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Lesson 3: Trade and Labor: Sweatshops


Activity:  Standing Up for Sweatshops?

Download Sweatshop Activity: Teacher Guide, Handouts, Visuals (.doc file) 

Lesson Overview

Based on a natural inclination to compare the lives of sweatshop workers to our own, many people react to news of sweatshops with outrage, followed by a call for the elimination of such inhumane practices.  This understandable, but essentially knee-jerk, reaction prevents a full examination of the issue – an examination that must include the accounts from workers, themselves, who often welcome the opportunity sweatshops offer and fear that foreign agitation will cause factories to close or relocate.  Economic analysis offers insight into this apparent paradox.  In this lesson, students use a series of clues and their knowledge of incentives and voluntary exchange to solve the sweatshop mystery. 

Content Standards

Standard 4: Students will understand that: People respond predictably to positive and negative incentives. 

  • Acting as consumers, producers, workers, savers, investors, and citizens, people respond to incentives in order to allocate their scarce resources in ways that provide the highest possible returns to them.

Standard 5: Students will understand that: Voluntary exchange occurs only when all participating parties expect to gain.  This is true for trade among individuals or organizations within a nation, and among individuals or organizations in different nations. 

  • Free trade increases worldwide material standards of living.
  • When imports are restricted by public policies, consumers pay higher prices and job opportunities and profits in exporting firms decrease.

Standard 13: Students will understand that: Income for most people is determined by the market value of the productive resources they sell.  What workers earn depends, primarily, on the market value of what they produce and how productive they are. 

  • Employers are willing to pay wages and salaries to workers because they expect to sell the goods and services those workers produce at prices high enough to cover the wages and salaries and all other costs of production.
  • To earn income, people sell productive resources.  These include their labor, capital, natural resources, and entrepreneurial talents.
  • More productive workers are likely to be of greater value to employers and earn higher wages than less productive workers.
  • People’s incomes, in part, reflect choices they have made about education, training, skill development, and careers.  People with few skills are more likely to be poor.
  • Changes in the structure of the economy, the level of gross domestic product, technology, government policies, and discrimination can influence personal income.
  • In a labor market, in the absence of other changes, if wage or salary payments increase, workers will increase the quantity of labor they supply and firms will decrease the quantity of labor they demand.
  • Changes in the prices for productive resources affect the incomes of the owners of those productive resources and the combination of those resources used by firms.
  • Changes in demand for specific goods and services often affect the incomes of the workers who make those goods and services.

Standard 15: Students will understand that: Investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living. 

  • Standards of living increase as the productivity of labor improves.
  • Economic growth is a sustained rise in a nation’s production of goods and services.  It results from investments in human and physical capital, research and development, technological change, and improved institutional arrangements and incentives.
  • Historically, economic growth has been the primary vehicle for alleviating poverty and raising standards of living.
  • Economic growth creates new employment and profit opportunities in some industries, but growth reduces opportunities in others.



  1. Divide the class into 3 groups of 6-8 students. 
  2. Explain that the purpose of the activity is to solve a mystery – a real-life paradox of human behavior.  Give the following instructions: 
    • Each group will have a packet containing a description of the mystery and a set of clues. 
    • Distribute the clues so that each person has at least one.  (Depending on the size of your group, some students may have more than one.)  Note that the clues are numbered.  There is no significance to the numbers; they are just provided for easy reference during the discussion. 
    • All the clues are true.  There is no effort to trick you by providing false or misleading information.  However, not all clues are important or useful in solving the mystery. 
    • Read aloud the mystery that came with the packet of clues. 
    • In round-robin fashion, share your clues.  Discuss whether or not the clue is relevant to solving the mystery and if so, in what way. 
    • Solve the mystery and decide which clues were necessary and sufficient to solve the mystery. 
    • Choose a spokesperson and be prepared to share your conclusions with the class. 
  3. Allow student groups time to discuss the mystery. 
  4. Ask groups to report.  Discuss with the class the solution to the mystery and the relative importance of various clues.  (See teacher guide.) 




