VOL. 1, NO. 3 MARCH 2006 Economic Letter Apparel Exports and Education: How Developing Nations Encourage Women’s Schooling by William C. Gruben and Darryl McLeod Insights from the FEDERAL RESERVE BANK OF DALLAS To qualify for factory jobs in major apparel- and footwear- exporting nations, more women stay longer in school. Whether Americans shop in fashion boutiques or low-priced superstores, the clothes and shoes they buy are often made in other countries. Many of these nations are poor, not just by U.S. standards but by global norms as well. In years to come, the have-not countries will likely continue to expand their role as world suppliers of apparel and footwear. With the dismantling of the Multifiber Arrangement in January 2005, the last quotas on clothing imports were lifted—except against China. In the World Trade Organization’s Doha Round, negotiators are considering a proposal to end tariffs on all exports from the world’s 70 poorest countries.
Transcript
VOL. 1, NO. 3MARCH 2006 EconomicLetter
Apparel Exports and Education:How Developing Nations Encourage
Women’s Schoolingby William C. Gruben and Darryl McLeod
Insights from theF E D E R A L R E S E R V E B A N K O F D A L L A S
To qualify for factory
jobs in major apparel-
and footwear-
exporting nations,
more women stay
longer in school.
Whether Americans shop in fashion boutiques or low-priced
superstores, the clothes and shoes they buy are often made in other
countries. Many of these nations are poor, not just by U.S. standards but
by global norms as well. In years to come, the have-not countries will
likely continue to expand their role as world suppliers of apparel and
footwear. With the dismantling of the Multifiber Arrangement in January
2005, the last quotas on clothing imports were lifted—except against
China. In the World Trade Organization’s Doha Round, negotiators are
considering a proposal to end tariffs on all exports from the world’s 70
poorest countries.
2EconomicLetter FEDERAL RESERVE BANK OF DALLAS
3
Activists criticize working condi-tions in developing nations’ factoriesand warn about U.S. jobs lost toimports. But even they concede thatentry-level jobs provide much-neededemployment for poor workers, partic-ularly young women. Some observers,however, suggest the factory jobsmight inflict subtle harm: What if thesefactory jobs tempt girls to leave schoolearly, sacrificing years of educationand sentencing them and their chil-dren to a future of low-wage jobs?
Our research refutes claims thatapparel and footwear production leadsto lower educational achievement forwomen. We find that clothing andshoe production requires more educa-tion than the average woman hasattained in many developing countries.The plants usually don’t hire womenwithout at least a junior high educa-tion. In Bangladesh and other majorapparel-exporting nations, to qualifyfor these jobs, more women staylonger in school (Chart 1). Our studyalso allays concerns that the exportfactories create jobs for underageworkers: Female workers’ commitmentto seek more education delays child-bearing and lowers the incidence ofchild labor.
In short, the maligned suppliersof Nike, Gap and Wal-Mart encouragegovernments to educate women, givewomen a reason to stay in school andpay them well by local standards. Ourstudy presents a picture of textile andfootwear plants that’s far less harrow-ing than the sweatshop stereotype andmore compatible with surveys indozens of countries that find femaleworkers feel they benefit from the fac-tory jobs.
Skill development and increasedincomes for women aren’t tied simplyto apparel and footwear manufactur-ing, but to production of these goodsfor export. The reason may involvethe industry’s peculiar demographics:Women are far more likely to work inexport operations. A Bangladesh sur-vey reported in 1999 that 90 percentof garment workers in plants that
serve domestic markets were male. Incontrast, 90 percent of export-plantemployment was female.1
Finding that textile and shoe fac-tories aren’t an albatross has importantimplications for economic develop-ment. Since at least the 1940s, econo-mists have argued that nations typical-ly transition from farm-intensive pro-duction to light industry and then tohigher value-added production. Theprogression can bog down if coun-tries—perhaps spurred by critics’views—shun the kind of light manu-facturing found in textile and shoeproduction or burden these operationswith regulations that make themuncompetitive.
