AI Data Center Expansion Poses High Risk of Child Labor Issues – Bloomberg Law News

Report on AI Data Center Expansion and Child Labor Risks: Emphasizing Sustainable Development Goals

Introduction

Artificial intelligence (AI) companies in the United States are investing billions of dollars to expand data center infrastructure, promising significant economic benefits such as job creation, tax revenue, and infrastructure development. However, this rapid expansion raises critical concerns related to child labor exploitation and abuse, issues that align closely with the United Nations Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth), SDG 16 (Peace, Justice and Strong Institutions), and SDG 4 (Quality Education).

Investment and Impacts on Children

Major US technology platforms have committed tens of billions of dollars to build AI-ready data centers across multiple states including Georgia, Virginia, Ohio, Arizona, Oregon, and Washington. The $500 billion Stargate initiative and other AI companies have pledged investments exceeding $1.4 trillion in infrastructure projects nationwide.

While companies focus on how AI products affect children digitally, less attention is given to the foundational risks of child labor within domestic operations such as data center construction. The rapid expansion creates conditions that may increase risks for children, including:

• Heightened demand for low-cost labor
• Extensive construction and hazardous work environments
• Overnight and third-shift work schedules
• Heavy reliance on subcontractors and labor brokers

These factors contribute to a 31% increase in child labor violations reported by the U.S. Department of Labor between 2019 and 2024. Child labor in hazardous conditions risks physical injury, psychological trauma, and exploitation, undermining children’s access to education and health care, thus perpetuating poverty — directly contravening SDG 1 (No Poverty) and SDG 3 (Good Health and Well-being).

Regulatory Environment and Enforcement Challenges

The surge in child labor risks coincides with reduced enforcement of corporate sustainability and human rights obligations by federal and some state regulators. This weakened oversight environment may discourage companies from prioritizing compliance with human rights standards, increasing the likelihood of undetected violations.

When violations surface, often through whistleblowers or media investigations, companies face severe consequences including lawsuits, monetary penalties, and reputational damage, which can erode trust and business value. For example, investigations in 2023 revealed illegal child labor in food processing sectors involving hazardous overnight shifts and dangerous tasks, highlighting the risks of lax enforcement.

This regulatory gap undermines SDG 16 by weakening institutions responsible for protecting human rights and ensuring justice.

Compliance Standards and Due Diligence Framework

Effective mitigation of child labor risks requires robust compliance frameworks, such as UNICEF USA’s Child Labor Compliance Framework, which aligns with international standards including the United Nations Guiding Principles on Business and Human Rights and U.S. Department of Labor guidance.

1. Risk-based assessments tailored to company operations and business relationships
2. Enforceable controls over subcontractors and labor brokers
3. Ongoing monitoring and auditing mechanisms
4. Remediation processes centered on the best interests of the child

For data center construction, due diligence should address:

• Labor sourcing across subcontracting tiers
• Use of staffing agencies and labor brokers
• Hazardous or overnight work conditions
• Age verification practices
• Local labor market conditions

These measures support SDG 8 by promoting decent work conditions and SDG 10 (Reduced Inequalities) by protecting vulnerable children from exploitation.

Key Takeaways and Recommendations

• The focus on AI’s digital impact on children must be expanded to include the physical labor conditions underpinning AI infrastructure development.
• Companies must proactively identify and mitigate child labor risks to uphold children’s rights and comply with legal obligations.
• Implementing child-centered policies and strong due diligence enhances corporate reputation and long-term business sustainability.
• Strengthening regulatory enforcement and corporate governance is essential to prevent child labor violations and align with SDG 16.
• Protecting children’s rights during AI infrastructure expansion contributes to achieving multiple SDGs, including SDG 4, SDG 8, SDG 10, and SDG 16.

Author Information

Jonathan Drimmer is a partner at Steptoe in Washington, DC, co-leading the firm’s business and human rights practice.

Jessica Leinwand serves as general counsel of UNICEF USA and is an adjunct professor on child rights and business at American University’s Washington College of Law.

1. Sustainable Development Goals (SDGs) Addressed or Connected to the Issues Highlighted in the Article

1. SDG 8: Decent Work and Economic Growth
   • The article discusses child labor exploitation risks in data center construction and related industries, highlighting the need for decent work conditions and the elimination of child labor.
2. SDG 16: Peace, Justice and Strong Institutions
   • Issues of regulatory enforcement, legal compliance, and corporate governance are raised, emphasizing the importance of strong institutions and rule of law to protect children’s rights.
3. SDG 4: Quality Education
   • The article notes that child labor prevents access to education, perpetuating cycles of poverty.
4. SDG 3: Good Health and Well-being
   • Child labor risks include bodily injury and psychological trauma, linking to the goal of ensuring healthy lives and promoting well-being.
5. SDG 10: Reduced Inequalities
   • The article highlights vulnerabilities of children from marginalized communities, indicating the need to reduce inequalities.

2. Specific Targets Under Those SDGs Identified Based on the Article’s Content

1. SDG 8: Decent Work and Economic Growth
   • Target 8.7: Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor.
   • Target 8.8: Protect labor rights and promote safe and secure working environments for all workers.
2. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable, and transparent institutions at all levels.
   • Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
3. SDG 4: Quality Education
   • Target 4.1: Ensure that all girls and boys complete free, equitable, and quality primary and secondary education.
4. SDG 3: Good Health and Well-being
   • Target 3.9: Reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination.
5. SDG 10: Reduced Inequalities
   • Target 10.2: Empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.

3. Indicators Mentioned or Implied in the Article to Measure Progress Towards the Identified Targets

1. Indicator for Target 8.7:
   • Prevalence of child labor, as reported by the US Department of Labor showing a 31% increase in child labor violations between 2019 and 2024.
2. Indicator for Target 8.8:
   • Number of enforcement actions and regulatory penalties related to labor violations, including child labor in hazardous work environments.
   • Implementation of child labor compliance frameworks and due diligence processes in companies.
3. Indicator for Target 16.6 and 16.3:
   • Effectiveness of regulatory enforcement and corporate governance mechanisms in preventing child labor violations.
   • Number of legal cases, consent orders, and public scrutiny incidents related to child labor violations.
4. Indicator for Target 4.1:
   • Access to education rates among children in communities affected by labor exploitation.
5. Indicator for Target 3.9:
   • Incidence of injuries and health issues among child laborers in hazardous work environments.
6. Indicator for Target 10.2:
   • Measures of social and economic inclusion of vulnerable children, including those at risk of labor exploitation.

4. Table of SDGs, Targets, and Indicators

Source: news.bloomberglaw.com