Would increased migration reduce global inequality?
By Daniele Malerba
Inequality is a topic of major interest nowadays, with recent reports showing that the richest 62 individuals possess more wealth than the bottom half of the global population. But this attention has not always been there.
One the main drivers of this new “inequality movement” has been the recent recession, coupled with the stagnant incomes of the middle classes. But Branko Milanovic, one of the pioneers of this movement, discussed also the importance of data improvements in the recent trend of inequality analysis.
During a masterclass with PhD students at the Global Development Institute, he argued that the increased availability of household level data has been impressive. This is especially true for Africa where the coverage rate increased by more than 20% in the last 20 years. Current advancements in the availability of data also includes: fiscal information to complement household surveys, the use of top incomes in inequality estimates (as they are not represented in common household surveys) and information on inequality of wealth. Improvements in the amount of information available is also helping to develop new fields of inquiry, such as the concept of inequality of opportunities as opposed to inequality of outcomes, the decomposition of inequality and growth, and historical inequalities.
Moreover, the increased coverage of data and the effects of globalisation, has enabled the study of global inequality, the inequality between all individuals in the world, regardless of country. In his public lecture, Milanovic, who has been assembling data from different countries in order to build a global income distribution, explained his findings and the policy implication for some of today’s main issues, such as migration and the future of the middle class.
Inequality between and within countries
To better understand global inequality, it is important to separate it conceptually it into inequality within nations and inequality between nations.
Inequality within countries, measured by the national Gini coefficients, increased in most nations between 1988 and 2008. The increase was mainly driven by market inequality (wages and returns from financial assets), which was cushioned by the use of redistributive capacity to make final disposable income less unequal.
More interestingly Milanovic pointed out that the majority of countries experiencing increasing inequality, such as the US, might be on a second Kuznets curve. On the other hand countries like Brazil (and many other LACs) and China are still moving along the first Kuznets curve. Their experience of decreasing inequality is the result of increased spending on social transfers, reduction of the education premium and minimum wages.
Inequalities between nations, which is usually conceptualized as looking at differences between country’s mean incomes, has decreased in the past 20 yearsmainly due to growth in Asian countries. Despite this, some facts remain striking. The figure below shows, for example, that not only is the mean income in Denmark’s remarkably higher when compared to a group of African countries; but there is also no overlap between the income distributions. This means that the poorest group in Denmark is richer than the richest group in Uganda (excluding billionaires which are not represented in household surveys). Similar patterns can be found comparing many rich and poor countries.
Finally, what if we look then at global inequality as a whole? First of all 1988-2008 was the biggest reshuffling on incomes since the industrial revolution. Decline in global inequality was accompanied by four main features: the large gains captured by the top 1% of the global distribution, the growth of the Asian middle-class, the “zero-growth” of the middle class of many western states such as the US, and the stagnant incomes of the bottom of the global distributions. The second and third points brought the emergence of what Milanovic calls the “global middle class” who earn between $10 and $100 US dollars a day. The size of the rising Asian middle class also meant that the global median income has been rising at a faster rate than the global mean income.
Secondly, the major driver of inequality is still location (between countries), meaning the country where you are born largely determines your income. As shown previously using the example of Denmark and African countries, the poorest group in one country might be richer than the richest group in another country. This is a change from 1850, when inequality was more prevalent between class (within country inequality) and location, representing Marx’s “world of classes”. The projections for the future, with the rise of Asia suggest the continuation of the current trend of diminishing importance of the location component, which might translate into further reduced global inequality (as well as structural change of the inequality decomposition).
The implications for migration
Milanovic outlined a number of policy implications that could reduce global inequality. The first possible solution is to increase growth in poor countries (and their mean incomes). The second tool is migration.
When people migrate from poor to rich countries their income increases. Given the importance of the location as a determinant of inequality, the gains are potentially large. In addition to this, the costs associated with travelling are reducing, meaning that labour supply is increasingly being globalized – in a way that hasn’t happened previously.
Does this mean advocating for growth in the rate of migration from poor to rich countries? Milanovic proposes trade-offs between migration and citizenship rights; this means allowing intermediate cases of partial citizenship, in order to mitigate migration flows. Regardless of the specifics, his proposals suggest one important thing: we need to get serious about global inequality and its consequences.
