That depends on the breeder, anonymous. There are plenty of breeders who use ethical practices, including rehoming standard variation pokémon or placing them in low-kill shelters, rearing pokémon in safe environments, and strictly breeding pokémon from different familial stocks (sometimes pokémon sourced from entirely different countries) to minimize inbreeding. Others, however, use less scrupulous means, including inbreeding and overworking parent pokémon. This is why it’s vital to work with only League-certified shiny breeders—and even then, to do your own research into a breeder’s background before contacting them. (This could also be said of pokémon breeding in general, actually.)
In short, there are some who unfortunately don’t take into consideration the well being of their breeding pokémon or the resulting hatchlings, and although the Association does its best to shut down as many of these as we can, there are some who manage to slip past us. However, not all breeders are like this, and many go out of their way to ensure that both their breeding pokémon and their hatchlings are handled in a humane manner.