Martin Wolf splendidly exposes the sorry consequences overlooked by those (such as William Greider) who clamour for corporations operating in low-wage countries to pay their workers wages above market-clearing levels:
In China today, the proportion of the work-force employed in more or less modern activities is still small (perhaps an eighth). The wage for unskilled labour is set by its value in the rural hinterland. That, in technical terms, is its ‘opportunity cost’. Critics — Greider, for example — complain that workers in countries such as China earn much less than the wages received by workers in comparable plants in high-income countries, even though those plants can operate just as efficiently there. That should be so. It makes no sense for workers with similar skills to be paid very differently in any given labour market. If employers are profit-maximizing, as Greider believes, they should employ more people instead, until the marginal product of labour equals its low cost. Any given plant would then employ substantially more people in China than it would in a high-income country. The average product of labour will be far higher than its marginal product, in such plants. Fortunately, this also makes China a profitable place in which to invest and so stimulates the country’s economic growth.
What might active trades unions achieve in this context? Suppose they were successful in raising wages and conditions for the lucky minority of workers employed in modern factories to levels closer to those westerners consider reasonable. The price of labour to modern enterprises would rise above its opportunity cost. The labour market would then be dualistic, with low incomes for the great majority and relatively high incomes for the organized few. Both profitability in the modern sector and the labour-intensity of production would be lower. The modern sector would then grow more slowly. People would queue for these high-paying jobs, creating more open unemployment. Migration from the countryside would also slow, delaying, perhaps indefinitely, the time when labour shortages began to raise rural wages rapidly. All these unions would achieve is to have created an island of privilege in an ocean of misery.
(Quotation from page 186 of Wolf’s Why Globalization Works.)
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Even if foreign companies pay the same wages, they're often better places to work because they're less likely to violate safety rules. For example, padlocking shut all of the rear exits: locking all the exits is a cheap way to discourage employees from stealing inventory, but it also leads to far more deaths if there's a fire. Foreign companies are more likely to fear bad publicity and thus less likely to cut corners.
So the inequality created would be even greater, if those jobs offered both higher wages and better working conditions, but only to a lucky few workers.
When I lived in Hong Kong in the 1990s, I was surprised at how much Asians generally seemed to resent the anti-sweatshop movements. They viewed it as rich Westerners saying "we got ours, now we're not going to let you get yours", designed to stop poor Asians from getting jobs that would improve their lives.
"Asians generally seemed to resent the anti-sweatshop movements."
I read something along these lines very recently, though I can't remember where. It wasn't Asian employers who were angry with American do-gooders. It was their employees.
This has actually happened in Public sector Companies in India.
This could be just a story but a now retired co-worker tells of inviting a professor of international relations to a League of Woman Voters meeting. The professor brought a student from Malaysia. The student said that they dislike sweatshops because all their maids leave to work in the sweatshops.