Exports and Education We developed a model to analyze
the links between shoe and textileexports, education and other key fac-tors in 48 countries, such as Brazil,Ecuador, Mexico, Indonesia,Bangladesh and Madagascar.2 Thesenations are among the developingworld’s most prolific exporters of
FEDERAL RESERVE BANK OF DALLAS EconomicLetter
SOURCE: “The Gender Imbalances in the Export Oriented Garment Industry in Bangladesh,” by PratimaPaul-Majumder and Anwara Begum, World Bank Policy Research Report on Gender and Development,Working Paper Series no. 12, June 2000.
Chart 1Education Among Female Apparel Workersin Bangladesh
Skill development and
increased incomes for
women aren’t tied
simply to apparel
and footwear
manufacturing, but
to production of these
goods for export.
shoes and clothing to generally richermember nations of the Organizationfor Economic Cooperation andDevelopment.
Most important, we look at therelationship between increases inapparel and shoe exports as a share ofGDP and the primary- and secondary-school enrollment for males andfemales. These nations often experi-enced surges of textile and apparelmanufacturing after they were award-
ed large new quotas under theMultifiber Arrangement, a 1974 agree-ment that regulated apparel trade forover 30 years. Although the MultifiberArrangement has lapsed, it was ineffect during the years of our studyand it served to strengthen our con-clusions.
Among the countries studied,increases in apparel and shoe exportsas a share of GDP were positivelyassociated with subsequent upturns in
For the average
country, a doubling
of apparel and
footwear exports as
a share of GDP
raises female
secondary-school
attendance by
20 to 25 percent.
4EconomicLetter FEDERAL RESERVE BANK OF DALLAS
Chart 2Female-to-Male Secondary-School Enrollment vs. Apparel Export Share: Typical Scenario
Guatemala Indonesia
Bangladesh Egypt
SOURCES: OECD; The World Bank.
2000–031995–991990–941985–891980–84
Enrollment(percent)
Export share(percent)
0
.5
1
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4.5
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65
70
75
80
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90
95
0
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80
2000–031995–991990–941985–891980–840
20
40
60
80
100
120
Enrollment(percent)
Export share(percent)
2000–031995–991990–941985–891980–84
Enrollment(percent)
Export share(percent)
0
5
10
15
20
25
30
35
40
45
50
82
84
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2000–031995–991990–941985–891980–84
Enrollment(percent)
Export share(percent)
0
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50
60
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both male and female secondary-school enrollment. For the averagecountry, a doubling of apparel andfootwear exports as a share of GDPraises female secondary-school atten-dance by 20 to 25 percent.
The average, however, maskslarge country-by-country differences(Chart 2). As apparel and footwearexports surged in Bangladesh, forexample, females’ secondary-schoolenrollment actually rose to exceed thatof men, starting from 40 percent rela-tive to male enrollment in the early1980s. In Egypt, an export increasehelped women’s school attendancerise from 65 percent to over 90 per-cent of men’s. In Guatemala, women’senrollment gained 10 percentagepoints to approach 93 percent ofmen’s. Indonesia went from 70 per-cent to nearly 100 percent.
Not all countries show a straight-line pattern. Brazil and China, forexample, saw women’s enrollment insecondary schools relative to men’srise for a time but then fall back as
clothing and shoe exports ebbed as ashare of GDP (Chart 3). This isn’t nec-essarily inconsistent with the observa-tion that the export factories encour-age women’s schooling. One possibleexplanation is that growth in indus-tries other than apparel and footweargave men greater incentives to get aneducation; thus, their enrollment rosefaster than women’s.
Apparel and footwear exportersemploy both men and women, butfemale workers make up an over-whelming majority of export clothingmanufacturing’s labor force and play asubstantial role in shoemaking. Thefactories’ skewed demographics mayexplain why the impact on femaleeducation is typically twice as large asthat for men.
What about primary education?Higher clothing and shoe exports areassociated with even greater increasesin female enrollment relative to males.This result isn’t surprising. In poorcountries, school attendance rates areusually much higher for males than
5FEDERAL RESERVE BANK OF DALLAS EconomicLetter
Chart 3Female-to-Male Secondary-School Enrollment vs. Apparel Export Share: Brazil and China
Brazil China
SOURCES: OECD; The World Bank.
