Governance

Unintended consequences of India's child labour ban

  • Blog Post Date08 January, 2014
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Prashant Bharadwaj

University of California, San Diego

prbharadwaj@ucsd.edu

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Leah K. Lakdawala

Michigan State University

lkl@msu.edu

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Nicholas Li

University of Toronto

nick.li@utoronto.ca

Bans and regulations against child labour are among the most popular policy tools used to address the problem throughout the developing world. But how well do they work in practice? This column analyses the effectiveness of India’s flagship legislation against child labour, the Child Labour Act of 1986. It finds that a few years after the ban, employment levels of children under the legal working age of 14 rose relative to those of legal age.

Despite facing near universal opposition for decades, child labour is endemic. According to a recent report by the International Labor Organization (ILO), there are nearly 168 million child labourers, of whom 85 million work under hazardous conditions (ILO 2013).

While many policy options exist to address this, bans and regulations against child labour are among the most popular policy tools used worldwide. However, it is not clear that such laws will always lead to reductions in child labour. When perfectly enforced, bans force employers to forgo the use of child labour. In reality, the governments of countries where child labour is prevalent rarely have the capacity and resources to perfectly enforce regulations on child employment, as documented in a recent study by economists, Eric Edmonds and Maheshwor Shresthra (2012). When bans are imperfectly enforced they raise the cost of hiring children, as employers anticipate facing stiff fines or other penalties when caught using child labour. Thus, bans may simply lower the wages that children are paid. If families send their children to work out of necessity, a drop in child wages lowers family income for those who rely on child labour to meet basic subsistence needs – compelling families to supply more child labour, rather than less (Basu 2005).

What effect do child labour bans have in practice?

In a comprehensive 2007 review article, Eric Edmonds concludes, “...despite all this policy discussion, there does not appear to be any study of the effectiveness of restrictions on work that would meet current standards of evidence.” In order to fill this critical gap in the literature, we use individual-level data from national employment surveys to study the impact of India´s flagship legislation against child labour, the Child Labour (Prohibition and Regulation) Act of 1986 (Bharadwaj, Lakdawala and Li 2013). Although the 1986 Act was not the first child labour law enacted in India, it put in place a stricter and more uniform code and most recent articles in the media cite this law as the starting point for legal action against child labour in India. Specifically, the 1986 Act prohibited the employment of children aged 13 and under in most manufacturing and service professions, while allowing employment of these children in agriculture and family businesses subject to regulations on hours. Violators faced fines and potential prison sentences.

While overall employment rates for Indians under the age of 18 have been falling year over year as a consequence of rising incomes and school enrolment, we show that after the ban, employment levels of children under the legal working age of 14 actually rise relative to those of legal age (aged 14-17). Thus the 1986 Act that was intended to reduce relative employment of children under 14 had a perverse, opposite effect. Children under 14 are 1.7 percentage points more likely to work after the ban. Given that around 14% of children under the age of 14 were employed before the ban, this amounts to a 12% increase in child employment.

This effect seems to stem in part from the large drop in child wages. In the manufacturing and service sectors that were the main targets of the 1986 Act, the wages of children under 14 fell 4% relative to the wages of older children and adults. The ban thus appears to have operated as a tax on the employment of children in the sectors affected by the ban, a tax that was passed on to the child employees in the form of reduced wages. This lost wage income coincides with an increase in relative employment of children under 14 in both manufacturing and agricultural sectors but with effects concentrated in the agricultural sector where the relative wages of younger children were unaffected. Because child wages were lower in agriculture than manufacturing to begin with, the combination of a reduced manufacturing wage and a larger employment share in agriculture resulted in a fall in wage income from under-14 children by 10%, relative to wage income from those aged 14 and above.

Which households were most affected by India’s child labour ban?