You can listen to Branko Milanovic’s lecture ‘Globalization, migration and the future of the middle classes‘ in full here:
Watch | Uma Kothari ‘Is water safer than the land? Public perceptions of Syrian refugees and the power of a warm welcome’
Professor Uma Kothari’s lecture was part of ‘Your Manchester Insights’.
Listen | Branko Milanovic on globalisation and the middle classes
Professor Branko Milaonvic spoke at the Global Development Institute on ‘Globalization, migration and the future of the middle classes’.
Branko is a leading scholar on income inequality. He is Presidential fellow at City University of New York, Visiting Presidential Professor and Senior Scholar in the Luxembourg Income Studies Center. He previously served as Lead Economist in the World Bank’s research department. He is the author of The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality, as well as numerous articles on methodology and empirics of global income distribution and effects of globalization.
Call for Abstracts: “Big and Open Data for International Development” workshop
Big and Open Data for International Development workshop
Tuesday 12 July 2016, Centre for Development Informatics, University of Manchester, UK
This is a call for abstracts/presentations on big and open data for international development, with an initial deadline of 30 April 2016.
In recent years, there has been growing activity around the “data revolution” in international development including formation of the Global Partnership for Sustainable Development Data. As ever-more and ever-faster data is available about trends, patterns and processes, then related decision/action systems will be significantly affected. Growth in research in this field has been slower and much remains to be done, particularly in bringing a socio-technical perspective to the creation, processing and use of new forms of data in development.
The aim of this workshop is to share socio-technical, socio-organisational and critical research on “data revolution” trends: most notably big data and open data. We hope the workshop will shape a future research agenda and form the basis for future research partnerships.
The following timeline will be observed:
- 30 April 2016 – prospective presenters to submit an abstract of 200-400 words outlining their proposed presentation to: cdi@manchester.ac.uk
- 8 May 2016 – presenters to be notified of response to abstract
- 8 July 2016 – draft papers (desirable but not essential) to be circulated to workshop participants
- 12 July 2016 – workshop in Manchester for presentation and discussion of papers
If you have any queries prior to abstract submission, do please ask.
Anita Greenhill, Richard Heeks, Jaco Renken, Pedro Sampaio
Centre for Development Informatics, University of Manchester, UK
We acknowledge funding support for this workshop from the Alliance Manchester Business School and Global Development Institute of the University of Manchester
Uganda field trip by GDI students
Some of our Master’s students are currently on fieldwork in Uganda. This video, of the March 2015 trip, gives an insight into their visit.
Last year three of our students also wrote blogs about the fieldwork they carried out. You can read them now.
Listen | Tomas Frederiksen on corporate social responsibility in the mining sector
Dr Tomas Frederiksen spoke last week as part of the Global Development Seminar Series. Tomas discussed whether corporate social responsibility in the mining sector can deliver development.
Listen to the talk:
The Global Development Seminar Series brings together scholars involved in cutting edge research on international development. It aims to facilitate dialogue and discussion, providing a space for leading development thinkers to share their latest research ideas
Find out more about the other seminars in the Global Development Seminar Series.
Do global value chains lead to forced labour?
Malaysia is a country which has experienced tremendous economic growth from the 1970s onwards, moving to upper-middle income status in the mid-1990s (Felipe 2012). One of the key industrial sectors that led its transition out of an agrarian society to an industrial one was the electronics industry. Malaysia was one of the first developing countries that inserted itself into the vast global value chain of the electronics industry.
Malaysia was one of the earliest locations where multinational corporations established offshored factories in the country’s free trade zones in the early 1970s. This led to a creation of a set of domestic firms, which specialised as suppliers of parts and components to a large number of multinational corporations in the country. While there was significant growth and some upgrading during the 1980s, the industry and importantly domestic firms have experienced stagnation since the late 1990s. The electronics industry in Malaysia has been unable to upgrade further and move up the global value chain (in value added terms) for many years (Rasiah et al 2015). Critically, it faces competition with new production locations such as Viet Nam and India.
A major reason behind the failure of the electronics industry in Malaysia to grow further is its deep embeddedness in the global value chain. Malaysia entered the electronics industry global value chain with very little domestic capability of its own. Rather, the industry was created with an excessive openness to foreign investment and multinational corporations. Multinational corporations did not only bring production to Malaysia, they also brought with them a set of interests, which were taken up by the Malaysian government as policies, to maintain the industry as low cost and labour intensive.
