Who thinks about wages and working conditions when companies are hopping around the world?

Last time we have been discussing Bangladesh labor force after the terrible tragedy in Dhaka textile company. But the textile industry is moving even from Bangladesh looking for even cheaper labor force e. g. Ethiopia. Doing this is basically pretty usual for any industry but if companies can move globally quite easily should also working standards be improved and strengthened somehow and what would be your suggestion on this? Read few comments.

Günseli BerikProfessor, Economics Department, University of Utah

On the one hand, it is not surprising at all that apparel companies are looking for alternative sites to produce. A slight rise in costs in the Bangladeshi industry, assuming stricter monitoring will increase costs,  will motivate companies to relocate. More importantly, the reputation damage (cost) of doing business in Bangladesh is getting too high.  So, in a world where capital is completely mobile, the rationale for moving to lower cost sites is clear. On the other hand, the article is talking about textile industry mostly, which is more capital intensive than clothing and likely will have higher-paid workers than the clothing manufacturing. Starting modern does have its advantages. I imagine the Ethiopian govt will not push for much labor regulation on these companies that move, but it remains to be seen what kind of conditions these companies will create in Ethiopia for both textile and apparel workers. They may be cautious about not tarnishing their reputation, since the spotlight will be on them.

That said, I am still convinced that in order to prevent the erosion of wages and working conditions by factories hopping around the world, there needs to be international minimum standards: everywhere they go, they should face workers who have to be paid living wages for that location; buildings built to code such that the factory will not collapse on the workers; exits that ensure escape in case of a fire etc.).  The problem is that these standards have to be set at the international level and enforced at the country level, everywhere. The problem is that in the current international climate there is a stalemate on having international standards.

Richard Freeman, Herbert Ascherman Chair in Economics at Harvard University, Faculty co-Director of the Labor and Worklife Program, Harvard Law School

As long as consumers know where products are made, they can keep moving to lower cost areas but they will be pressured to have safe and decent standards. It is a chase of sorts … many consumer branded firms make an effort to keep tabs of conditions — as you may know NIKE lists their subcontractors — so any activist group can track them down.  I think that on average standards have risen for mfg workers around the world  but only because we have some vigilant activists chasing after the subcontractors.
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