Balancing Sweatshop Ethics and Economics

Labor Standards Working Paper No. 9901

57 Pages Posted: 14 Jan 2000

See all articles by Laura P. Hartman

Laura P. Hartman

DePaul University - College of Commerce

Bill Shaw

University of Texas at Austin - Department of Information, Risk and Operations Management

Rodney Stevenson

Wisconsin School of Business

Date Written: December 1999


At the close of the twentieth century, sweatshops remain an integral part of the world economic order. Most sweatshops are in developing countries where governments implicitly sanction them as an instrument of economic development. Multinational corporations and other advanced economy suppliers reduce operating costs by importing sweatshop products. Consumers who do not pay attention to supply sources buy sweatshop products that are priced lower than domestically produced goods.

All sweatshops, by definition, have at least one highly questionable labor practice, such as paying workers extremely low wages, requiring long hours of work, operating with unhealthy and unsafe work environments, limiting worker rights, and employing child labor. As with exams, however, whether a questioned practice is found acceptable or unacceptable depends on the perspective of the grader. Certain sweatshop practices, such as slave labor, are considered fundamentally or culturally unacceptable by ethicists simply because the practice exists. For other practices ethicists look at the extent to which a practice deviates from universal or cultural norms in assessing acceptability. At some level, ethicists would find that practices are unacceptable because required work hours are too long, wage rates are too low, workplaces are too much of a threat to health and safety conditions, or employees are too young. For economists, or at least neoclassical economists, acceptability is assessed based on the economic result. Wages are not too low if more workers are employed; hours are not too long, work conditions are not too poor, and employees are not too young if low operating costs bring economic growth.

Unless economic and ethical dimensions are completely orthogonal, there are workplace conditions that enable ethically minded corporations to operate economically with developing country sweatshops. But those practices can not be put in place and sustained unless the results are acceptable to governments, industries, and consumers. A government in a non-industrialized country might enact and enforce labor laws if the result does not significantly threaten its economy. Producers might abide by labor constraints if the result does not significantly raise the cost of production. Consumers might pay higher prices if they are assured that the worst labor practices have been eliminated.

This paper considers the adverse nature of sweatshop practices, critically examines their economic and ethical implications, and assesses whether various ethical theories provide sufficient guidance for establishing labor practices that balance ethical concerns and economic consequences. An Integrated Social Contract Theory methodology is applied to identify a minimum set of hypernorms that could serve as a foundational base for balancing ethical and economic concerns. The paper concludes with recommendations on how businesses can ethically acquire developing country imports and how governments and consumers can reinforce those efforts.

JEL Classification: A13,D63,D81,E13,E24,F02,F11,J00,O01,O11,O19

Suggested Citation

Hartman, Laura Pincus and Shaw, Bill and Stevenson, Rodney E., Balancing Sweatshop Ethics and Economics (December 1999). Labor Standards Working Paper No. 9901, Available at SSRN: or

Laura Pincus Hartman (Contact Author)

DePaul University - College of Commerce ( email )

Chicago, IL 60604
United States

Bill Shaw

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
(512) 471-9448 (Phone)

Rodney E. Stevenson

Wisconsin School of Business ( email )

975 University Avenue
Madison, WI 53706
United States
(608) 284-0175 (Phone)

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