Why the Obama Administration Allegedly Pressured Haiti to Lower Its Minimum Wage
June 9, 2011
Two years ago Haiti raised its minimum wage from 24 to 61 cents an hour, a significant but relatively meager increase, but it was too much apparently for Hanes and Levi Strauss, which, according to an embassy cable, went to the U.S. government for assistance and, with some intervening pressure from the U.S. ambassador, succeeded in seeing the minimum wage raised to only 31 cents. Rufus is right: this is how the world works. Our elected and appointed officials ain’t servants of the public and certainly not servants of the poor. But we’ll keep pretending they are because we like our underwear and jeans.
Update: Levi Strauss denies lobbying for a decrease of the minimum wage. (Thanks David Nickol for the link).
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When i worked at the Haitian Center in Miami with Tom Wenski, he always talked about the crazy guy who often would come on the grounds of the center and stand in front of the big outdoor Crucifix and say “M’ap dechoucage ou” — which if I have my fading Haitian creole remotely correct meant something like : “I will tear you down from there”. The distrust of those in power was so ingrained and so empowered by bitter memories that it even extended to the Savior himself, being de-throned from his cross.
Indeed.
Sam
Hanes and Levi Strauss need to save their money. They have to spend billions building an image via advertising so that we’ll feel like we need their products.
Well color me not surprised. Katherine Mangu-Ward of Reason comes to the defense of the minimal increase to the Haitian minimum wage.
Obviously, anyone who’s vaguely human is going to want to see people in Haiti do better than they’re doing now. And obviously, the amount of cost that this change would add to jeans and undershirts is pretty minimal.
The thing that’s worth asking in this situation is whether the proposed minimum wage increase actually benefits people in Haiti or not. From the source (The Nation broke the story) I would imagine that the assumption is that this is a simple matter of taking a small amount of money from Hanes and Levi and a few other companies (actually, reading around, it appears that Hanes and Levi do not in fact operate the and factories in Haiti, they just buy stuff from locally run factories there) and giving that money to workers in Haiti who will clearly be much better off. If that is all there is to it, it’s hard to oppose.
To the extent that there’s a reasonable cause for the Obama administration to weigh in against this, it would be concern that this move would in fact hurt Haitians overall. The increase from $0.24 to $0.61/hr may seem very tiny to us, but it’s more than a doubling of the wages for workers and labor costs for employers on the ground actually in Haiti. This is in a country in which two thirds of potential workers can’t get formal jobs anyway. (Meaning that at best the 1/3 best off Haitians would be affected by this increase.) So it could well be that this would result in making the barriers to expanding formal employment even higher than they are already. And at best offer a meager “trickle down” to the two thirds who aren’t formally employed from the one third who are.
If this is just a move on the part of the Obama administration to help out some friends in the fashion industry, it’s pretty disgraceful. But it may well be that, having been alerted by Levi and Hanes’ self-interested complaints, the economists in the administration honestly think that this will overall hurt the Haitian economy, which doesn’t exactly have a surfeit of jobs in the first place. Goodness knows, it wouldn’t be the first time that Haiti had hurt itself with policies that seemed like they would help people but in fact made things even worse.
It is nice to see that Darwin, whom I always find very intelligent and thoughtful, is in this case also right. :-)
Thanks.
I figure, I can’t always help whether people see me as the latter, but I can at least strive for the former. Glad it (usually) works. :-)
Whether the originally intended increase would be better for Haitians overall I’ll leave to analysts more intelligent than me, but then, isn’t this something for Haitians to decide without the meddling interventions of foreign entities? It would be one thing if they asked for foreign assistance (and maybe they did) in figuring out economically feasible ways to increase their standard of living, or even if the U.S. offered unsolicited advice which they could take or leave, but it’s another thing for the U.S government to get involved because two corporations have an interest in very cheap labor.
If the advice is actually good — and prevents a bunch of Haitians from losing their jobs — does it really matter if the reason why it came to the administration’s attention was via two large companies that have interests there? (And as it stands the workers in those factories still get a 25% raise from 0.24 to 0.31/hr.)
I honestly don’t know if the actions of the administration will end up benefitting ordinary Haitians or not — but it does strike me as mildly ironic that if the Obama Administration had refused to do anything on behalf of the companies, and so they’d turn to contract manufacturers in some other country putting Hatians out of work, that neither the companies nore that administration would be catching flak right now.
Yes, it does, because it speaks to the why of U.S. global economic policy.
As for catching flak, let’s say you’re right that no one would be catching flak for seeking cheap labor elsewhere and putting people in Haiti out of work; is this a good thing?
. . . . it’s another thing for the U.S government to get involved because two corporations have an interest in very cheap labor.
Kyle,
Levi Strauss has denied it lobbied in any way to have the minimum wage changed in Haiti. Also, even The Nation itself apparently pointed out that workers in Haiti making the minimum wage of $3 a day are in the top 20% of wage earners.
