Sweatshop - Meaning & Example

Published in Human Resources Terms by MBA Skool Team Last Updated: August 13, 2023Reading time:

What is Sweatshop?

Sweatshops are companies or factories in which the working conditions are very poor. Sweatshops have erratic working time which is socially unacceptable and there might be other issues such as safety, lack of ventilation, temperature, no proper equipment or being underpaid in terms of wages. Sometimes even children are employed in sweatshops and it is illegal. These are mostly a phenomenon in third world & under developed countries.

Fast fashion and low Education levels are main contributing factors to such factory setups and also the companies trying to manufacture products and offer it at the lowest price. The markets are very competitive and after globalization distances between markets have not become a barrier, organizations have to now compete on a global level leading to sweating and creation of more sweatshops.

Reasons for Existence of Sweatshops

Globalization, competition, fast fashion and low education and awareness levels are some of the reasons due to which, the poor in third world countries are exploited. In a sweatshop, they are made to work long hours and are paid below minimum wages. The workers are also helpless and have to work long hours in sweatshops as they do not have the knowledge, skills or abilities to get other jobs which have better working conditions and pay. The organization also tends to skim on safety standards by not investing in safety equipment that is required in the plant, this may lead to accidents taking place and then the organization has to pay a hefty compensation for the accident and also gets bad publicity due to it.



Advantages of Sweatshops

Despite being a poor strategy, some advantages of such factories are

1. Low costs & investments for companies

2. Lack of policies & hence low retention costs

3. No investment needed in training or infrastructure improvement or making working environment better

Disadvantages of Sweatshops

Many disadvantages of are:

1. Exploitation of the poor, children and women.

2. Safety standards are compromised upon.

3. It has promoted environmental pollution.

4. Create discrimination towards workers while the management earns well.

5. Unhygienic and poor working conditions.

Example of Sweatshops

Many organizations have been caught following the seating system in sweatshops by assigning piece work rates to the labour. This has resulted in companies losing business as some of the customers believe in buying products which are not created. Some organizations allegedly involved in having such factory setups are Nike, H&M, Gap, Apple etc.

Hence, this concludes the definition of Sweatshop along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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