Young children in underdeveloped countries with limited or no public

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Youngchildrenin underdevelopedcountrieswith limitedornopublicschoolsystem

Childlaboris currently a troubling phenomenonsince itpreventsmany kidsfrom accessing the schoolprogramsthat are intendedto enhancetheir humancapitaldevelopment.Thisincreasesthechancesforperpetuationof inter-generational povertyandthenumberof familiesthat rely on transitoryincomeforsurvival(Miller106). Familiesthat liveon transitoryincomeare at theriskof requestingorforcingtheir childrento engagein paidlaborduring thetransitoryincomeshockswith theobjectiveof supplementingthelittletheir parentsearn(Beegle81). Transitoryincomeshocksare commonoccurrencesin underdevelopedworld,wheremosthouseholdslackassets that can helpthem generatingpermanentsourceof incometo smooththeir consumptionduring theshocks.Child labor in underdeveloped economies has increased with thepopularity of the concept of globalization (Dagdemir 39). Thispaperpresentsan argumentthatincreasingtheassets holdingof thefamiliesthat rely on transitoryincomeis themosteffectivesolutionto themenaceof childlabor.

Mechanismthrough which transitoryincomeshockscontributetowards theprevalenceof childlabor

Manyhouseholdsin underdevelopedcountriesrely onshort-term incometo sustainthemselves andmeettheirlong-termaswellas their short-term needs.Thisplacesthesehouseholdsin difficultsituationsbecausetransitoryincomeis unpredictableandthelevels of earningcapacityvaryfrom one periodto theother.Althoughparentsare importantsourcesof livelihoodforthehouseholdsthat depend on transitoryincomea slightfallin their wagebelow thelevel in which subsistenceneedscan nolongerbe metforcethesefamiliesto engagein childlabor(Bandaran 3).In thisscenario,childlaboris viewedas a mechanismto smoothen thehousehold’sconsumptionas wellas theearning capacitysincetheearningsbroughtbychildrento supplementwhattheir parentsearnson a dailybasis.Forexample,a familythat relies on subsistent cropproductioncan facesignificantshockin its transitoryincomewhendroughtoccurs.In thiscase,thedroughtleavessuchfamilieswith nothingto eatorevensustaintheir kids’schoollife.Childrenin suchfamiliesare forcedbycircumstancesto dropout of schoolandengagein someformsof laborthat can givethem moneyto feedthemselves as wellas othermembersof their family.Therefore,childrenwhoengagein childlaborare victimsof circumstances.

Usingchildrenas a bufferto transitoryincomeshocks

Poorfamilies,unlike thewellup familiesthat haveaccumulatedassets, usechildlaborto buffer themselves against unexpectedshocksin transitoryincome.Theconceptof relying on childlaboras a bufferto unexpectedshocksismainlyusedby familiesthat haveexperiencedtransitoryincomeshockin thepast.Parentsof familiesthat haveexperiencedeconomichardshipsin thepastandhavenot accumulatedanyassets thattheycan depend on in casesof incomeshocksperceivethatengagingtheir childrenin income-generatinglabor,evenin goodtimescan reducetheriskof incomeshocksin thefuture(Bandaran 4).However,thechildis a short-term methodof addressingtheissueof transitoryincomeshockssince itreducesthehumancapitaldevelopmentof theaffectedkids.Thisoccursbecausechildrencannot manageto proceedwith their educationandcommerciallaborat thesametime.

Childrenwhoengagein theincomegenerating activitiesendup droppingout of school.In thelong-run, theincomegeneratingcapacityof childrenwhostartedengagingin commerciallaborat earlyagesis relativelylowcomparedto their counterpartswhodidnot dropout of school.Thereis a probabilitythatkidswhodropout of schoolto workwill onlyearntheir dailybreadandbeleftwithnothingto saveforthefuture.Thisincreasethechancesthattheir children,once theybecomeparents,will alsoengagein childlaborin orderto buffer theexpanding familyfrom transitoryincomeshocks.Therefore,failureto addresstheissueof persistentincomeshocksin thepresentincreasestherateof childlabor,which in turnincreasesthenumberof householdsthat depend solelyon transitoryincomefortheir survival.

Factorsaffectingthechild’shumandevelopment

Thelevel with which childlaboraffectsthehumandevelopmentcapacityof affectedkidsis influencedby two factors.First,the proportion of income that children are expected to contributeddetermines the length of time that they will stay out of school.For example, a study conducted in Peru indicates that children aged10-12 are expected to contribute up to 7.5 % of the household’sincome, which forces them to dropout of school completely (Rena 4).

