Globalization and the Rising Income Inequality - Essay Example

Globalization and the Rising Income Inequality Globalization and the Rising Income Inequality Globalization and income inequality have sparkled much attention from economists and political figures alike. While many support globalization and see it as a step toward the right direction, there are those who think globalisation is a menace as it brings woes to the world than it benefits it. Increasing income inequality is a situation where the rich become richer, and the poor become poorer. Globalization has been the leading factor in income inequality. Nonetheless, the issue remains debatable as there are few theories and empirical evidence to support that idea. This paper seeks to explore globalization and its relationship with income inequality citing available research findings. The central question that the paper asks at this point is what income inequality and globalisation mean. Income inequality refers to the disparities in how revenues and assets are distributed. The term is used to refer to the inequality that exists among individuals and groups in the society. It also means the inequality in economic opportunities. The issue of income inequality is itself debatable as there are those who support it while other refute its importance on both moral and utilitarian grounds. It is a condition that has existed in many countries and for a very long time. Issues such as economic structure, for example socialism or capitalism, ongoing or past wars, and the individual’s abilities to create their wealth are the contributing factors in income inequality. Globalization entails the transformation of local and economic activities into global phenomena. The idea of making the world a global village is by itself what globalization is where ease of flow of goods and services and information characterize the global economy (Hirst & Thompson, 1995). Today, it is evident that the people of the world are more connected to each other than they were a few decades ago. Transport and infrastructure have been developed immensely bringing about ease of flow of ideas, money, and movement of people throughout the planet. It is this simplicity that globalization has brought about that some fear has much impact in presenting some individuals with more economic opportunities than others. Goods produced in one part of the world are now available in another, and international travel has become more frequent than ever. This situation is what economists blame for enriching some corporations that do not care much about the planet and its people more than they care for amassing wealth. It is the same globalisation blamed for enriching despotic rulers and greatly exposing workers to unhealthy work conditions that often leave them vulnerable to exploitation, Workers are increasingly losing their jobs while others are earning less and less despite inflation levels hitting record high. Those who oppose the idea of creation of income inequality argue that with globalisation comes the ease of flow of technology. The flow of technology is now faster than it ever was. Globalization has allowed people to leverage talent to an even greater extent that it ever was possible. In this regard, designers, athletes or sportsmen for that matter, and artists can reach out to a global markets and, in this case, earn greater rewards. If for example, there were no globalization, football, film industry, and music industry may not be as developed as they are currently. An artist like PSG, who sung “Gangnam Style” has managed to receive such fame and money due to technological advancement and more so globalization. His video has received over 2 billion views on YouTube yet he and YouTube are from two distant continents. This is an example of why globalization is beneficial and does not cause income inequality. A company like Apple is evidently one of the many corporations that have utilized globalization efficiently and in return making profits from the venture. Apple is an American firm but outsources its work to Chinese workers. While people hail the US for producing such a high-end gadget, the iPhone, the truth is the device is developed and manufactured in China. There are a few issues that come up from this arrangement. The central question to ask is why Apple does not employ the Americans and instead chooses to look for labour thousands of kilometres away. First, labour is very expensive in the US. With the minimum wage being over $7, it is no doubt that employing people to produce such device would cost the company a lot of money which it may never recover due to competition from its closest rival, Samsung, which produces its gadgets in China where labour is cheap. The fact that technology is developed in China yet the cost of labour is low appeals to may international organizations. When leading companies in the US outsource labour to thousands of Chinese workers, then many people in the US are left jobless. The situation is a significant income disparity between those who own and operate Apple and the American people who need the jobs the company offers other workers abroad. A country like China, as mentioned above, is one that provides cheap labour to international corporations from other developed countries like the US. The main issue that affects Chinese workers such as those working in Apple in the country is being subjected to inhuman working conditions. For some reasons, the labour rules in China are not as strict or established as those in the US which results in the Chinese workers being paid less and working in conditions that pose health risks to their lives. Such working conditions result in workers committing suicide. Globalization significantly impacts the pay that these people receive. Were it not for globalization, the workers would not be prone to international corporations that do not ensure their employees are not exploited. In globalization, corporations have to ensure that they act local so as they can attract the local market. This move sometimes entails employing the local people in top managerial levels. In the case of Apple, the heads of the companies in China are Chinese. To ensure that they do their jobs ‘well’, these people are compensated handsomely at the expense of the other workers in the firm. The result has a few people earning ridiculously high amounts of money while the larger portion of employees, both unskilled and semiskilled, being exploited (Wood, 1995). There is significantly high unemployment in countries such as India and China. With globalization, it is very easy to look for employment from any oversea country. Since a person can find work in every country they please, unemployed Chinese and Indian workers look for jobs in countries in the West and more specifically the US replacing the low-level workers in these countries as they drive down incomes. Such trends are socially disruptive and are the same reasons there are people resisting globalization. If globalization is not encourage, it will be difficult for the world to progress economically and technologically for that matter. The main thing that should be done is ensure countries protect their citizens in case there is too much inflow of cheap labour. Burtless (1995) discusses one of the central issues related to the wage inequality and globalization. In his article, “International Trade and Earnings Inequality”, he mentions several economists who have discussed the equilibrium theory in regard to factor and product prices as seen when trade barriers of developed countries are removed or a state that was not producing a given commodity starts to produce it. Among the main characteristics of globalization is the transfer of skills from a country to another. In the case of a state that depended on exporting products, Burtless (1995) quotes several economists to deduce that the factor-content-of-trade “estimates are consistent with the view that a shift in the factor content of United States exports and imports has reduced the relative demand for less-skilled workers and raised the demand for skilled workers” (p.809). He, nonetheless, concludes that these estimates do not show whether the shift has been as a result of elimination of trade barriers, development inside the US, or even economic development overseas as in the case of globalization. Such inconclusive deduction is responsible for not showing whether it is globalization that brings changes in commodity prices and thus wages of workers (Krugman, 1994). Something evident, however, is the fact that were it not for globalization, countries would not be producing the same types of commodities that they were earlier in importing thus affecting the workers in the exporting countries. In conclusion, there are countless ways that globalization affects income inequality in the developed nations. One-way globalization affects income of individuals is that they can leverage their talents and compete in a global market. The case of athletes and artists, as had been mentioned earlier, is a clear example of how this happens. On the other hand, globalization can affect workers negatively and foster income gaps. Companies that outsource labour to countries where labour is cheap leave the workers unemployed. Apple is a popular international company that depends on labour from China for its production of iPhones and other gadgets. To the owners of Apple, globalization is fruitful as it provides them with cheap labour, but to the US, it brings about income inequality. Doing away with globalization is not possible or favourable as it would mean that economic and technological advancement in one country is not felt in another. The main issue to address in ensuring that the models of international trade do not perpetuate income inequality, but improve on every other person’s economic situation. References Burtless, Gary (1995), “International Trade and the Rise in Earnings Inequality”, Journal of Economic Literature, Vol. 33, No. 2, pp 800‐816 Hirst, Paul, and Grahame Thompson. "Globalization and the future of the nation state." Economy and Society 24.3 (1995): 408-442. Krugman, Paul and Robert, Lawrence, (1994), “Trade, Jobs and Wages”, Scientific American, Vol. 270, No. 4, Wood, Adrian. "How trade hurt unskilled workers." The Journal of Economic Perspectives (1995): 57-80. Read More