wage inequality
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

Sources: Business Week, Aftershock: The next Economy and America’s Future, Telegraph
Photo: Cult of Mac

According to Forbes magazine’s annual list, the billionaires’ club has welcomed 210 new members within the last 12 months, despite the rising gap between the ultra-rich and the poor and as a global recession continues to linger. The number of the world’s billionaires has now reached an all-time high of 1,426 people, with the United States leading the list with 442 billionaires, and East Asia not far behind at 382.

The trend has alarmed economists and proponents for eradicating poverty, as the signs of wealth inequity worsening is confirmed with the growing fortunes of a small percentage of the world’s richest people.

The estimated wealth of the world’s billionaires is estimated at $5.4 trillion, having grown significantly from just one year ago when it was estimated at $4.6 trillion. This year, the collective wealth is “equal to more than a third of the annual output of the U.S., the world’s largest economy.”

Heading up the list is Mexican billionaire and telecom magnate Carlos Slim, whose estimated net worth is $73 billion, with Microsoft co-founder Bill Gates taking the number two spot with a net worth of $67 billion.

American billionaire Warren Buffett, who has long neared the top of the list, fell out of the top three for the first time this year with an estimated net worth of $55.5 billion. Spanish businessman Amancio Ortega took Buffett’s place at third, as the founder of the company behind the Zara clothing line and retail stores. Ortega’s net worth jumped to $57 billion within the last year, the highest rise of any on the list with an additional $19.5 billion added in the last 12 months, as Spain continues to struggle through a recession with a 55% youth unemployment rate.

Frances O’Grady, of the Trade Union Congress of the UK, called the results of the Forbes study “disturbing” and added that a huge contributor to the global recession was increasing levels of wage inequality. He also stated that in order for the economy to recover, wealth needs to be distributed more equally so consumer spending can increase.

Although Buffett dropped out of the top three richest, the rest of the members remain familiar faces on the annual list, with eight of the top 10 being aged 70 or older. The number of women billionaires also increased this year, up to 138 from 104.

Christina Kindlon

Source: The Guardian
Photo: CNN