffolding and ropes to secure people instead.
There should be some kind of proportionality. Here in Uganda way more people die on the roads, and of curable diseases. For construction and industry to make sense withing the economy, its always going to be at least a bit more dangerous.
But yes, all the low hanging safety fruit which doesn’t cost as much should be carefully implemented for sure.
But competing on safety is like a negative externality, like companies emitting pollution.
I do not think decreasing safety standards is like increasing pollution. Pollution decreases the quality of public goods like air and water bodies, which are often underprotected because the benefits are distributed across many people. In contrast, safety standards affect the health of workers, which is a private good, and therefore workers have a strong incentive to consider whether they are worth it.
Is there a specific country or example you would like to see safety standards held back on the grounds of higher employment? I’ve never heard of onerous safety standards being a cited as a reason for suppressed economic development. The Rana plaza fire safety reforms were widely lauded.
To clarify, I am not arguing that safety standards should be more or less strict. I just think they should be overwhelmingly determined by companies and workers instead of imposed by governments.
Empirical evidence about the effects of safety standards on employment is mixed, but this not surprising. There are lots of confounders, and it is difficult to rely on randomisation to isolate the effects of safety standards. However, “cost of labour” = “worker-hours”*(“wage per worker-hour” + “other costs per worker-hour”), and imposing safety standards tends to increase “other costs per worker-hour”, so companies will tend to decrease “worker-hours” and “wage per worker-hour” to compensate, thus decreasing employment and wages.
The Indian state of Kerala is widely recognised as having high living standards relative to the rest of India due to the strong presence of militant unions and labour standards.
I think the causality goes the other way around. A higher income per capita means people are willing to pay more to protect their health, and therefore push for stricter safety standards.
You have a point that safety isn’t a negative externality in the way pollution is. I will concede that. Never really thought of it like that.
To clarify, I am not arguing that safety standards should be more or less strict. I just think they should be overwhelmingly determined by companies and workers instead of imposed by governments.
Don’t you think unions have an important role to play in this? Because as a worker, especially in a poor country, there’s a lot of asymmetry. It’s difficult and often impossible to assess the risk of a workplace before you’ve started. You lack the expertise to understand the breadth of all the safety issues, and don’t have the information readily available to accurately compare safety across different firms.
And if governments can step in, productively with union & employer stakeholders, set sensible rules on safety (minimum safety standards, workplace assessment ratings), that makes it much easier for workers to assess safety of different firms, make better judgements, bargain for higher pay at more dangerous firms, allocate their labour more economical efficiently. Helps employers compete too.
Maybe you are arguing against the rules being too inflexible? Maybe you are just against first world unions don’t always have the interests of third world workers in mind but maybe third world unions are ok?
“The Indian state of Kerala is widely recognised as having high living standards relative to the rest of India due to the strong presence of militant unions and labour standards.”
I think the causality goes the other way around. A higher income per capita means people are willing to pay more to protect their health, and therefore push for stricter safety standards.
I think it’s a good case study to challenge this line of argument. I’d say that example is a clear case where the causality is opposite to how you described. A lot of the social democratic countries show that trend. The Nordic countries famously were amongst the poorest parts of Europe when they adopted the Nordic model pushed by militant labour movements in those countries.
I suspect prospective workers could get an idea of the safety risks by trying to talk with people who worked or work there. They could wait for them nearby the workplace. In some cases, they could also just work there to understand the conditions, and then quit if they do not like them.
I agree greater transparency about the working conditions is good, but I worry governments or unions pushing for rules on this may impose more costs than benefits.
I am not informed about Kerala’s case study. I guess there are many cases that fit my narrative, and others that do not. However, in general, I am very confident that having a higher income increases the willingness to pay for health. The value of a statistical life tends to increase with income.
I actually think Kernaghan is making a good point and you’ve failed to appreciate his logic in full. Third world country businesses should not be able compete by having lower safety standards. Kernaghan is right, that creates a moral hazard, it pressures jurisdictions with high standards to lower them. It rewards bad behaviour here and there. We don’t want that surely. No one wants that.
But third world country businesses should be able compete by having lower wages for their workers, operating in a low cost environment etc. That does accurately capture the relative economic advantage.
I’m somewhere in the middle. I would probably enforce certain minimum safety standards, but they wouldn’t be full-strength developed country standards.
I can’t see a compelling reason to impose the specific safety standards of (e.g.) the United States on factories in developing countries. Regulators consider the value of a statistical life in deciding whether to impose a specific requirement—and at least one federal agency has that value pegged at over $13MM. The underlying methodology reflects the economic situation in the United States—e.g., by asking people how much they would be willing to pay to reduce their risk of death (or demand in order to increase their risk of death), by looking at how much higher pay is in high-risk occupations like mining, by looking at lost earnings, and so on. There is no reason to believe those views are universally correct or wise in other contexts.
Employers in societies that do not agree with American sensibilities are not engaging in “bad behaviour” merely because they follow local norms rather than American ones. At least for countries with reasonably functioning democratic systems (or which we otherwise think are doing a respectable job governing in the interests of their citizens), it’s not clear to me why we shouldn’t usually defer to the level of safety that the society has determined to be generally appropriate. (By generally appropriate, I mean across the society as a whole—I would not defer to regulations for industries that were more permissive than what was required in other regulatory domains).
Thanks, Jason! I agree.
Not only this, but there is also reason to believe people in lower income countries will be less willing to pay for safety because they have less money. Someone spending 100 $/d can afford 2 $/d to decrease their risk of death by e.g. 1 %. However, someone spending 2 $/d (close to the maximum income of people living in extreme poverty of 2.15 $/d) cannot afford 2 $/d because this would decrease their available spending to 0, which could lead to death from starvation without the support of others.