One of these policies has been the maintenance of low wages in the industry. As the Malaysian economy grew and wages rose during the 1990s, domestic workers were no longer interested in the low paid factory jobs offered by multinational corporations in the electronics industry. The solution to this problem, which was backed by large multinational corporations with large factories in the country, was an influx of low paid foreign workers. Today, foreign workers are a significant feature of the electronics industry in Malaysia. While there are no exact numbers, there are estimates that up to 60% of the workforce in large factories are foreign workers (personal interview 2015). The majority of these workers hold temporary contracts and are hired by labour agencies, which are poorly regulated and whose networks are not transparent (Simpson 2013).
The demand for low paid workers, has also, tragically, led to a high incidence of forced labour (Verite 2014). In its damning report, which was commissioned and funded by the United States Department of Labor, Verite (2014) found that a third of the 501 workers it interviewed were in a situation of forced labour. This report raises serious questions about how an upper middle-income country which hosts major electronics firms with global reputations, such as Intel, Hewlett-Packard, AMD, and Motorola (note: the report does not name which firms were found to have forced labour), has found itself in a situation of forced labour amongst its foreign workers. It also raises questions of how global value chains are implicated in the incidence of forced labour.
For Malaysia, there are various factors at play. An excessive openness to foreign investment has led to the inability of domestic firms to upgrade in the electronics industry. The large and significant presence of multinational corporations has essentially led to a crowding out of domestic innovation and capabilities. More significantly, multinational corporations in Malaysia are interested in maintaining the production location as low cost and labour intensive as possible (Raj-Reichert 2016). While this would normally contradict with characteristics of an upper middle-income country, Malaysia has, however, artificially maintained low wages with the influx of foreign workers (Malaysia is reported to have the largest number of foreign workers in South-East Asia (The World Bank 2013)). This is being done through a network of labour agencies that are poorly regulated, largely non-transparent, and which have historical roots of informal worker recruitment dating back to the 1970s (Chin 2002).
The combination of a fast paced order and delivery schedule of the electronics industry global value chain and government policies, that have failed in innovative upgrading and that have resorted to maintaining a large multinational corporation dominated low cost labour intensive industry, are significant factors which have led to forced labour in the electronics industry in Malaysia.
References:
Chin, CBN (2002) The ‘host’ state and the ‘guest’ worker in Malaysia: Public management and migrant labour in times of economic prosperity and crisis, Asia Pacific Business Review, 8 (4), 19-40.
Felipe, J (2012) Tracking the Middle-Income Trap: What is it, who is it, and why? Asian Development Bank Economics Working Paper Series.
Raj-Reichert (2016) ‘How global value chains contribute to the middle-income trap: a case study of the electronics industry in Malaysia’, Presentation at ‘The Political Economy of the Middle-Income Trap: Towards “Usable” Theories in Development Research” 24 February 2016, King’s College London.
Rasiah, R, Crinis, V, and Lee, H-A (2015) Industrialization and labour in Malaysia, Journal of the Asia Pacific Economy¸ 20 (1) 77-99.
Simpson, C. (2013) ‘An iPhone tester caught in Apple’s supply chain’, Bloomberg News. http://www.bloomberg.com/bw/articles/2013-11-07/an-iphone-tester-caught-in-apples-supply-chain#p1 (accessed 9 September 2015).
Verité (2014) ‘Forced labor in the production of electronic goods in Malaysia: A comprehensive study of scope and characteristics’. Amherst: Verité.
World Bank (2013) Migration and remittance flows: Recent trends and outlook, 2013−2016, Migration and Development Brief 21, Migration and Remittances Team, Development Prospects Group (Washington DC).
Gale Raj-Reichert is a British Academy Postdoctoral Fellow at the Global Development Institute.
Corruption and its role in development
The use of public office for private gain benefits a powerful few while imposing costs on large swathes of society. Transparency International publishes an annual Corruption Perceptions Index which measures the perceived levels of public-sector graft by aggregating independent surveys from across the globe.
