Outsourcing and Global Inequality
The world today is somewhat globalized economically. At the same time, there is a striking level of economic inequality. Currently, about 1% of the population controls nearly 46% of global wealth, while the bottom 55% of the people share only 1.1% of the wealth. While many in the developed countries are taking their luxury lifestyles for granted, 25,000 people starve to death every single day, and about 690 million people are starving when they go to bed. Starvation is only an extreme manifestation of inequality. There are also countless fellow humans of ours working in a dehumanized way to gain their basic need for living. The terrifying reality urges us to act and reduce such massive inequality under the structure of today’s economy. Some would suggest that the separation of labor markets works better in protecting labor’s rights and avoiding exploitation that intensifies economic inequality. However, outsourcing under strictly enforced international regulations should end up better mitigating global inequality since cooperation and specialization between markets can eventually better facilitate the growth of developing economies, and proper regulations that are strictly enforced are necessary to eliminate unfair and exploitative practices.
We have witnessed some very powerful anti-globalization waves going on, especially during the past few years. When Donald Trump gained many supporters by his economic policy to “bring jobs back to America,” we can tell that economic globalization had gone wrong. Apart from people in developed countries losing their jobs, the improvements of workers’ conditions in developing countries can also be seen as insignificant. China, the major target of outsourcing over the past few decades, had witnessed little improvement in its workers’ conditions. The tremendous wealth China had gained during outsourcing skyrocketed its national Gini coefficient. In other words, the wealth went into the hands of a very small proportion of people. In the end, it seems like inequality is intensified through the process of outsourcing.
People may argue, based on the facts above, that we should strengthen the barriers between national labor markets and stop outsourcing. However, I believe it is a better option to refine the current system rather than overturn it. This is because, based on well-established economic principles, all parties involved in international specialization and cooperation should end up benefiting from it. I consider the current unsatisfactory outcome of outsourcing in terms of wealth distributions an externality generated by the current overly-free world labor market. Powerful international regulations should be imposed to limit this externality. One possible way of doing this is through the establishment of a global organization with special power or a restrictive international treaty. This measure should be seen as a prerequisite for any nation participating in the future outsourcing process. The key part of this international regulation is to set strict requirements on workers’ basic rights. It may include basic wages, working condition limitations, and safety requirements. I believe the standard for different economies should be based on national differences such as the level of development and other measures of the economy. In other words, it should be a dynamic requirement when it comes to different nations. For example, the basic wage for a less developed country should not be expected to be the same as that of the United States. However, the established standard should be able to secure basic workers’ rights in developing nations and provide them with a higher share of the benefit of outsourcing while maintaining an attractive advantage due to its lower costs.
Establishing such regulations is a practical option because it will still maintain the structure of outsourcing. Companies such as Apple will continue to move their production lines to developing countries, but with less profit. Those profits that are the result of outsourcing will be transferred to the working class in developing countries, so their working conditions will be improved. Not only will the workers in developing nations benefit from it. According to the supply and demand rule, there will be more jobs offered to workers in developed countries as well since their disadvantage on labor costs is weakened by a little. In this way, all parties involved in outsourcing will be benefited from the process through a reasonable redistribution to have companies give out part of their share to the workers whose basic living conditions cannot be secured under the current situation.
Admittedly, this ideal scheme will be hard to implement due to realistic barriers, including a variety of issues, such as the lack of motive among governments, resistance from companies, and difficulty to make sure countries obey their own promises. However, as globalization progresses, there will be one day that the global labor market will need international regulations to give workers a reason not to act against it. I strongly believe that in the long run, the current distribution of wealth generated by outsourcing will need to be interfered with by non-market powers. As long as the outsourcing process promotes the workers’ rights and wealth, a globalized labor market will always outrun a national approach to separate the global labor market.
