More sweatshops for Africa? An experimental Study of Firms, Factory Labor, and Poverty Alleviation

The economist Joan Robinson once said, -the only thing worse than being exploited by capitalism is not being exploited by capitalism.- To date, her hypothesis remains untested. Some policymakers and activists fear that industrial work exploits the poor. The researchers, however, believe that it is possible that industrial jobs provide higher incomes and steadier employment than the alternatives. They may even lead to sustained growth and well-being. This study proposes to test scientifically whether industrial labor is pro-poor. Researchers from Yale and Oxford are partnering with IPA and a venture capital firm in Ethiopia to test each view. The venture capital firm will open more than 10 firms in 2010-11,creating hundreds of low skill jobs with thousands of applicants. Each firm will select new hires randomly from the pool of qualified applicants. A second randomly-selected group of applicants will receive a microenterprise intervention from an NGO partner.A third group will receive nothing. IPA's randomized evaluation will compare welfare effects across the groups. The intervention outputs are the provision of factory jobs and real microenterprise support to the poor. The research outputs include a unique data set, academic papers, policy briefs and presentations,and media publicity. A key outcome is rigorous answers to the questions:What are the impacts of industrial labor on worker welfare: incomes, education, health, stress, and empowerment? Do steadier incomes lead to household specialization and productivity gains? And how do any gains compare to aid programs for small enterprise and agriculture? Ultimately,however,the researchers aim to influence global public policy at the highest levels. If industrial jobs are as pro-poor as the researchers hypothesize, it implies sweeping changes for foreign aid and international development goals, including a renewed emphasis on creating conditions for the growth of medium and large enterprises in Africa.