Secondly,familycharacteristicshavea significantrolein determiningthechild’stendencyto engagein childlaborin casesof transitoryincomeshockorthefearof unexpectedshocks.Forexample,parentswhoare altruisticto their childrenwill alwayssendthem to schoolandwithdrawthem onlywhentheincomeshockis unbearableandthesituationdemandsthecontributionof childreninenhancingthehousehold’ssurvivalcapacity(Bandaran 5).In mostcasesaltruisticparentshavea highereducation,orunderstandthesignificanceof educationin thefutureproductivityof their children.Non-altruisticparents,on theotherhand,haveahighertendencyto withdrawtheir childrenfrom schoolevenin casesof slighttransitoryincomeshocksandusechildlaboras a bufferto futureshockswhenthecurrentshockshaveended.Therefore,theassociationbetween childlaborandshocksin transitoryincomeis highlyinfluencedparent’scapacityto seetheadvantageof presenteducationalattainmentin thefutureof their children.

Intra-householdframeworkandits contributionto childlabor

Theintra-household frameworkplacesweighton differentfamilymembersin decision-makingfunctions.Thisframeworkholdsthatchildlaboris theresultof someoptimization processthat allowseachfamilymemberto contributetowards thedevelopmentof thefamily(Beegle 4). Under theintra-household framework,eachof thefamilymembersis assigneda weightdepending on their respectivecontributiontowards thefamilyresources.Parentswhoadoptthistypeof bargainingframeworkbelievethatchildlabormakesa substantialcontributiontowards thefamily’slivelihood.Children,on theotherhandmayendup likingchildlaborsince itincreasestheir weightin thehousehold’sdecision-making function.Collectively, membersof thefamily(includingparentsandchildren)that upholdstheintra-household modelseechildlaboraneffectiveinsuranceagainst thevulnerability to transitoryincomeshocks.Childrenin suchfamiliesdocommerciallaborwillinglysince theyunderstandthattheirfamilieshavenofixedassets to ensurethesurvivalof their familiesduring theadversefinancialcycles.

Beliefinthemarginalpropensityto save

Itis widelyacceptedthatmostof thechildrenwhoengagein childlaborcomefrom familiesthat lackfixedassets andtheir entirebudgetis based on transitoryincomethatthefamilymembersbringontableat theendof everyday.It is widely believethatfamiliesthat rely on transitoryincomehavea highermarginalpropensityto saveout of their limitedearningscomparedto familieswith permanentincome.Thisnotionhas madea significantcontributiontowards a beliefthatwithdrawingchildrenfrom householdsthat rely on transitoryincomecan helpthem accumulatesomeresourcesto shield themselves from incomeshocks.Theperceptionthatthepoorfamilieshavea highermarginalpropensityto savethan thefamilieswith permanentincomemay be correct.However,thefactthesefamilieshavea limitedearningcapacitysubjectsthem to a situationin which theyonlygetenoughfortheupkeepandleftwithnothingto saveforthefuture.For example, exporters in Ecuador buy each box of banana fromchildren at $ 2 and sell them in the U.S. at $ 25, which means that,children who dropout of school earns too little to save (Miller16). Thisincreasesthelikelihoodthatchildrenfrom familieswith transitoryincomewill engagein incomegeneratingactivitiesduring their entirechildandreachtheir adulthood without achievingtheobjectiveof savingoraccumulatingassets forthefutureuse.Thisconfirmsthefactthatchildlaborcan neverbe a reliableshieldagainst shocksassociatedwith transitoryincome.

Permanentincomeandassets as theviable solutionto themenaceof childlabor

Thepermanentincomehypothesis

Thepaperindicatesthatthehousehold’srelianceon transitoryincomethat is vulnerableto frequentshocksis themajorfactorthat contributestowards theprevalenceof childlaborin theunderdevelopednations.Thisimpliesthathelpingthesefamiliesacquirefixedassetsorpermanentincomeis themostappropriatemeasureto counter themenaceof childlabor.Thepermanentincomehypothesisholdsthatpeopletendto spendtheir moneyat levels that are consistentwith their anticipatedlong-term income(Beegle81). Thelevel of anticipatedincomeis consideredto be thelevel of permanentincomethatone orthehouseholdcan safelyspend.Thehypothesisalsoassumesthatindividualsandhouseholdssavewhentheir currentlevel of incomeis higherthan theexpectedlevel of long-term incomein orderto protectthemselves from therisksof thefutureincomeshocks.

