Now let's consider the economics of what is sometimes called bonded labor.
Bonded labor occurs when a laborer signs away his rights to an employer
and almost becomes a kind of slave in the longer term.
Sad to say, it's a pretty widespread practice.
There are about 18 to 20 million bonded laborers today.
Well over 80% of them are in South Asia,
and in South Asia, this represents more than 1% of the population.
There are, by the way, two common subcategories
within the idea of bonded labor.
One of them is debt bondage,
when an individual turns himself over to his or her employer
because he or she cannot pay off a debt,
and also child labor as bonded labor.
In that case, it may not be voluntary at all,
but rather it's the parents selling the child and the labor of the child
to an employer.
By the way, when it comes to debt bondage in South Asia,
quite commonly the amounts of money at stake are really quite small,
typically in the neighborhood of about 150 U.S. dollars.
Bonded laborers work in many sectors,
but some especially common jobs involve
working with brick kilns,
in stone quarries,
with cotton handlooms,
and also, in the case of children, carpet weaving.
For many women, and also some boys in addition,
bonded labor as prostitution is a serious issue.
So what are some reasons for bonded labor?
You'll note of course that bonded labor is especially common in very poor societies.
One cause is that you have some number of individuals who, because of their poverty,
become quite desperate and sign up for bonded labor
simply as some kind of mistake.
They give up on holding out for a better future.
Another possibility has to do with imperfect credit markets
and this is especially likely when it's debt-related bonded labor.
Imagine owing someone, say,
150 or 200 dollars and not having the money to pay it off.
Well, one way you might pay off that debt
is by signing up as a laborer and that indeed may relieve your debt.
You would be better off if you could simply borrow that money and pay it back later,
but that's not always possible.
If the level of capital accumulation is very low and it's a very poor region,
it could just be that the normal wage is below a level of subsistence.
Individuals then would rather sign up for slavery
rather than die or go hungry.
Note that if you've effectively been enslaved to an employer,
that employer might have an incentive to feed you enough
just to keep you around and working.
Finally, bonded labor may represent a form of insurance or wage smoothing.
So, let's imagine that you can be offered a wage today,
but you're not sure what your offered wages will be in the future,
and you are afraid that you might starve or earn very little.
You might agree to an arrangement where your wages,
over future periods, are guaranteed,
albeit at a very low level,
but in return, you have to give up your freedom.
Of course, none of these are happy arrangements,
but you should note that sometimes
the alternatives to bonded labor can be even worse.
Bonded labor does survive for a reason.
It's a very ugly and arguably morally offensive practice,
but still, the solution is not simply to rail against bonded labor,
but rather to cure the conditions which gave rise to it in the first place.
So what to do about bonded labor?
Well, some good reforms would be
greater education, which is a good idea for many different reasons,
greater access to microcredit, and do see our videos on the microcredit topic.
Notice that if bonded labor arises because credit markets are imperfect;
if you give people greater chances to borrow,
they might simply borrow money rather than agreeing to a bonded labor contract.
Finally, there's land reform.
The people who sign up for bonded labor very often do not have access to land.
If they had this asset, through land reform,
then again, the amount of bonded labor probably would go down.
Another possible solution is to have tougher restrictions on bonded labor
and stronger laws against bonded labor,
but note that in an economic perspective this isn't always going to work.
You'll notice that India has numerous laws and restrictions on bonded labor,
dating from at least the 1970s, but still, bonded labor continues in India.
Part of the problem is that,
if wages and productivity levels truly are low,
simply passing laws against bonded labor;
well that's addressing a symptom rather than the cause.
What we need to do is to get up the wages and productivity of labor,
and simply passing a law does not automatically do that.
This is a very sad and tragic topic,
and it deals with some of the most extreme sufferers in developing economies today.
But it's very important, and if you'd like to read more about it,
I recommend a very good book by Kara called simply
Online, there's a good article,
and in general, you can just Google "bonded labor" to a wide variety of sources.