The demise of child labor

Economically valuable and emotionally worthless to economically worthless and emo­tionally valuable. In 1896 the Southern Railroad Company of Georgia was sued for the wrongful death of a two-year-old boy.^[148] The parents claimed that their son per­formed valuable services worth $2 per month, “going upon errands to neighbors...

Now move forward in time to January 1979. The New York State Supreme Courtjury awarded $750,000 to the parents of three-year-old William Kennerly. He had been given a lethal dose of fluoride in a city dental clinic. The twentieth century has witnessed a profound transformation in the value of children. Along with the Second Industrial Rev­olution emerged the “economically worthless” and the “emotionally priceless” child. For in strict economic terms, today’s children are worthless to their parents. They are expensive. The direct cost to a two-parent median income family of raising a child born in 1995 through to the age of 17 was estimated to be $145,320.^[149] And this does not include college costs, time costs, and foregone earnings. In return they provide no labor.

What caused this dramatic change in society’s valuation of children over such a rela­tively short period of time? And what accounts for the apparent paradox that the value in the twentieth century that society placed on an economically useless child far surpassed the one in the nineteenth century that society placed on an economically useful child? A case can be made that technological progress resulted in the liberation of children from work.

4.1. Theenvironment

The analysis here closely follows the setup of the previous section. Assume that an individual lives for three periods: the first as a child, and the second and third as an adult. In the first period of life a person undertakes no economic decisions; he simply accumulates the level of human capital dictated by his parents. He begins the second period of his life with a fixed number of children, η. In addition to being exogenous, childbearing is costless. Skilling a child, however, involves two costs. First, as before, there is the direct cost of educating the child. In particular, endowing a child with h' units of human capital involves a cost of φh' units of unskilled time. Second, there is the opportunity cost of sending the child to school; that is, by going to school a child forgoes some labor earnings. Specifically, suppose that a child is as productive in the labor market as ζ < 1 unskilled adults. Additionally, assume that in order for the child to acquire h' units of human capital he must go to school for h' units of time.

A young adult’s decision problem. The economic environment is pretty much the same as that in the previous section, with the above notable exceptions. Another distinction is that a parent now cares about the leisure that his children will enjoy, in addition to his own consumption and the quality of his children. The purpose is to break the link between the time spent schooling and the time spent working by children. The analogue to choice problem (20) is

where once again consumption when old, c^o/, has been substituted out using the Euler equation (19).

The first-order condition for h' is

The right-hand side of this equation gives the value from extra human capital accumu­lation in children. It has the same form as (22). The left-hand side gives the cost of extra human capital accumulation. Observe that part of this cost is the forgone earnings wζ that a child would realize by working instead of going to school. Also, the cost of edu­cating kids is an increasing function of the number of kids η. Hence, one would expect that as η falls h' should rise. Note that an equiproportionate increase in υ, υ', w, w' and c^y will have no effect on h'. Consequently, along a balanced growth path h will be constant. Hence, in order to get some action it must transpire that v must rise relative to w, or equivalently that z must increase relative to x. Recall that this was exactly what was needed to account for the U.S. demographic transition in Section 3.

Finally, the first-order condition for leisure reads

The right-hand side of this equation gives the marginal benefit from providing an extra unit of leisure to each child while the left-hand side gives the marginal cost. Observe that for leisure, l, to increase, c^y must rise relative to wη. This will happen if either v rises relative to w, or if the level of human capital h increases, ceteris paribus. Note that a fall in fertility, η, plays an important role in increasing l. When fertility declines, the marginal cost to the parent of providing more leisure to each of his children falls, hence leisure rises.

4.2. Analysis

Imagine that the economy is resting in a steady state where z and x are constant.¹³ Variables such as h, l, w∕c^y and v∕c^y will also be constant. Others such as the size of the young generation, ∙s∙^y, will be changing at a constant rate dictated by the size of η. The market-clearing condition for skilled labor will again be described by (26). The one for unskilled labor will now appear as

which follow from Equations (24), (25), (26) and (36).

In principle one can solve the first-order conditions (34) and (35), in conjunction with (37) and (38), to obtain a solution for h and l.¹⁴ General results are hard to obtain for

this economy, however, so a numerical example will be used to highlight the effect of changes in z/x and η on h.¹⁵ The goal of this example is to show that the above setup is capable of generating a large decline in child labor. Little attention has been paid to its realism.

EXAMPLE 4 (The natural death of child labor). Assume the parameter values listed below.

(i) Tastes: β = 0.94²⁰, χ₁ = 0.14, χ₂ = 0.03, ψ = 1 — χ₁ — χ₂.

(ii) Technology: σ = 0.7.

(iii) Childcare: φ = 0.1.

(iv) Child productivity: ζ = 0.15.

Again, start off in 1800. Set η₁₈₀₀ = 3.5, since an average family gave birth to 7 chil­dren. Observe that in work a child has the productivity of 0.15 adults.¹⁶ Assume that z₁₈₀₀ = x₁₈₀₀ = 1. Then Equations (34) and (35) imply that h₁₈₀₀ = 0.025 and Z₁₈₀₀ = 0.16; i.e., about (1 — h₁₈₀₀ — Z₁₈₀₀) ? 100 = 81.5 percent of chil­dren are gainfully employed.

Child labor laws and compulsory schooling laws. Child labor laws are often cited as a reason for the decline in child labor. While the National Child Labor Committee was formed as early as 1904, it was not until 1938, when the Fair Labor Standards Act was passed, that children were freed from the bondage of dangerous work. The data suggests that the process of the withdrawal of children from the workforce had been completed before child labor laws were firmly in place. The conventional wisdom among economic historians is that these laws had little impact on teen attendance early in the twentieth century because the laws were imperfectly enforced [Landes and Solmon (1972) and Eisenberg (1988)]. More recent work by Margo and Finegan (1996) finds significant positive effects on school attendance when compulsory schooling laws were coupled with child labor laws. There is still the possibility that the enactment of these laws was a reaction to the greater demand for skilled labor, and the lower demand for unskilled labor, caused by industrialization. Nardinelli (1990) echoes this sentiment and provides evidence that those areas that industrialized first were also among the first to adopt these laws. Hence the enactment of these laws in more industrialized states is consistent with

the notion that technological progress increased the demand for skilled labor vis a vis unskilled labor and consequently reduced the demand for child labor.

The above example suggests that sector-specific technological progress alone can account for all of the decline in child labor. There are three effects at play.

5.