At Solbridge International School of Business in South Korea, students and teachers gathered at a seminar and spoke of how Asian markets were booming because of the combination of huge labor pools, unregulated industry and extreme wage inequality. In combination, these factors have attracted business and manufacturing firms from around the world, producing products at miniscule costs.
Every lecturer spoke with great confidence on the boon of wage inequality and unregulated industry. For the corporate beneficiaries at Apple, Microsoft, Nike, Wal-Mart and other manufactures with production lines in Asia, the low wages, no labor benefits and unregulated industries are certainly a great benefit. But what about the actual worker on the assembly line?
Estimates from the United States Bureau of Labor Statistics approximate that Chinese factory workers earn a paltry 64 cents an hour. Such low wages are not sufficient to lift oneself out of the perpetual cycle of poverty. Lack of labor unions or collective bargaining rights prevent worker representation to counter corporate interests, resulting in long hours in unsafe working conditions for little pay and no benefits.
The prevailing economic ideology at the seminar ignored the blatant instances of social and financial inequality that perpetuates so many instances of poverty around the world. From a moral perspective, workers should be given fair wages and proper representation because that’s what’s “right.” But big business and fairness are rarely considered simultaneously. However, even from a financial perspective, a well-paid, safe and cared-for labor force can benefit everyone.
Robert Reich, former U.S. Secretary of Labor, wrote on the validity of paying workers fair wages. Reich pointed out that in 1914, business magnate Henry Ford paid his workers $5 per eight-hour work day for his Ford Model T production – triple what the average factory worker earned at the time. And yet to the chagrin of critics who called Ford crazy, socialist or both, these high wages created a class of laborers capable of remaining financially secure and able to become consumers of their own product. With higher wages, Ford’s autoworkers could eventually purchase a Model T of their own, reimbursing the company for money spent on higher wages. In the next year, Ford’s profits doubled.
Reich makes an important note in his book, “Aftershock:” “Workers are also consumers,” he says. “Their earnings are continuously recycled to buy the goods and services other workers produce. But if earnings are inadequate…an economy produces more goods and services than its people are capable of purchasing.” In the end, everyone suffers from unfair wages. The economy stagnates and poverty reigns.
In addition, the seminar wrongfully ignored the potential for blow-back resulting from the unfair wages and dangerous working conditions. This is highlighted at Foxconn in China, the primary electronics manufacture for Apple. Work conditions and pay have been strenuous enough to cause a stream of suicide attempts. In 2010 alone, 18 workers leapt from the company’s rooftops. Without financial recourse, factory workers like those at Foxconn strike for better working conditions, damaging both the company’s profits, investors’ returns and the workers’ ability to provide for themselves and their families.
Criminally cheap labor is not conducive to an efficient workforce, and while the Asian markets continue to boom, laborers have not seen a proportional share of that growing economy. Promoting prosperity is as simple as decreasing this vast inequality.
– Michael Giacoumopoulos