College students, organizations like the Worker Rights Consortium, and protesters at WTO and World Bank meetings clamor for an end to sweatshops.  Many of us sympathize.  We’ve been convinced by writing and rhetoric that poverty in the lesser-developed countries of the world results from a shameful partnership between materialistic American consumers and greedy corporations.  But Nicholas Kristof and Sheryl WuDunn, in their recent Pulitzer Prize-winning coverage of China and the Far East, want to lead “Two Cheers for Sweatshops.”  They urge us to buy more from sweatshops, not less, warning that “refusing to buy sweatshop products risks making Americans feel good while harming those we are trying to help.”  Columbia Daily Spectator editorial page editor, Jaime Sneider, writing in the New York Times in May, 2000, chides the sweatshop protesters for “threatening to impoverish the very workers they claim to protect.” 

How can standing up for sweatshop workers do harm instead of good? 


  1. “The only thing a country like Cambodia has to offer is terribly cheap wages; if companies are scolded for paying those wages, they will shift their manufacturing to marginally richer areas… ”  (Kristoff and WuDunn).
  2. Nike, often the focus of “sweatshop” controversy, subcontracts all its manufacturing to countries with lower wage rates than those in the United States.  The company reported in July, 2000, that it contracts with 700 factories in 50 countries, employing 550,000 workers. A typical Nike factory worker in Vietnam makes $564/year (or about $.30/hr.).
  3. Holger Jensen, writing for the Rocky Mountain News, reports that in Indonesia, 60% of the people live below the poverty line (defined as an income of less than $1.50/day).  Nike jobs, considered “highly desirable,” pay $65 month, or less than $.50/hr.  Approximately 110,000 Indonesians are employed.
  4. The proud father of a 15 year old girl working in a Bangkok factory that exports clothing to the U.S. reports that she earns $2/day for a 9 hour shift, 6 days a week.  It’s dangerous work and she has twice had needles go through her hands.  The loving father isn’t worried about her hands but about the pressure that might close the factories:  “I hope she can keep that job.  There’s all this talk about factories closing now…   I hope that doesn’t happen.  I don’t know what she would do then.”
  5. Nike receives $90 income for a pair of shoes produced by a sweatshop worker paid $3.37.
  6. Apparel industry jobs are typically filled by a country’s low-skilled workers.  In the U.S., an apparel industry worker makes about 56% of per capita GDP. In Guatemala, a worker in the apparel industry makes $1250 per year, about 75% of per capita GDP. This is even more dramatic in Vietnam and Honduras where the going wage rates paid in the sweatshops are actually higher than per-capita income.
  7. Regulations supported by the Worker Rights Consortium would increase foreign manufacturing costs for American companies, causing some of them to abandon foreign operations and/or mechanize operations.
  8. Recently, NPR reported the results of a follow-up study of the impact of public pressure on the well-being of child laborers. A foreign-owned company operating in India employed children in a manufacturing process using potentially dangerous substances. When public pressure led to the discharge of child laborers, the children were tracked by the researchers. The majority ended up doing more dangerous work.
  9. A teenage girl stitching leather purses in China for a company in Hong Kong works a 12 hour day with a half hour lunch.  She and her friends happily report that they consider these good jobs because the factory allows them to work long hours, laughing that the factory manager complains, “It’s actually pretty annoying how hard they want to work.” [emphasis added]
  10. Worker loyalty in Asia’s “sweatshops” is notable.  The turnover rate in Nike’s Indonesian factories has stayed below 2% for years, far lower than that in the United States.
  11. Today, “Sweatshop Belt” economies comprise about 1/4 of the global economy.  Some forecasters at the World Bank believe that as the industrial revolution spreads throughout Asia, its share of global GDP may rise as high as 55-60% by 2025.
  12. During Britain’s Industrial Revolution, per capita output doubled in 58 years.  As China experiences its own industrialization, per capita output has been doubling every 10 years in a veritable “explosion of wealth.”
  13. Some of the most oppressive factories in the 1980s were found in Dongguan in south China.  Since 1987, conditions have improved dramatically and wages there have risen from $50 to $250/month as factories scramble to attract and keep good workers.
  14. American pressure on sweatshops clearly has 2 effects:  1) it improves working conditions in American-owned companies overseas, and 2) it raises labor costs for those companies.
  15. Company spokesperson Tammy Rodriguez says that public pressure forced Nike to improve conditions in some of its Asian plants, requiring contractors to improve safety and working conditions and to limit working hours and days.