Long-termorfixedassets asan effectivebufferto incomeshocks

Familiesin theunderdevelopedeconomiesallowtheir childrento engagein paidlaborduring incomeshocksas thelastoption.Based on thepermanentincomehypothesis,family’sspending decisionsare, in mostcases,guidedby their perceptionabout theaveragelifetimeincome,alsoknownas thepermanentincome.During incomeshocks,allfamilies(both poorandtherich)devicemechanismsthat helpthem smooththeir consumption(Beegle82). Theselectionof themechanismsto smoothconsumptionbringsout thedifferencebetween householdswith permanentsourcesof incomeandthosethat rely entirelyon transitoryincome.Householdswithout permanentsourcesof income,on theotherhand,findchildlaboras theimmediateoptionto normalize their consumption.To thisend,theonlyviable optionis to helpthesefamiliesto accesspermanentsourcesofincometo ensurethattheirchildrenareprotectedfrom theriskof engagingin childlabor.

Theeffectof increasingtheasset holding among thepoorfamilies

Increasingtheasset holding of thefamiliesthat havealwaysrelied on transitoryincomecan reducechildlaborandreducetherateof schooldropoutin two ways.First,thepossessionof assets increasesone’s accessto creditservices.In mostjurisdictions,assets areusedas collateralsecuritythat allowstheownersof thoseassets to accessfundsfrom thefinancialinstitutionsin timesof need(Beegle4). Familieswith assets that can beusedas collateralwould preferborrowingmoneyto smooththeir consumptionandretaintheir childrenin schoolto requestingorforcingtheir childrento engagein childlaborduring thetransitoryincomeshocks.Therefore,theavailability of assets increasestheborrowingcapacity,which reducingthechancesof thechildrenfrom familieswith collateralassets to engagein childlabor.

Secondly,non-financial assets may enhancethehousehold’sfinancialstatusby yieldinga flowserviceorrealincomeby allowingtheownersof thoseassets to paylessforsomeservices.Inaddition,householdsthatownpersonalcarsraisetheir realincomeby payinglessforsomeservices(suchas thetaxi), which helpsthem savesomemoneythat can be usedto smooththeir consumptionduring thetransitoryincomeshocks.Therefore,familieswith nonfinancial assets cannot allowtheir childrento dropout of schoolto engagein childlaborduring thetransitoryincomeshocks.

Third,mostof theassets that are acceptableasthe collateralasset havethecapacityto generatelong-term (permanent)income.Thisimpliesthatfamilieswith assets remainwith somesourceof permanentincometo smooththeir consumptionduring thetransitoryincomeshocks.Therefore,familieswith fixedassets havenot convincingreasonsto requiretheir childrento engagein incomegeneratingactivitiesas a meansof survival.Theasset holding of thepoorfamiliescan be enhancedby addressingtheconstraintsthat preventthesefamiliesfrom acquiringassets thattheycan be usedto smooththeir consumptionduring transitoryincomeshocks.Although the decision to increase the asset holding is an effectivemeasure, its impact can be felt well in underdeveloped countries thatutilize the international labor standards to fight against childlabor (Palley 13).

Conclusion

Childlaboris currently a troubling occurrencethat can be effetely addressedby increasingtheasset holding of thefamiliesthat liveon transitoryincome.During thetransitoryincomeshocks,allfamilies(bothrichandpoor)identifythemeansthrough which theycan smooththeir consumption.Familieswith permanentincomethat isderivedfrom fixedassets usethepermanentincomegeneratedby thoseassets of usetheassets as collateralsecurityto accessthecreditservices.Thisreducesthechancesforchildrenfrom familieswith fixedassetsto engagein childlaborduring thetransitoryincomeshocks.Familiesthat lackfixedassets,on theotherhand,are leftwith childlaboras theonlyviable alternativeto smooththeir consumptionduring thetransitoryincomeshocks.Therefore,increasingtheassets holdingof familiesthat relied on transitoryincomeforsurvivalcan reducethechancesfortheir childrento engagein childlabor.

Workscited

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Beegle,K., Dehejia, H., Gatti, R. “Child labor and agricultural shock”.Journalof Development Economics81 (2006): 80-96.

Dagdemir,O. and Acaroglu, H. “The effects of globalization on child labor indeveloping countries”. Businessand Economic Horizons2.2 (2010): 37-47.

Miller,E. “Child Labor and Protecting Young Workers around the World.”InternationalJournal of Occupational and Environmental Health 16(2010): 103-112. Web.

Palley,I. “The child labor problem and the need for international laborstandards”. Journalof Economics Issues36.3 (2002): 1-15.

Rena,R. “The child labor in developing countries: A challenge tomillennium development goals”. IndustrialJournal of Management and Social Science3.1 (2009): 1-11.