Improving the conditions of workers? Minimum wage legilsation and anit-sweatshop activism

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Harrison, Ann; Scorse, Jason;
  • Subject: corporate social responsibility; minimum wages; employment; Indonesia; anti-sweatshop campaigns
    • jel: jel:J80 | jel:J31 | jel:F23

During the 1990s, anti-sweatshop activists increased their efforts to improve working conditions and raise wages for workers in developing countries. Indonesia, home to dozens of Nike, Reebok, and Adidas subcontractors, was a primary target for these activists. At the s... View more
  • References (11)
    11 references, page 1 of 2

    F I G U R E 7. Average Change in Salary for Unskilled Workers in Indonesia between 1990 and 1996 by Foreign Ownership, Export Status, and Sector ($US 1996 Constant) S O 1. For another view that suggests that anti-sweatshop activism is bad for workers, see the work by the Academic Consortium on International Trade (ACIT) at <>.

    2. Teri L. Caraway, "Solidarity across Borders: Transnational Labor Activism and Empowering Workers in Indonesia," prepared for the 2001 Annual Meeting of the American Political Science Association, San Francisco, CA, 2001.

    3. B.J. Bullert, "Strategic Public Relations, Sweatshops, and the Making of a Glohal Movement," Working Paper #2000-14. The Joan Shorenstein Center on the Press, Politics and Public Policy, Harvard University, 1999.

    4. Richard M. Locke, "The Promise and Perils of Globalization: The Case of Nike," working paper, MIT, 2003.

    5. The data for all of the analysis that follows comes from the annual manufaauring survey of Indonesia collected and compiled by the Indonesian government's statistical agency BPS (Badan Pusat Statistik). The completion of this survey is mandatory under Indonesian law and therefore the data captures almost the entire population of Indonesian manufacturing firms, which ranged from approximately 13,000 in 1990 to over 18,000 in 1999. The survey includes over 400 questions in any given year, the large majority of which remain constant although in certain periods additional questions are included and others removed. Over the ten-year period there is an average of 4.5 observations per firm, reflecting the fact that some firms go out of business while others enter.

    6. The term "production worker" refers to unskilled workers, and "non-production" to skilled workers.

    7. Given that Indonesia has minimum wage laws there would appear to be an incentive for firms to exaggerate wages in order to feign compliance. However, whether due to ignorance of these laws or a lack of enforcement a very large percentage of firms reported wages significantly below the minimum for a number of years. These estimates of compliance are consistent with other studies that examine compliance with the minimum wage in Indonesia, including a study by the Indonesian SMERU Research Institute and by AJatas and Cameron. SMERU Research Report, "Wage and Employment Effects of Minimum Wage Policy in the Indonesian Urban Labor Market," SMERU Research Report, SMERU Research Institute, Indonesia, October 2001; Vivi Alatas and Lisa Cameron, "The Impaa of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in-Differences Approach," World Bank Policy Research Working Paper 2985, March 2003.

    8. Ann Harrison and Jason Scorse, "The Impact of Globalization on Compliance with Labor Standards: A Plant-Level Study," in Susan Collins and Dani Rodrik, eds., Brookings Trade Forum 2003 {Washington D.C.: Brookings Institution Press, 2004).

    9. The stronger wage increases documented for foreign plants and exporters in distrias with anti-sweatshop activity did not, however, carry through to exiting plants. Plants that exit the sample were less likely to respond to both minimum wage pressures and to anti-sweatshop activism. Entrants suggest a mixed story. While exporters in districts vnxh anti-sweatshop activity systematically increased wages across all specifications, increasing wages for foreign TEA plants is confined to the balanced panel.

    10. For alternative theories on employment responses to minimum wage increases, see David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton, NJ: Princeton University Press, 1995).

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