Since wages of those below the age of 14 fell by more, poor households with children working in that age range suffered even greater income loss, and we would expect the effects to be concentrated in those households. When we focus on children with siblings in the 10-13 age group – those who are most likely to experience a loss of household income due to the wage effects of the ban – we find they are about 5.6% more likely to be pushed into work as a result of the ban than children who do not have a sibling in this age group. We also find that the increase in employment of children under 14 relative to children 14 and older is largely concentrated in the poorest families – those in which the household head’s education is below the secondary level, or those whose food consumption consists mainly of the cheapest staples.

Finally, we explore other ways in which households are affected by the ban. The increase in child employment we observe need not result in lower school attendance if these children were previously economically ‘inactive’ - engaged in domestic production or enjoying leisure. However, our results suggest that some children are indeed being taken out of school in order to work; children with siblings aged 10-13 are about 1.4% less likely to be in school after the ban than before relative to children without siblings aged 10-13. Another impact of the ban may have been to shift children out of wage labour and into household enterprises, preventing a large reduction in total household income for households with children aged 10-13 even if wage income from children falls. Alternatively, households may have responded to the decline in household income by cutting their expenditures or drawing down their assets. We examine several measures of household welfare including per capita expenditure, food expenditure, caloric intake, and an index of household asset wealth and find that these measures slightly declined for households with children aged 10-13 relative to those without, suggesting that the various coping strategies of poor households – including increased provision of child labour – are insufficient to make up for lost wage income from children.

Taken altogether, our results suggest that households with children 10-13 are worse off after the 1986 Act relative to those with older children – child wages fall, child employment rises, child schooling falls, and household consumption and wealth fall.

Implications for policy

These results are important for understanding the impacts of child labour bans in settings where people live at the margin of subsistence and where legal enforcement is weak. They are particularly salient given the current policy climate in India, which involves legally guaranteeing certain `rights´ such as the right to employment (Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA)) or the right to education. While such policies could have beneficial effects, understanding how such rights interact with the broader context of corruption and behavioural responses of poor households is crucial. Perhaps most relevant to our findings, in February 2013 a bill was introduced to the Parliament of India calling for the abolition of all forms of child labour. Among other provisions, the proposed bill also calls for increased monitoring and punishment for violators of such laws. The results of our paper caution against such policies in the presence of broader institutional and market failures. Even if the proposed bill was aggressively enforced and actually succeeded in reducing child labour – and it is plausible that a ban with no exemptions for household enterprises or any sectors might be easier to enforce – the resulting decline in income for the families affected could have negative consequences for the adults and children in the household including substantial declines in nutrition, education and health expenditures.

Our findings do not discourage all forms of government-led policies against child labour.1 There are many options available to policymakers who wish to reduce the incidence of child labor such as cash transfers to families and increasing investments in education. If anything, we think a discussion in policy circles about these alternatives should be heightened since it appears from our study that child labour bans of the type instituted under the Child Labor Prohibition and Regulation Act can be ineffective. Recognising that child labour is frequently the last resort of poor households suggests an approach that is focused on reducing the supply of child labour by helping poor households rather than restricting the demand for child labour which we find will lower their incomes and can generate perverse responses.

A version of this column has appeared on VoxEU (www.voxeu.org).

Notes:

  1. The case of product boycotts is a well studied example of a policy that governments impose to try and bring about regulatory change; although, even these could be less effective than expected (see Doepke and Zilibotti 2010, among others).

Further Reading

  • Basu, K. (2005), “Child labor and the law: Notes on possible pathologies”, Economics Letters, 87(2), 169–174.
  • Bharadwaj, P., Lakdawaka, L. and Li, N (2013), ‘Perverse Consequences of Well Intentioned Regulation: Evidence from India’s Child Labor Ban’, NBER Working Paper 19602.
  • Doepke, M and Zilibotti, F (2010), “Do International Labor Standards Contribute to the Persistence of the Child-Labor Problem?”, Journal of Economic Growth, 15(1), 1-31
  • Edmonds, E. V. (2007), ‘Child labor’, Handbook of development economics 4, 3607–3709.
  • Edmonds, E. V. and M. Shrestha (2012), “Impact of minimum age of employment regulation on child labor and schooling”, IZA Journal of Labor Policy, 1(14), 2–28.
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