Nova workboard

a blog from young economists at Nova SBE

Child Labour as a Poverty Trap

After a great Friday, comes a great Monday’s reflection. Kailash Satyarthi and Malala Yousafzai were awarded the Nobel Peace Prize “for their struggle against the suppression of children and young people and for the right of all children to education”. Beyond all the moral and political issues raised by children suppression, specifically child labour, Economics also has a lot to add to the discussion.

Child labor is often defined as work that deprives children from their childhood, undermining their potential and their dignity. It is regarded as extremely harmful to physical and mental development. It is estimated that 250 million of children between the ages of 5 and 14 are working, mainly in countries like India, Nigeria, Ethiopia, Congo, Liberia and Pakistan.

Analyzing the determinants of the phenomenon is crucial because they are essential to define policy targets and instruments to combat it and to avoid unexpected counter-effects. The supply of child labour comes mainly from family poverty issues, as families with very low income feel forced to make their children work. This supply side emphasizes the death spiral that links poverty and child labour while the demand side comes from the intense pressure on many companies to become increasingly competitive and profitable. Global competition encourages firms and governments to seek low labour costs, slowing child labour reforms and repressing trade union activism.

Besides all the severe consequences that child labour has on the health and education of a young population, the economic impact is tremendous. It weakens the power of adult workers as they are forced to compete with the low cost labour that is preferred by firms. Basically, parents are not able to work because companies prefer to hire their children. Plus, wages are generally driven down, as firms need to compete with the ones that have really low costs and low prices. Although, in the short-run, child labour may increase families’ income and probability of survival, in the long-run, it perpetuates poverty through lower human capital accumulation. In terms of schooling, there is evidence of reduced enrolment rates and higher drop out rates among working children. Some children even combine work with school but it is obviously harmful in the sense that it does not develop the adequate skills children need and it subtracts time to other forms of human capital. There is clearly a poverty trap beginning in children working, not getting enough proper education and becoming illiterate adults who, in turn, send their children to work because they do not have means to support themselves and the family, perpetuating the cycle.

There is no straightforward, obvious solution to end this curse, although education seems a very powerful weapon. Providing a strong educational background to children will turn them into productive workers which benefits the community and allows for a better job fit in the sense that adult workers can more easily find a suitable job, with a general raise in wages. Real economic and social development can only occur when adults are at work and children are given the possibility to study. Until then, countries with child labor will be condemned to a poverty and development trap as long as they continue to waste the immense potential their children have.

“Child labour and poverty are inevitably bound together and if you continue to use the labour of children as the treatment for the social disease of poverty, you will have both poverty and child labour to the end of time.”

Grace Abbott

#690

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Author: studentnovasbe

Master student in Nova Sbe

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