Question

Explain the following statement by Kaushik Basu using graph – “Child labor as a bad equilibrium”. What are the policy prescriptions to overcome child labor?

Answer 1

Child Labor refers to the employment of children in an industry or business, especially when illegal or considered exploitative.A family with sufficient income will not send the children for work. On the other hand family with low income have to make their children work even by sacrificing their education.

In the below figure Supply Curve is along AA'. If the wage is below WL,the supply curve is along TT', and in between it follows the S- shaped curve between the two vertical lines.Also consider Labor demand curve DL. If the demand is elsatic enough to intersect the AA line above WH and also cut the TT' line below WL then there will be twostable Equilbria labeled as E1 and E2.When there are two Equilbria and if we start out at bad Equilibrium E2 an effective ban on child equilibrium will move the region to good equilibrium to E1.Once the economy has moved to new equilibrium , the child labor ban would be self enforcing because the new wage will be sufficient enough and family will not have to send their children to work.

Assuming that Labor Supply of Adults is fixed At E1 wage is high enough and no child has to work. At E2 all have to work because wage is not high .

Wat - - - S-Shaped curve WH wage Wet - - WES . L A 1 Labor

Following Strategies can be used to control Child Labor:

• Getting more children admitted to schools as this will provid ethem basic education and help them in securring a job ay later stage.
• Taking steps to end poverty so that families dont have to send their children to work.
• Regulation of child labor with the help of certain agencies like UNICEF, only in case if child labor is unavoidable.
• Ban the child labor completely.