This is the 3rd in a series on Child Labour by Guest Post Eshanee Singh. Post two can be read here.
Global Value Chains and the Power
of Multinational Enterprises (MNEs)
The state is ultimately responsible for creating and enforcing laws to combat child labour; however, the ILO’s 1997 rapid assessment found that the laws have little impact on the actual conditions of employment of children, as they are not effectively enforced. A 2005 Canadian research paper from the Journal of International Affairs, by Michael E. Nielsen, states that there is a normative change in the way responsibility for employment conditions in the ready-made-garment industry is distributed. He states that enforcement is shifting from the nation-state to other societal actors, most notably corporations in the form of corporate social responsibility. This corporate responsibility is further shifting from condoning activities that are illegal, under national and international laws, towards emphasizing regulatory compliance. The paper states that the Bangladesh Department of Labour and Inspectorate of Factories was said to be lacking in sufficient resources, staff and logistical support to adequately perform the task of monitoring child labour law compliance. It also states that the Bangladeshi garment industry is heavily dependent on overseas markets, with production and the global commodity chain being heavily dominated by US and European buyers.
This leads to the question of the power multinational corporations have in shaping the laws and policies of the countries in which they operate or dominate. It is possible that the prevalence of child labour in Bangladesh’s garment industry and the lack of willingness, on the part of the Bangladeshi government and commerce/retail executives, to address child labour is a direct response to the multinational enterprise need for cheap labour to serve the high demands and high profits of the fast fashion industry. The paper states that the norm and practices of corporate responsibility in relation to child labour may be characterised in terms of tacit acceptance of ‘that’s just the way things were done over there’, viewing child labour in the garment industry as a lesser problem and more of a positive social and employment potential.
The CLARISSA study found that child labour is designed into the business model of enterprises; rather than lots of children working in a few unregulated enterprises, which they state could be characterised as outliers or particularly bad hot spots, every enterprise has at least one or two children working in it. The study states that they were unable to find child labour interventions in Bangladesh that focused on the business drivers or business models for hiring children.
The study analyzed necessity-based entrepreneurs. These included individuals who were once child labourers who may take over running a leather processing business, for example, once other family members become too sick to work. Their focus is centered on how to keep the business going, which may drive them to take loans from NGOs and microcredit organizations. But the payment schedules of these loans and credits increases how much their business needs to turn over on a daily and weekly basis in order to meet principle and interest requirements. This forces them to look for new strategies to minimize operating costs.
The study also looked at production-based contracts, which work on a produce now pay later system. In this system processors and producers wait many months to be paid in full and there is no uniformity in the length of time corporate buyers and enterprises must pay. This runs the problems of revenue shortages to pay for labour and raw materials that have been sourced on credit and are themselves perishable. Another factor that may increase pressures to lower production costs is if buyers refuse to pay the original contracted price or rejects some produced work.
The study states that in a competitive marketplace with rising costs of materials, producers and processors of all types frequently take commissions close to or less than the cost of production, a decision likely based on poverty and constrained economic circumstances. The study also states that as manufacturing processes become more fragmented, meaning there are more and more processors and producers for every micro step of manufacturing, the number of informal enterprises in operation, and the number of individuals in precarious circumstances, increase. But the profit margins for completing a micro step in the manufacturing process are diminishing because buyers’ price points do no increase to accommodate more actors in the system nor the increase in price of materials.
It can be argued that the pressures faced by enterprises in the informal economy of Bangladesh to cut costs and produce high volumes may be a contributing factor to the prevalence of child labour. The CLARISSA study states that precarious contracts and heavy reliance on foreign loans and credit, a reliance driven by deep poverty, forces entrepreneurs in the Bangladeshi business environment to focus on what they can control, costs reductions and working long hours, thus relying on child labour.
It can be argued that the Bangladeshi government’s lack of response to the informal economy is due to the country’s heavy economic reliance on an export-oriented strategy and foreign buyers. The shift to regulatory compliance, rather than condoning and prosecuting illegal acts and enforcing child labour laws, may be a tactile shift in order to attract corporate buyers and foreign enterprises in search of low-cost manufacturing and production. Other incentives are used by the government, such as favourable tax breaks and financial compensation for business relocation, which benefits the formal economy, such as foreign corporate buyers, multinational enterprises and domestic middlemen corporations, while disadvantaging the informal economy of smaller subcontractors. While this may be a positive strategy for the overall GDP and economic growth of the country, it comes at a cost of relying on child labour as a cost cutting measure. It can therefore be argued that corporate acceptance of ‘that’s just the way things are done over there’ is not an accurate statement; child labour is not a culturally accepted business practice but is relied upon out of necessity for many small informal economy entrepreneurs. The CLARISSA study states the fragmentation creates a cascade of commissions into activities that are smaller in scope and revenue, but which are accepted by people whose business survival and household survival are tightly intertwined.
This raises the question of the extent of corporate responsibility for the prevalence of and reliance on child labour. A state may be economically dependant on precarious employment practices and conditions in order to attract and keep economic activity, but corporations do not have an excuse for using child labour in their production and manufacturing process. Corporations benefit from child labour and low labour costs, but such benefits are not necessarily passed on to the consumer nor to the people of the country in which they operate. The benefits are passed on to shareholders through increased profits. The CLARISSA study states that complex supply chain fragmentation is academically and politically labelled as a reason why child labour is difficult to identify and prevent, rather than viewing it as something which is causally linked to child labour; but the capitalism business model of multinational enterprises, operating through complex structures of subcontractors and subsidiaries, creates the conditions which enables the use of child labour. Child labour is not an inherent concept within countries which corporations have no control over. Transparency and technology are assumed to be the solutions to the issue, but both nation-state and corporations play a role in addressing and preventing the causes of child labour.
Let’s move from “that’s just how it’s done” to “we won’t accept this”
Complex global value chains and fragmented supply contracts
don’t make child labour in Bangladesh inevitable, they make it profitable.
When corporations, buyers, and governments
treat hazardous child work as a cost‑saving norm,
they hard‑wire exploitation into business models.
Act on corporate responsibility now:
- Share this post and the linked research with colleagues, students, and community groups to challenge the idea that child labour is simply “the way things are done over there.”
- Press brands and retailers you buy from to disclose their suppliers, commit to living‑wage and no‑child‑labour standards, and support reforms that change the business drivers of exploitation—not just the public relations around it.
KIDS AT RISK ACTION / KARA / INVISIBLE CHILDREN
#ChildLabour
#Bangladesh
#GlobalValueChains
#FastFashion
#CorporateResponsibility
#MultinationalEnterprises
#InformalEconomy
#SupplyChains
#CLARISSA
#HumanRights
#KIDSATRISK
#KARA
#SHANEESINGH
