Is Wage Theft Worth it? An analysis of the profitability of wage theft and the role of reciprocity in the factory-worker relationship in Vietnamese apparel factories.
This paper examines the impact wage theft can have on a firm’s level of productivity and how wage theft impacts the role reciprocity plays in the relationship between factories and workers in Vietnamese Apparel factories. Ostensibly, by lowering costs, wage theft is a profit-maximizing practice. However, insights from behavioral economics suggest that is not always the case. Departing from the ... read moreneoclassical idea that the relationship between factories and workers will result in the prisoner’s dilemma, this paper uses a gift exchange model to discover that the prisoner’s dilemma is not the only possible outcome. The paper then examines the role that Better Work plays on helping firms reach these efficient cooperative outcomes. Empirical results demonstrate that some firms have already realized the role reciprocity plays in the relationship between workers and factories and have reached an efficient cooperative outcome. Further results also find that while Better Work has made an impact, the magnitude of that impact is fairly small.read less