Can raising labor standards and wages increase sweatshop productivity?

One day late for May Day.

About half the world’s soccer balls are made in one city in Pakistan, Sialkot. So what happens if you invent a better ball design and offer it freely to all factories?

we gave out the new dies randomly to 35 of the 135 producers in Sialkot and sat back to watch. The first surprise was that few firms adopted the new die, despite indications that it was yielding more pentagons per sheet. We asked owners why not. Their number one answer: employee resistance. The vast majority of cutters in Sialkot are paid piece rates (usually per ball), and our new die was slowing them down, at least initially. Without changes to this scheme, the cutters bore the increased labor cost and saw none of the much larger benefits of reducing waste of material. Figuring that their earnings would decline, the cutters were trying to block adoption, in part by misinforming owners about the benefits of the technology.

That’s Eric Verhoogen writing in Harvard Business Review about his study, with coauthors, of barriers to technology adoption in Pakistan.

The one place that adopted it was the Nike-supplying factory with salaries and a higher wage bill. In a second experiment, they show that insuring workers against the losses from technology change increased adoption.