Young workers in a garment factory in Bangladesh. Photo credit: Jonathan Silvers/Saybrook Productions.

The harsh realities of rewarding wealth, not work

Inequality Leave a Comment

Iñigo Macías-Aymar outlines the issues with rewarding wealth and not work, and gives an insight into the harsh realities many face as a result. 

Young workers in a garment factory in Bangladesh. Credit: Jonathan Silvers/Saybrook Productions.

Young workers in a garment factory in Bangladesh. Credit: Jonathan Silvers/Saybrook Productions.

Lan, a garment worker in Vietnam, makes shoes for some of the world’s most famous brands. Despite the overtime, she earns so little that she will never be able to get a pair of the same shoes she is helping to make for her child, because they are being sold for more than she earns in a month.

The current global economic model is broken. It allows for a minority to keep on concentrating wealth while a great majority have to survive on poverty wages.

It’s a billionaire bonanza

2017 has been a great year for the small but wealthy elite around the world. According to the latest estimates provided by Credit Suisse, 4 out of every 5 dollars created in wealth (82% of total wealth increase) ended up in the hands of the few (more concretely, of the 74 million people belonging to the richest 1%). In fact, during last year, the world saw the biggest annual increase in billionaires in history, one more every two days. This thriving reality, however, contrasts with the one faced by the bottom 50% (3,700 million) who saw no increase at all in their wealth.

In clear contrast to what happens to the world’s elite, the wealth of the great majority of households around the world originates and is built from the earned income from day to day work.

Why is this happening?

Our economies are designed to prioritise the increase of wealth at the expense of jobs and wages, preventing workers from getting their fair share of their contribution to profitable good and services. In fact, on average, between 2006 and 2015, billionaires’ wealth increased six time faster than wages. The benefits of economic growth are absorbed elsewhere in the economy, including through returns to capital, owned by that same elite.

This is happening all around the world. From 1995–2014, in 91 of 133 rich and developing countries, wages did not keep pace with increased productivity and economic growth. Therefore, work is increasingly failing to provide an escape from poverty. Almost one in three workers in emerging and developing countries live in poverty, and this is increasing. Increasingly too, workers from rich countries, especially young and female workers, are also suffering from poverty wages. 

From 1995–2014, in 91 of 133 rich and developing countries, wages did not keep pace with increased productivity and economic growth.

Many countries around the world still do not have a minimum wage, but for those that do, the wages are insufficient to meet daily needs.

Workers are not getting their fair share

The harsh reality of millions of workers around the world goes beyond their poverty wages. A lion share of the fortunes our economies generate every day lays on the backs of excluded and marginalised workers. Worldwide, the number of people in vulnerable forms of employment including informality was expected to reach over 1.4 billion in 2017 (which is over 40% of total employment). The ILO has estimated that 40 million people worldwide were enslaved in 2016 – 25 million of them in slave labour. These are the people who make our clothes, grow and process our food, assemble the mobiles phones and other goods we use. Take the case of Dolores, working in the poultry industry in the United States. She must wear diapers to work, because she and her colleagues are not allowed to take toilet breaks.

Far away from the factory where Lan in Vietnam works, the CEO from one of the top 5 garment companies needs just 4 days to earn what an ordinary Bangladeshi woman worker earns in her whole lifetime. Actually, it would cost $2.2bn a year to bring the average wages of the 2.5 million garment workers in Vietnam up to a living wage. This is one-third of the amount rewarded to their shareholders by these same five biggest fashion retailers in 2016.

Women are particularly vulnerable to poverty pay

At the global level, the average gender pay gap is 23%. According to the World Economic Forum, at current rates of change the global economic gender gap at work (considering both disparities in the pay and in employment opportunities) will not be closed for another 217 years.

Women’s choices and decision-making abilities are often constrained by their unequal responsibility for unpaid care work. Roles considered to be ‘women’s work’, such as cleaning or nursing, are often valued and paid less. The huge but often unrecognised contribution that women make through unpaid care work, crucial for the sustainability of our economic system, is estimated to be worth $10 trillion.

What can we do about it?

Ultimately, this is an unjust and unsustainable economic model that feeds inequality, by giving ever more to those who do not need it, while failing to reward millions of hard workers. Our economies need to be managed in a way to ensure a fair reward from work.

Companies should not be paying out dividends to wealthy shareholders or bonuses to their top executives unless they can show that everyone in their supply chain is paid a living wage, and that nothing they produce is the result of slave labour, exploitation or abuse.

Governments must do more to eliminate the gender pay gap and ensure the rights of women workers are fully realized. Laws that discriminate against women’s economic equality must be repealed, and implement legislation and regulatory frameworks that support women’s rights. Countries all around the world must transition from minimum wage levels to ‘living wages’ for all workers, based on evidence of the cost of living, and with full involvement of unions and other social partners.

To end the inequality crisis, we must build an economy for ordinary working people, not the rich and powerful.

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Author
Iñigo Macías-Aymar

Iñigo Macías-Aymar

Iñigo Macías-Aymar works as Research Coordinator for Oxfam Intermón (Spain) and he is the co-author of this year’s Oxfam Report: Reward work and not wealth”. Trained as an economist and specialized on international development and cooperation issues at the London School of Economics (LSE), he has been developing his professional experience in different research centres, civil society organisations and the private sector. He holds associate positions at IBEI (Institut Barcelona Estudis Internacionals) and UAB (Universitat Autònoma de Barcelona) universities. His research interests are in the field of economic inequality and aid architecture and effectiveness.