Universal minimum wages and incomes

Income inequality within countries has increased almost everywhere across the world over the past 50 years. Yet, the per capita income gap between the global North and South has now roughly tripled in size, according to the World Bank data. Globalisation may have created more jobs for poorer people in developing countries, but mere job creation is hardly enough. It is the quality of jobs which matters.

For decades, several scholars from the South have been pointing out how the global wage gap is a major driver of inequality between poor countries and rich countries. The renowned Egyptian economist Samir Amin, for instance, had noted back in the 1970s, how workers in the global South are paid much less than their Northern counterparts. This wage differential enables the global North to buy cheaply and make enormous profits margins. Consider, for instance, how much a Bangladeshi garment worker makes in comparison to the price of designer jeans in a retail outfit.

On the other hand, when poorer countries import goods from richer countries, they also must pay for the price of labour charged by comparatively high waged workers in those countries. This so-called ‘unequal exchange’ according to a 2012 estimate outstrips foreign aid by a factor of at least 11.

If we lived in a world where the movement of people was allowed, it would have been possible to reach some sort of wage equilibrium. But in our world, while capital is increasingly able to transcend national boundaries, rigid borders do not enable labour to migrate freely in search of a better pay.

Wages in poorer countries are not a natural phenomenon. They have been lowered through concerted efforts. Historically, colonial policies across much of the so-called ‘developing world’ depressed the prices of exports from their colonies, resulting in very low wages for labour. In the post-colonial world, Western powers have frequently supported authoritarian and military regimes which have helped undermine pro-worker leaders in poorer countries. Structural adjustment programmes implemented by the IMF and the World Bank, alongside WTO trade agreements, have pushed for deregulation and increased foreign investment. In the desperate bid to attract foreign investors, poorer countries have been outdoing each other in the ‘race to the bottom of the barrel’, by offering cheap labour (and lax environmental standards).

One evident solution to this problem is to instill a global minimum wage. Many development economists have called for setting a minimum global wage. Coupling universal basic wages with a universal basic income would allow people to opt out of exploitative jobs, and it would compel employers to raise wages and prevent exploitation of workers in the informal sector, where a large proportion of people in developing countries work.

These ideas are not just a matter of academic speculation. Rahul Gandhi has recently announced plans that his party, the Congress would implement a universal minimum income in India. Whether he is using this proposal as an election manoeuvre, or whether he will be able to implement an effective minimum wage scheme, if the Congress does manage to wrestle power away from the BJP with its top-heavy ‘Shining India’ mantra, will become apparent soon enough.

Successful implementation of these ambitious schemes at the global level will certainly need both international consensus and national resolve. International agencies like the World Bank or the International Labour Organisation do have the capacity to help implement and manage such schemes across most poor countries. Yet, these entities continue promoting lopsided rules of trade and exploitative market mechanisms to deliver economic growth, despite their evident failure to adequately spread the benefits of growth. It is unfortunate that most economists and policymakers within poorer countries also remain obsessed with promoting top-heavy models of growth, instead of focusing on how their marginalised multitudes can get a fairer share of the benefits of global growth.

Published in The Express Tribune, March 1^st, 2019.

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