Optional Lesson Extension: 

The New York Times Magazine published an article about Kristof and WuDunn’s Pulitzer Prize-winning Thunder From the East, in October, 2000.  The article is linked to the first chapter of the book.  Both can be found a http://www.nytimes.com/library/magazine/home/20000924mag-sweatshops.html (8-29-06)  The magazine article and the first chapter of the book are readable for high school students. 

Following are excerpts in support of the contention that sweatshops are a step in many countries’ progression from subsistence agriculture to developed industrialization: 

“We and other journalists wrote about the problems of child labor and oppressive conditions in both China and South Korea.  But, looking back, our worries were excessive.  Those sweatshops tended to generate the wealth to solve the problems they created.  If Americans had reacted to the horror stories in the 1980’s by curbing imports of those sweatshop products, then neither southern China nor South Korea would have registered as much progress as they have today…. 

The sweatshops have helped lay the groundwork for a historic economic realignment that is putting Asia back on its feet….
For all the misery they can engender, sweatshops at least offer a precarious escape from the poverty that is the developing world’s greatest problem.  Over the past 50 years, countries like India resisted foreign exploitation, while countries that started at a similar economic level – like Taiwan and South Korea – accepted sweatshops as the price of development.  Today there can be no doubt about which approach worked better.  Taiwan and South Korea are modern countries with low rates of infant mortality and high levels of education; in contrast, every year 3.1 million Indian children die before the age of 5, mostly from diseases of poverty like diarrhea.” 

In 2003, Swedish journalist, Johan Norberg weighed in on the subject, his interest piqued by the seeming incongruity of the Communist government of Vietnam calling Nike an example of a “good and responsible” business.  The posting contains excellent content for a student reading handout.  See Norberg’s full article on his website: “The Noble Feat of Nike,”  Johan Norberg.net, June 7, 2003.  http://www.johannorberg.net/?page=articles&articleid=53 (8-29-06) 

“Today Nike has almost four times more workers in Vietnam than in the United States. I traveled (sic) to Ho Chi Minh to examine the effects of multinational corporations on poor countries. Nike being the most notorious multinational villain, and Vietnam being a dictatorship with a documented lack of free speech, the operation is supposed to be a classic of conscience-free capitalist oppression. 

In truth the work does look tough, and the conditions grim, if we compare Vietnamese factories with what we have back home. But that´s not the comparison these workers make. They compare the work at Nike with the way they lived before, or the way their parents or neighbours still work. And the facts are revealing. The average pay at a Nike factory close to Ho Chi Minh is $54 a month, almost three times the minimum wage for a state-owned enterprise. 

Ten years ago, when Nike was established in Vietnam, the workers had to walk to the factories, often for many miles. After three years on Nike wages, they could afford bicycles. Another three years later, they could afford scooters, so they all take the scooters to work (and if you go there, beware; they haven´t really decided on which side of the road to drive). Today, the first workers can afford to buy a car. But when I talk to a young Vietnamese woman, Tsi-Chi, at the factory, it is not the wages she is most happy about. Sure, she makes five times more than she did, she earns more than her husband, and she can now afford to build an extension to her house. But the most important thing, she says, is that she doesn´t have to work outdoors on a farm any more…. Farming means 10 to 14 hours a day in the burning sun or the intensive rain, in rice fields with water up to your ankles and insects in your face…. 

Furthermore, the Nike job comes with a regular wage, with free or subsidised meals, free medical services and training and education. The most persistent demand Nike hears from the workers is for an expansion of the factories so that their relatives can be offered a job as well.
…Nike is not the accidental good guy. On average, multinationals in the least developed countries pay twice as much as domestic companies in the same line of business. If you get to work for an American multinational in a low-income country, you get eight times the average income.
…I asked the young Nike worker Tsi-Chi what her hopes were for her son´s future. A generation ago, she would have had to put him to work on the farm from an early age. But Tsi-Chi told me she wants to give him a good education, so that he can become a doctor. That´s one of the most impressive developments since Vietnam´s economy was opened up. In ten years 2.2 million children have gone from child labour to education. It would be extremely interesting to hear an antiglobalist explain to Tsi-Chi why it is important for Westerners to boycott Nike, so that she loses her job, and has to go back into farming, and has to send her son to work.” 

(See download, above, for complete list and links to sources used in compiling this lesson.)