The answer is that corporations do not, and should not, have social responsibilities outside of legally maximizing profits.
Economist Gary Becker writes:
To take an example of what I do not believe companies should do, a global company operating in a poor country should not pay higher wages for either adult or child labor, adjusted for the quality of the labor, than is the prevailing standard in the labor market of this country, as long as higher wages would lower the profits of the company. I am assuming the wages they pay do not violate any laws or contracts of the countries where they operate, and that they are not subject to such bad publicity that their profits actually would increase if they paid more. I should add that pressure to pay much higher wages in labor markets of developing nations reduces the number employed there by international companies, and would tend to worsen, not improve, the plight of the poor populations of these countries.
The whole post was very informative. I recommend you read it, and his rebuttal to common objections here.
More on this, here, here, and here.
Having read the link to his rebuttal, I think he puts to much confidence in legal standards and enforcement. Not everything that is legal is necessarily “socially responsible” or even moral.
That a blanket adherence to the standards of law as sufficient for governing corporations is a bit naive. Aren’t corporations ultimately made of individuals - individuals who are capable of great moral behavior and equally capable of egregious corruption & injustice.
To think that this moral spectrum can be simplistically ‘checked’ by what is legal or not, reduces the need for exercise of the conscience - whether through individual consciousness or through social consciousness.
I think his main point in all of that is to argue that corporations are not morally required to pay their employees more than market value. Because the more you ‘morally obligate’ the corporation, the more it backfires, by having less corporations hire there, thereby hurting the very target (poor people) you intended to help. It touches on the whole Wal-Mart and sweatshop overseas debate.
I agree with you that corporations should not being legally required to pay OVER the market value - though morally required is sometimes another issue & a different topic. My concern is about how widespread (and generally unregulated practice) the UNDER paying of market value is.
I think this is the core problem of the sweatshop practice, whether here or overseas. Some that is due to morally empty corporate decisions, and some to legitimate debate about what is “market value.”
Wal-Mart’s practices & impact is another discussion.
P.S. Unrelated: Since you’re from Compton, are you going to post something on the $$$ scandal at Compton CC??
Scott,
Now we are in the realm of economics, and under economics jargan, there is no way that a company can pay under market value. If, for example, my company decided to pay its engineerings under market value, say $2 under, what do you think would happen? Several engineers, especially the most talented ones, will leave and go to another company that pays them atleast market value. In other words, companies hands are tied to what they pay their employees based on the employees alternate sources of income.
As far as Compton goes, no, I don’t write about current events anymore. Reason being that it has been 7 years since I left, and while I occasionally visit, I am not in tune with the everyday problems that it is facing (for example, Compton is currently set to double its last years murder rate, and I have a very limited knowledge as to why - I don’t talk to my old friends as much as I used to, and so now, I am out of the loop on the day to day events in the CPT).
First of all, you’re a leg up on any economics discussion due to… Oh, yeah, you studying economics in grad school.
Anyway, this is where what is “market value” is full of debate. I agree with your scenario for an engineer - educated & probably mobile. That breaks down for uneducated poor who are less easily mobile. I’m sure you could better quote me sources about economic exploitation of the poor, which I am defining as paying “under” market value.
Maybe I should describe it as paying under people’s value. But then that gets us into a complicated discussion about living wage, minimum wage, etc.
Honestly, HP, this is where you confuse me ideologically. You argue passionately - and rightly - for the value of a human as a person (thus, anti-abortion), but then philosophize about what is market value, even if it ignores the same human as person value. I think these two issues are pretty closely tied.
Actually, I haven’t taken any economics classes in grad school. I am trying to get my grad degree in Electrical Engineering, and while I did take economics as general education in my undergrad, I have not taken any economics courses since. My Electrical Engineering background may help a little when economists start talking about the math behind their beliefs, but that is about it. I have learned it all primarily by reading, reading, and a lot of reading. I try to read everything Thomas Sowell, Milton Friedman, Gary Becker, Arnold Kling, and even Alan Blinder writes, among others.
As far as ‘market value’, it always exists. It may move up and down depending on where you are, but there is always a market value to every situation.
I understand your frustration with sweatshops, and I agree, from a non-economics perspective, I may come across as contradictory, but believe you me, by supporting ’sweatshops’, and by agreeing with Becker above, I am supporting the most humane solution possible. But before we get into the details of all of that, please read these articles. They will help us get on common ground, and avoid talking past each other.
Read, this, this, this, this and especially this. On that last link, it’s important to keep in mind that Brad Delong, professor of economics at UC Berkeley, is replying to an article by slate. So you may want to start reading from where he writes, “Seth Stevenson of Slate urges…” and skip all of the above stuff until the end.
Btw, sorry for the spam blocking, I don’t know what is wrong with my spam filter, I put you and a few other people on the ‘whitelist’, giving you guys free reign to post as often as you like, but it still blocks you guys sometimes. It’s really very annoying. grrrr…I’m going to try and set some time aside to look into fixing this.
Again, sorry for the blocking, I appreciate and welcome your comments.
When we gonna start that child porn company?
You liberals, you really go too far with your moral relativism. I refused to start that company with you, remember, precisely because I believe in absolute morality that tells me that that would be wrong, and oh yeah, because that would be illegal.
OK, but you do have an 18-year-old sister I can photograph right?
Hiyo!
LOL. Not unless you get past my ‘44!!