The increase from 24 to 31 cents an hour is a 29% increase and would be the equivalent of raising the minimum wage in the United States from $7.25 to $9.35. As I pointed out elsewhere, a raise in Haiti’s minimum wage from 24 to 61 cents an hour would be the equivalent of raising the minimum wage in the US from $7.25 an hour to $20.70.
The average hourly wage in the United States is around $19.50 an hour. Compare that to our minimum wage of $7.25. So Haiti’s minimum wage that the US seems to have been instrumental in holding down still puts its recipients in the top 80% of wage earners. The poverty level in the United States is as follows for families of one to four persons:
1….. $10,890
2…….14,710
3…….18,530
4……..22,350
So someone working full time at $7.25 an hour makes $15,080, which means if it is a husband with a child and a stay-at-home wife, this puts his family below the poverty level.
Who has the better minimum wage, even after the alleged US intervention? Haiti, by a dramatic margin.
Of course, there are all kinds of problems with comparing the “well to do” by Haiti’s standards to workers in the United States. Still I would argue that all of the above is quite relevant, and that to whatever extent the US prevented Haiti from pricing itself out of the market, the benefit went far more to Haiti than to t-shirt manufacturers.
Thanks for the link, David. I updated the post.
Yes, it does, because it speaks to the why of U.S. global economic policy.
Well, yeah, but that fact that Haiti has jobs making stuff for Haines and Levi Strauss in the first place speaks to the why of U.S. global economic policy as well. It works both ways.
I guess I’m with Adam Smith on this one:
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages.”
Well, it really isn’t all that simple. Check out Adam Davidson at NPR. Dramatically simplified, if Haiti makes itself uncompetitive in the t-shirt industry, it will lose the t-shirt industry.
We are in a world economy, and jobs that can be moved will be moved to places where they can be done more cheaply. And in general, the people and the places where the jobs move to be done more cheaply are better off than they were before. This is not to say that workers in places like Haiti can’t be exploited. However, suppose in the United States, we picked some industry—say, the printing industry—where we thought the workers were underpaid, and a federal law was passed to more than double wages in that industry. The result would be that soon nothing would be printed in the United States, and all the people in the US printing industry would be out of jobs.
There are big fights between liberals and conservatives about the federal minimum wage and whether raising it causes jobs to be lost. Well, I don’t think you would find any economist, no matter how liberal or conservative, who would claim that raising the federal minimum wage from $7.25 an hour to $20.70 an hour (which is the equivalent of what Haiti tried to do) would benefit much of anyone.
Optional Reading: Personal experience that I cut from the above message.
When I got my first job in publishing (1970), my company published books that were typed on typewriters. One of the companies we worked with was based in Wisconsin, and I believe they farmed out typing jobs to home typists. Along came a company who had set up an operation on one of the Caribbean islands (I forget which) and offered typing services cheaper than the company in Wisconsin. I and my co-workers were fresh out of college, and when we found out what the islanders who worked for the typing service were paid, we were troubled. It seemed to us, initially, that these people were being exploited.
My boss made a trip to the islands to visit the plant, and when she came back she she told us that the employees were extremely enthusiastic to be working for this new company. They were very proud. They wore company uniforms. It had troubled us young folk that, in our own terms, the pay for these workers seemed so meagre. However, it also happened to be the case that on this island, these were among the best-paying, most desirable jobs to be had.
Jumping forward to the 1990s, when computers had revolutionized the publishing business, the company I was then working for sent a lot of work to companies in the Caribbean islands. By this time, “keyboarding” (typing the text of the book as the “raw material” to have a design imposed on it, made up into pages, and so on) was being farmed out by the companies in the Caribbean to China or India, with the more highly skilled work still being done in the Caribbean. Jump forward to today, and it is now mainly Indian companies doing everything from keyboarding to proofreading to paging. I am no expert in the economy of the Caribbean, but presumably the jobs that have moved from the Caribbean to China or India have been replaced by equivalent or better jobs.
Dramatically simplified, if Haiti makes itself uncompetitive in the t-shirt industry, it will lose the t-shirt industry.
Okay, fine, but what kind of social-economic system are we talking about in which being competitive means a whopping minimum wage of 31 cents?
But whether a wage is a good one depends on comparison with prices that are actually relevant to the wage-earner. 31 cents in the U.S. would be a horrible wage, because it would take forever to collect the money for very basic staples and requirements. But Haitians don’t pay U.S. prices for most things. The only way to determine how good a wage in Haiti of 31 cents is, is to look at what it will buy in Haiti.
