For my third proposal, I came across an article in the international journal of social economics regarding the practice of labor exploitation overseas. In my previous proposals, I have talked about the many reasons why companies choose to outsource labor and the positive and negative aspects that they have on a business and the economy. A point I haven’t really considered yet, is how moral it actually is to hire a worker overseas who has the same qualifications as an American citizen, while paying them half as much. How ethical is it for corporations to undervalue labor and take advantage of the low cost of living in underdeveloped countries?
The article discusses the differences in opinion between Horace Fairlamb and Adam Smith over the ambiguity of labor wages. According to Smith, there is a systematic undervaluation of labor and there is a tendency in the market to undervalue labor. He sees labor as any other commodity with the faith that “the same balance of forces that determines natural prices in all other commodities will determine natural prices for labor as well” (Fairlamb, 1996, p.199). In the U.S, if an employee feels like their labor is being undervalued, they will seek work elsewhere. Although this seems like the logical response, labor in developing countries doesn’t operate this way. Labor is cheaper overseas because the people are desperate for work and corporations take advantage of this desperation by paying them drastically reduced wages. The only reason why there should be any difference in wages is the imbalance between differing economies, which most of the time does not even take into consideration the standard of living in that country.
The article also goes into detail on the true definition of a sustainable living wage which I will discuss in the paper. By this definition, this wage should be dramatically higher than the wages presently paid at most sweatshops overseas and many corporations are taking advantage of what is actually considered a sustainable living wage. The principle of group responsibility discussed in the article demands that corporations organize either to self-regulate within the industry, or to push for both national and international regulation in order to standardize the payment of appropriately valued labor wages. The problem with this continual undervaluing of labor is that each corporation hides behind the fairness-affordability rationale (Jackson 1993 p. 548). They see it as unfair to hold any one corporation responsible for the actions of hundreds of corporations involved in the same activities. In order for any kind of change to take place with exploiting overseas labor, a communal action needs to occur.
So is the reason why companies outsource labor to avoid the cost and burden of mandated government programs, including worker’s compensation? The costs that many corporations are looking to avoid are the ones, including worker’s compensation, that have been mandated by law in developed countries. These developed countries are the ones who have the luxury to worry about the morality of labor standards. The underdeveloped countries that are being exploited simply cannot afford this kind of luxury and are continuing to be overworked, undervalued, and unappreciated.