Kailash Satyarthi, this year’s Nobel Peace Prize winner, founded Bachpan Bachao Andolan (Save Childhood Movement) in 1980 to protect the rights of children, whom he found to be exploited. Recently, he appealed members of Parliament to support a Bill that extends the ban on child labour to include non-hazardous occupations like agriculture. The government too seems keen on passing the Bill in the winter session of Parliament.

For an economist, however, the real issue when it comes to child labour is whether children need to be saved from farm employers or activists who have dedicated their lives to ban child labour. Quite often with government policy, good intentions take precedence over proper analysis of cause and effect. At the end, the policies harm the very people they are supposed to benefit. Child labour is no different.

If millions of Indian children go to work every day in sweatshops, it is primarily due to poverty in their families. Satyarthi, in a 2011 article in Mint, argued against this conclusion, claiming that employers prefer child workers given their lower wages. How this refutes the fact that children opt to work for reasons of poverty is unclear. For lower wages merely reflect the increased supply of labour due to the influx of child workers, which in turn makes it lucrative for employers to exploit.

The challenge that faces child rights activists, then, is to provide alternatives that first keep children out of poverty. Banning child labour that saves millions of children from much worse living conditions without offering better living standards will simply turn out to be a double whammy.

Attempts in the US to ban imports from Bangladesh citing child labour caused children employed in Bangladesh’s garment factories to lose their jobs. But this did not cause the children to spend time in schools, but only led them to be employed in much worse jobs that pay lower. In fact, the release of labour from affected industries into other sectors could have caused wages there to dip further.

Perverse Consequences of Well Intentioned Regulation: Evidence from India’s Child Labour Ban, a National Bureau of Economic Research working paper by Prashant Bharadwaj, Leah K. Lakdawala and Nicholas Li issued in 2013 studied the effect of India’s Child Labour (Prohibition and Regulation) Act of 1986. The results found from the study were similar. The ban did not cause children to live better lives as activists would love to believe, but simply caused their wages to drop. This was good news for the new employers who could hire more labour at lower wages. The living standards of the families of child labourers also dropped after the ban.

Now, activists do argue that the government should take measures to keep children out of factories, and may be put them in schools. This, they believe, will empower children with skills that can help boost their incomes in the future. Indeed, if schools imparted useful skills this would be the ideal case. There could even be reason to believe that parents and children would be willing to give good schools a try.

But, quite often, the standard of public schooling is abysmal. Thus, if both government and activists cannot offer a better life for children that are adversely affected by the ban, the case for it becomes even weaker. After all, at least in the availability of some alternative venues of work, children could escape much deeper poverty as well as the ineffective schooling system. In a way, free access to work can act as a signal exposing the quality and efficiency of the public support system.

All this reinforces the same fundamental point: children in a vast spectrum of Indian families choose to labour in hard conditions simply because of the lack of better alternatives. Banning child labour in such a situation will not count as a noble deed, but as a great crime against children.

Natural Order runs every Monday, with a libertarian take on the world of economics and finance.

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