Thanks for the comment! Could you clarify why you think paying less is fine, but having lower safety standards is not? Increasing safety standards increases the cost of hiring workers, and therefore increases unemployment. Assuming a prospective worker is aware of the risks of the job, and still thinks the job is worth it, would you oppose the worker taking the job?
One needs to consider the harmful effects on other workers—allowing goods to come into your market that were produced with abysmal safety standards puts pressure on other employers and their regulators to cut corners on safety. Pro-sweatshop logic is stronger at establishing that the sweatshop is not worse than the alternatives for the workers than at establishing its superiority to those alternatives. So the harms to non-sweatshop workers could outweigh any possible minor gains to the sweatshop workers.
I suspect most people are more sympathetic to developed-country workers who object to being undercut by unsafe labor than by inexpensive labor. There’s an understanding that there are certain things you shouldn’t be expected to do to keep your job—agreeing to work in unsafe conditions, sleeping with the boss, voting a specific way—and that society is going to enforce those boundaries. The right to safe working conditions may not mean very much in practice if you can get run out of business by factories outcompeting your employer because they use unsafe labor.
That’s the way our economic system works. Competing on the price of labour is fine and desirable—that helps sends signals to the global economy on how to order itself for optimal output.
But competing on safety is like a negative externality, like companies emitting pollution.
Safety is not an onerous cost either. As a cost, it would be in line with doing business in the jurisdiction. If the cost of labour is low in a poor country, so too is the lower cost of implementing safety.
Is there a specific country or example you would like to see safety standards held back on the grounds of higher employment? I’ve never heard of onerous safety standards being a cited as a reason for suppressed economic development. The Rana plaza fire safety reforms were widely lauded.
The Indian state of Kerala is widely recognised as having high living standards relative to the rest of India due to the strong presence of militant unions and labour standards.
Maybe there’s a theoretic economic argument but it seems very edge-casey in the real world.
<<If the cost of labour is low in a poor country, so too is the lower cost of implementing safety.>>
That makes sense for some safety measures, but not all. If the cost is borne in terms of lost worker productivity, then it makes sense—a safety measure resulting in a 5 percent productivity loss costs 1⁄10 as much where the cost of labor is 1⁄10 as expensive. But there are other kinds of safety costs as well—imagine a requirement that a factory have one automated external defibrillator (AED) on site for every X workers. That isn’t going to be meaningfully cheaper for the factory in the developing country.
Completely agree with Jason—its just not realistic.
Even simple things like metal Scaffolding and complicated harness/pully systems to protect from falls aren’t meaningfully cheaper here (sometimes might even be more expensive), so people often use bamboo scaffolding and ropes to secure people instead.
There should be some kind of proportionality. Here in Uganda way more people die on the roads, and of curable diseases. For construction and industry to make sense withing the economy, its always going to be at least a bit more dangerous.
But yes, all the low hanging safety fruit which doesn’t cost as much should be carefully implemented for sure.
I do not think decreasing safety standards is like increasing pollution. Pollution decreases the quality of public goods like air and water bodies, which are often underprotected because the benefits are distributed across many people. In contrast, safety standards affect the health of workers, which is a private good, and therefore workers have a strong incentive to consider whether they are worth it.
To clarify, I am not arguing that safety standards should be more or less strict. I just think they should be overwhelmingly determined by companies and workers instead of imposed by governments.
Empirical evidence about the effects of safety standards on employment is mixed, but this not surprising. There are lots of confounders, and it is difficult to rely on randomisation to isolate the effects of safety standards. However, “cost of labour” = “worker-hours”*(“wage per worker-hour” + “other costs per worker-hour”), and imposing safety standards tends to increase “other costs per worker-hour”, so companies will tend to decrease “worker-hours” and “wage per worker-hour” to compensate, thus decreasing employment and wages.
I think the causality goes the other way around. A higher income per capita means people are willing to pay more to protect their health, and therefore push for stricter safety standards.
You have a point that safety isn’t a negative externality in the way pollution is. I will concede that. Never really thought of it like that.
Don’t you think unions have an important role to play in this? Because as a worker, especially in a poor country, there’s a lot of asymmetry. It’s difficult and often impossible to assess the risk of a workplace before you’ve started. You lack the expertise to understand the breadth of all the safety issues, and don’t have the information readily available to accurately compare safety across different firms.
And if governments can step in, productively with union & employer stakeholders, set sensible rules on safety (minimum safety standards, workplace assessment ratings), that makes it much easier for workers to assess safety of different firms, make better judgements, bargain for higher pay at more dangerous firms, allocate their labour more economical efficiently. Helps employers compete too.
Maybe you are arguing against the rules being too inflexible? Maybe you are just against first world unions don’t always have the interests of third world workers in mind but maybe third world unions are ok?
I wouldn’t be so quick to dismiss the Kerala case study. Kerala actually has a lower per capita income. https://en.m.wikipedia.org/wiki/Kerala_model
I think it’s a good case study to challenge this line of argument. I’d say that example is a clear case where the causality is opposite to how you described. A lot of the social democratic countries show that trend. The Nordic countries famously were amongst the poorest parts of Europe when they adopted the Nordic model pushed by militant labour movements in those countries.
Thanks for the follow up.
I suspect prospective workers could get an idea of the safety risks by trying to talk with people who worked or work there. They could wait for them nearby the workplace. In some cases, they could also just work there to understand the conditions, and then quit if they do not like them.
I agree greater transparency about the working conditions is good, but I worry governments or unions pushing for rules on this may impose more costs than benefits.
I am not informed about Kerala’s case study. I guess there are many cases that fit my narrative, and others that do not. However, in general, I am very confident that having a higher income increases the willingness to pay for health. The value of a statistical life tends to increase with income.