To be sure, the fact that most Haitians have a sheer inability to pay U.S. prices for thing says something about the disparity between the Haitian and the U.S. system as a whole; and businesses and nations like the U.S. do use this differential to make themselves much richer than they otherwise could, much as engineers can use massive temperature differentials to perform work.(Haitians use the differential for the same thing, which is why a truly extraordinary portion of the Haitian economy consists of remittances from the U.S.; individual Haitians are merely not positioned to take as much advantage of it as multinational corporations are.) And I think it’s worthwhile to raise the ethical issues. But comparison across economies is not straightforward.
Fair enough.
It is the point that companies WILL move to a cheaper workforce that makes me wonder if Karl Marx’s critique of capitalism was right now on the $. So sad.
If companies didn’t move to a cheaper workforce, then the Hanes and Levi Strauss jobs would never have gone to Haiti in the first place — they’d be in the US — and the garment workers in Haiti wouldn’t have jobs at all.
I doubt they’d be in the U.S. There’s cheaper labor elsewhere.
Well, yes, there’s cheaper labor elsewhere. But if companies didn’t move to a cheaper workforce, that wouldn’t matter, would it? It’s because of the tendency of companies to move to cheaper labor that the jobs are in Haiti, and given that this is what brought the jobs to Haiti, it seems a little odd to expect that they wouldn’t go elsewhere if Haiti was no longer the most cost effective option.
I doubt they’d be in the U.S. There’s cheaper labor elsewhere.
Kyle,
Darwin’s point is that if the jobs didn’t go where the labor is most competitive, those places (be they Haiti, Bangladesh, Vietnam, or wherever) wouldn’t be getting better jobs than they already have (if they have any).
Also, if one t-shirt manufacturer decides to stay where labor costs are high out of benevolence, other t-shirt manufacturers will go where there is cheaper labor (offering those people better jobs), have lower-priced t-shirts, and drive the benevolent manufacturer out of business.
I get the economic ramification of available cheap labor. What I object to that U.S. policy encourage this state of affairs in which the only two feasible options are no labor or very cheap labor.
Having had some personal contact with the Haitian community of course my heart aches even thinking about these grim realities. But I want to interject as well the odd but telling calculation of an economist I remember reading about in a Vanity Fair article on Haiti in the late eighties (I think). He posited that given the really unprecedented erosion of the soil there, which makes it hard for the poor to even grow subsistence food , coupled with the long history of distrust for any real reform relating to attraction to regressive religiosities, that simpler humanitarian solution presented itself. I am not sure if this was an altogether serious suggestion but it was telling of the depth of the difficulty. He said that it would be cheaper to move every Haitian to a different place, and set them up with a basic standard of living, than to rectify the situation on the ground in country in any meaningful way.
I’ve appreciated the push-back I received on this post. It’s given me pause and a chance to clarify my thoughts (to myself if to no one else), which may or may not lead to a separate post. I haven’t substantially changed my position, but I see I need to take this position from another angle.
I find this discussion distressing on a number of levels. People have taken a decontextualized approach to the question of the minimum wage in Haiti. Details of the economic history of Haiti are unclear, but from what I have been able to glean, any increase is long overdue. There have been few increases in the minimum wage, while inflation
in Haiti
has been in the double digits for the past twenty years. As a result, workers earning a minimum wage have a purchasing power that is a fraction of what it was 20 years ago. Historically, the populist government of Aristide tried to raise the minimum wage; this was strongly opposed by the business community and the wealthy elite, and played a role in the coups that removed him from power.
Further, the discussion takes as a given (indeed, as an immutable law) that the predatory aspects of global capitalism are the way things are and so must be accepted without question. This seems to boil down to the assumption that the workers of Haiti should be grateful for the scraps which are given them in return for their labor. (Shades of Dickens and 19th century Britain here.) It is worth noting, however, that the connection between job loss and increases in the minimum wage are contested among economists in the United States. As has been pointed out, the price to a major U.S. corporation of a minimum wage increase will have a barely noticeable impact on the bottom line.
Finally, in thinking about this question, we need to consider not simply economics but justice. What does the Catholic Church teach about setting wages? Here is Leo XIII from Rerum Novarum:
“[B]efore deciding whether wages are fair, many things have to be considered; but wealthy owners and all masters of labor should be mindful of this – that to exercise pressure upon the indigent and the destitute for the sake of gain, and to gather one’s profit out of the need of another, is condemned by all laws, human and divine….Lastly, the rich must religiously refrain from cutting down the workmen’s earnings, whether by force, by fraud, or by usurious dealing; and with all the greater reason because the laboring man is, as a rule, weak and unprotected, and because his slender means should in proportion to their scantiness be accounted sacred. ” (20)
“Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.” (45)
By this measure, the Haitian government was acting with justice, and the United States, by pressing for lower wages, was acting injustly. Whether or not they were doing so at the bidding of international corporations, they sinned grievously against the working men and women of Haiti.
David,
Well put!!! And a great use of a Papal document!!!