2000–031995–991990–941985–891980–84
Enrollment(percent)
Export share(percent)
0
20
40
60
80
100
120
0
5
10
15
20
25
2000–031995–991990–941985–891980–84
Enrollment(percent)
Export share(percent)
95
100
105
110
115
120
125
130
135
0
.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Apparel and footwear
exporters employ both men
and women, but female
workers make up an
overwhelming majority
of export clothing
manufacturing’s
labor force.
India, Côte d’Ivoire and Bangladesh—the top five nations in educationalbias against females.
Because clothing and footwearfactory work often involves migrationfrom villages to cities as well as longworkdays with overtime, womenemployees typically postpone mar-riage and childbearing for severalyears. A series of surveys in Bangla-desh from 1990, 1993 and 1997,reported in 2000 by Pratima Paul-Majumder and Anwara Begum, foundthat in 1997 female workers who wedbefore entering garment work marriedat about age 16, compared with age20 for those who married after takingfactory jobs. The average woman’s ageat first childbirth was 17 if she hadchildren before garment work; if thefirst child arrived after she startedworking, the average age rose to 21.3
Survey data can’t demonstrate aclear connection between childbirthand factory work. It could be that fac-
tory work has no effect on thewomen’s childbearing behavior. Todetermine such a relationship, weemploy a model similar to the oneused for school enrollment to test forthe effects of apparel and footwearexports on birthrates in our 48-countrysample. The results show that theseexport industries lead women to givebirth to fewer children over their life-times. The effects are somewhatstronger in countries with highbirthrates than in those with low rates.
The women’s higher educationattainment may also have an effect onchild labor. The United NationsInternational Labor Organization andthe World Bank recently began collect-ing data on labor-force participation ofchildren aged 11 to 14. Because thedata don’t make gender distinctions,we can’t isolate the effects of any fac-tors upon female child labor. But thedata do show that apparel andfootwear exports as a share of GDPhave a negative and significant effecton the likelihood of 11- to 14-year-olds being employed.
The Multifiber Arrangement coun-tries provide a rich database toexplore the impact of increasing tex-tile and footwear production. Mostimportant, the data suggest the plantsencourage education, particularly forwomen, without exacerbating child-labor rates. Increases in exports of oil,soybeans and other products notstrongly associated with women’semployment didn’t lead to increases infemale education. The results holdeven when we include other explana-tory variables that might send morechildren to school instead of work—such as overall trade, real per capitaincome and previous levels of second-ary-school enrollment. The models,therefore, don’t attribute to appareland footwear outcomes that wereactually related to other factors.
The conclusions about clothingand shoe factories’ effects on women’seducation are particularly striking inlight of past research. Some studieshave found that export manufacturing
6EconomicLetter FEDERAL RESERVE BANK OF DALLAS
*Purchasing power parity, in dollars.NOTE: Each country is represented by up to four dots, one for each five-year period in the sample.
SOURCES: OECD; The World Bank.
–4 –2 0 2 4–20
–15
–10
–5
0
5
10
15
20
Change in enrollment, by country (percent)
Chart 4Influence of Apparel Exports on Women’sSecondary-School Enrollment
Change in apparel exports as a share of GDP*
for females. Most boys would alreadybe in school, so added apparel andfootwear exports wouldn’t motivatethem to seek primary education. Thegirls, many of whom had been gettinglittle primary schooling, would be sentto classes when opportunities emergedfor employment in industries requiringeducation.
