Working Paper: NBER ID: w10492
Authors: Ann Harrison; Jason Scorse
Abstract: During the 1990s, human rights and anti-sweatshop activists increased their efforts to improve working conditions and raise wages for workers in developing countries. These campaigns took many different forms: direct pressure to change legislation in developing countries, pressure on firms, newspaper campaigns, and grassroots organizing. This paper analyzes the impact of two different types of interventions on labor market outcomes in Indonesian manufacturing: (1) direct US government pressure, which contributed to a doubling of the minimum wage and (2) anti-sweatshop campaigns. The combined effects of the minimum wage legislation and the anti-sweatshop campaigns led to a 50 percent increase in real wages and a 100 percent increase in nominal wages for unskilled workers at targeted plants. We then examine whether higher wages led firms to cut employment or relocate elsewhere. Although the higher minimum wage reduced employment for unskilled workers, anti-sweatshop activism targeted at textiles, apparel, and footwear plants did not. Plants targeted by activists were more likely to close, but those losses were offset by employment gains at surviving plants. The message is a mixed one: activism significantly improved wages for unskilled workers in sweatshop industries, but probably encouraged some plants to leave Indonesia.
Keywords: antisweatshop; labor market outcomes; minimum wage; Indonesia; activism
JEL Codes: F1; F2; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Direct U.S. government pressure (F59) | Increase in minimum wage (J38) |
| Increase in minimum wage (J38) | Increase in real wages for unskilled workers (F66) |
| 1% increase in real value of minimum wage (J38) | 0.67% increase in real unskilled wages (J39) |
| Increase in minimum wage (J38) | Decrease in employment for unskilled workers (F66) |
| Antisweatshop activism (J81) | Increase in wages (J31) |
| Antisweatshop activism (J81) | No significant employment reductions (J63) |
| Antisweatshop activism (J81) | Employment gains at surviving plants (J63) |