Study: Banning child labor in developing countries through trade agreements leads to more child labor

A lot of effort has been taken to end child labor in developing countries. Among other things, Contemporary Regional Trade Agreements, especially those between developed and developing countries, have usually included some provisions banning the use of child labor.

According to new evidence, however, these bans do not work as intended. In fact, instead of reducing the use of child employment in developing countries, they increase it.

Why is this the case?

Usually bans on child labor decrease wages for children. Such low wages induce families to employ more hours of child labor — especially from older kids —  to make up for the lost income.

Specifically, the authors find that,

trade agreements that include provisions banning household supply of child
labor will lead to reductions in employment of the youngest children (i.e. those under 14 years of age that are directly affected by the ban), but increases in employment of older children (i.e. those above 14 years of age that are not included in the ban) via intra-household substitution effects.

Additionally, if such bans are enforced as fines on employers, they also increase the employment of kids under 14 if the kids contribute significantly to family income.

On the other hand, agreements with no such provision reduce the use of child labor by increasing household income. This reduces the fraction of children employed and not in school.

A lesson for policymakers

Just because a policy is intended to help people does not mean that it will do so. This has been shown time and over again by the results of policies like rent control and minimum wage hikes.

Indeed, as Milton Friedman famously said,

One of the great mistakes is to judge policies and programs by their intentions rather than their results.