Because of cultural or other fac-tors, not all developing nations offerthe same educational opportunities tofemales. We handle this problem withfixed-effects modeling, which distin-guishes between countries with highand low female-gender bias. Usingthis procedure, we find that increasedapparel and footwear exports havetwice the impact on female secondary-school enrollment in the 28 high-gen-der-bias countries but little effect onmale behavior (Chart 4). These resultssuggest enrollment increases from newapparel and footwear exports wouldbe greatest in Pakistan, Cambodia,
operations in developing countriescan discourage education and erodethe foundations for long-run growth.4
The chain of reasoning follows astylized version of comparative advan-tage. When poor countries open tradewith rich ones, each will raise outputof goods that require inputs it has inabundance and reduce production ofgoods that require inputs in scarcesupply. The opening of trade encour-ages developed countries such as theUnited States to increase productionof goods that require a highly educat-ed labor force. Developing countrieswill shift production toward goodsthat require lower educational levels.As the shift in relative demand forinputs takes place, wages of low-skilled workers in poor countries riserelative to highly skilled workers. Theresulting decline in the education pre-mium in wages discourages education.
These arguments, however,assume all sectors trade international-ly. They also ignore the existence ofsubsistence agriculture—the workwomen factory employees want toescape because of its low income andstatus—and the so-called “informalsector,” another of the inferior alterna-tives to factory work. Women mightvery well choose to gain educationand find work in textile and shoe fac-tories rather than work in these lessdesirable sectors.5
Previous studies found little ifany connection between trade andfemale education because theyfocused on general exports, notfemale-intensive industries. Our studyreaches different conclusions becauseit looks explicitly at export industriesthat chiefly employ women.
How Women View Work The model’s results largely con-
firm the anecdotal evidence thatcomes from surveys, interviews andother evidence involving developingcountries’ textile and footwear workers.
Women who take jobs in apparelplants could stay home and work.Why don’t they? The at-home alterna-
7FEDERAL RESERVE BANK OF DALLAS EconomicLetter
tive isn’t very attractive. Surveys offemale home-based workers in Brazil,Ecuador and Mexico found that theyearn 25 to 60 percent less an hour thanwomen who work in factories. In thesame surveys, home-based men earnedat most 17 percent less than factoriespay.6
Factory pay is greater—but is itgood? An Indonesian survey by MariPangestu and Medelina Hendytioreports that 85 percent of women inthe garment industry receive at leastthe minimum wage. With meals, trans-portation and other allowances includ-ed, 96 percent surpass the minimumwage threshold. Overtime work liftseven more employees above the mini-mum wage standard.7 The Bangladeshsurvey series showed factory womenearning about 23 percent of theirincome in the form of overtime andbonuses in 1997.
If you make Nikes, you earnmore. The shoe company’s Indonesianshop-floor workers on average earnmore than four-fifths of the nation’sworking population. In Bangladesh,garment export firms generally paymore than firms not oriented to sellingoutside the country.
Wages also tend to rise over time.An econometric study of Madagascar’seconomy indicates that “a sustainedexport-driven growth in Madagascar’stextile and apparel industry will leadto a substantial increase in the incomeof poor households, with a conse-quent decrease in poverty.”8
Pay and working conditions makeapparel and shoe factories preferredplaces to work. Indonesian womendon’t see garment factory employmentas low-level manual labor. More than80 percent of them say their jobs givethem higher status than being ahousewife. Pangestu and Hendytiocite other surveys that find womenfactory workers regard the agriculturaljobs they would have held back homeas hard manual labor. AnotherBangladesh report finds that womenperceive jobs outside the home asenhancing their status.9
Because clothing and
footwear factory work often
involves migration from
villages to cities as well as
long workdays with
overtime, women
employees typically
postpone marriage and
childbearing for
several years.
Relatively high pay encourageseducation directly by creating demandfor employees with more schooling. Ingeneral, the surveys found that gar-ment factories had come to expect theequivalent of some middle-schooleducation—more than the nationalaverage. Textile and apparel firmsexpected even more. In fact, the 1993version of the Paul-Majumder andBegum surveys found the literacy ratemuch higher for garment workers thanfor employees in nonexport sectors.More striking, this series showed thatthe average years of schoolingattained by female garment workersincreased from 4.1 years in 1993 to 6.3years in 1997.
The factories boost education inanother way, albeit indirectly. In theIndonesia survey, factory pay wasgood enough to allow 69 percent ofthe women to assist their familiesfinancially. One of the uses of thismoney was to pay for siblings’ educa-tion. The survey reported that theserespondents migrated to cities and
found work in the industrial sector asa means of alleviating poverty, bothfor themselves and their children. Thesurvey also found that the women notonly valued the income but also theindependence that went with it.
Other surveys echo these find-ings. The Bangladesh compendium ofsurveys revealed that women wereoften paid less than men for the samejob, but 19 percent of the female gar-ment workers still said they hadopened bank accounts without theirhusbands’ and families’ knowledge.
Reassessing Women’s WorkThe disappearance of the
Multifiber Arrangement’s quotas hasresulted in some shifting of operationsfrom very poor countries to China,where transportation infrastructure,availability of low-cost industrial waterand other nonlabor factors hold downproduction costs. Despite the persist-ence of quotas, China has emerged asthe top clothing supplier to the U.S.market. The quota removals for othercountries were not accompanied bytariff removals. If the Doha Roundnegotiations succeed in removing alltariffs faced by the 70 poorest coun-tries, these countries will have oppor-tunities for upward mobility that manyof them don’t have now.
Some of the best opportunitieswill be in the apparel and footwearexport factories. Much of the criticismaimed at them has been undeserved.Our study shows that these industriesencourage rather than diminishwomen’s education. Clothing andfootwear manufacturing employmentalso tends to delay female workers’marriage and motherhood, and itdoesn’t increase child labor.
These findings should helpremove the stigma attached to factoryjobs and encourage nations to includethem as an integral part of develop-ment. The findings also reinforcelong-held arguments in economic
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development theory that the replace-ment of agricultural or rural informal-sector jobs with light-industry assem-bly firms is an important step in rais-ing incomes.
Gruben is vice president and senior econo-mist at the Federal Reserve Bank of Dallas.McLeod is associate professor of economics atFordham University.
Notes1 “Female Employment Under Export-PropelledIndustrialization: Prospects for InternalizingGlobal Opportunities in the Apparel Sector inBangladesh,” by Debapriya Bhattacharya andMustafizur Rahman, U.N. Research Institute forSocial Development, OPB no. 10, Sept. 1, 1999.2 “The Effect of Apparel Manufacturing onFemale Education and Child Labor in DevelopingCountries,” by William C. Gruben, DarrylMcLeod, Rosendo Ramirez and Maria Davalos,working paper, forthcoming. 3 “The Gender Imbalances in the Export OrientedGarment Industry in Bangladesh,” by PratimaPaul-Majumder and Anwara Begum, World BankPolicy Research Report on Gender andDevelopment, Working Paper Series no. 12, June2000.4 “In Search of Stolper–Samuelson LinkagesBetween International Trade and Lower Wages,”by Edward E. Leamer, in Imports, Exports, andthe American Worker, ed. Susan M. Collins,Washington, D.C.: Brookings Institution, 1998.5 “Skill, Trade and International Inequality,” byAdrian Wood and Cristóbal Ridao-Cano, OxfordEconomic Papers 51, no. 1, 1999, pp. 89–119,and “Trade, Skills and Persistence of GenderGap: A Theoretical Framework for PolicyDiscussion,” by Ramya Vijaya, InternationalGender and Trade Network, January 2003.6 “The Home as Factory Floor: Employment andRemuneration of Home-Based Workers,” byWendy Cunningham and Carlos Gomez, WorldBank Policy Working Paper no. 3295, May 6,2004.7 “Survey Responses from Women Workers inIndonesia’s Textile, Garment, and FootwearIndustries,” by Mari Pangestu and MedelinaHendytio, World Bank Policy Research WorkingPaper no. 1755, April 1997.8 “Who Benefits and How Much? How GenderAffects Welfare Impacts of a Booming TextileIndustry,” by Alessandro Nicita and SusanRazzaz, World Bank Policy Research WorkingPaper no. 3029, April 15, 2003.9 The Power to Choose: Bangladeshi Womenand Labour Market Decisions in London andDhaka, by Naila Kabeer, London: Verso, 2000.