OECD countries appear less in the top 25 which is largely formed mainly of failed states, poor African countries and nations that either were once communist or are still run along similar lines. Comparing the corruption index with the UN’s Human Development Index (a measure combining health, wealth and education), demonstrates an interesting connection. When the corruption index is between approximately 2.0 and 4.0 there appears to be little relationship with the human development index, but as it rises beyond 4.0 a stronger connection can be seen whereby corruption at this level impacts negatively on development. As development experts, we should be interested in this dynamic.
The work done by the Effective States and Inclusive Development research centre investigates what political contexts are needed for development to succeed. Transparency International looks specifically at sectors where we should be shining a light to ensure transparency of action, objective and lack of corruption and that progress or action doesn’t work against development goals.
Corruption in Defence and Security is Dangerous, Wasteful and Divisive:
- Public trust: Corruption erodes the public’s trust in the armed forces and, in some cases, can undermine trust in the government as a whole.
- Government integrity: The government exists to serve its people, and defence and security establishments to protect them. When defence and security establishments are corrupt, the integrity of the government is undermined as leaders abuse the power entrusted in them for personal enrichment.
- Economic impact: Corruption is costly and a waste of a country’s scarce resources as defence and security are expensive areas of a national budget, even when conducted with integrity.
- Threat to security: Corruption is a danger to security and anti-terrorism policies, even contributing to regional and international instability.
- Peace keeping: A critical element in the conflict resolution and/or immediate post-conflict phase is the role of the military and a compromised defence force impacts a country’s ability to restore peace.
The need for transparency in the pharmaceutical industry:
- Provision of services: Corruption weakens the quality of services and in some cases can deny access to healthcare
- Economic impact: Corruption in the sector has a corrosive impact on health, negatively impacting public health budgets, the price of health services and medicines, and the quality of care dispensed.
- Knowledge is power: There is a knowledge gap between the providers and users of healthcare, leaving patients subject to the knowledge they are provided by healthcare providers, suppliers, and regulators. This inequity of information is open to exploitation for private gain, opening possibilities of corruption.
- Temptation: The volume of funds involved in the sector provides incentive for private gain. Due to the high number of people involved in decision making, and the often bureaucratic nature of the pharmaceutical and health sectors, it is susceptible to individual discretion and regulatory capture.
Find out more about Transparency International’s work in defence and the pharmaceutical industry and listen to the full lecture here:
Britain in the EU and the importance for development
Last week, I added my name to letter calling for the UK to remain in the EU. You can read the letter, signed by leading development experts, in The Guardian newspaper.
I, and my peers signing the letter, believe that for UK development agencies, the EU membership is essential to tackling global problems.
We know that the UK is global leader in development and leaving Europe would set us back as well as diminish our ability to influence European responses to development. Being part of Europe is a practical way to extend our influence and tackle global problems and so EU membership is vital to the UK’s ability to tackle global challenges, specifically cooperation within the EU will be essential to tackling the humanitarian emergency in Syria, the migration crisis, and the wider issues of peace, security and development in the Middle East and north Africa.
Simon Maxwell, the former director of the Overseas Development Institute who helped to organise the letter, said: “The signatories to this letter represent the UK’s global leadership in international development. As practitioners and advocates in international development, our strongly held view is that the EU needs UK heft and engagement to achieve its global goals – and that the UK multiplies its impact when it works with and through the European Union.
“We now urge the huge numbers of people who support development work in the UK, locally and nationally, to give the EU’s role in international development the profile it needs as we campaign to remain in the EU.”
Analysing fire risk response in Macedonia
By Laura Hirst
An initial investigation of fire and rescue services, community participation and humanitarian assistance
Fire risk and the impacts of fire hazard in resource poor urban settlements in the ‘Global South’ are hugely neglected within academic discourse, policy and practice. The various adverse effects fire risks have on well-being and wider development issues have not been systematically explored despite fires being a common occurrence in cities worldwide. Whilst large scale fires often make the headlines (see here and here for a few examples), and can lead to the displacement of entire communities, serious physical injury and deaths, the everyday risk and impact of smaller scale fires are less reported yet also severely jeopardise health, livelihoods, housing, markets and well-being on a number of levels. The strategies available to low-income groups in terms of response to fire risk and fire hazard have also been under-explored. This reflects a general lack of attention given to inclusive urban governance, disaster risk reduction and public service provision that takes into account the participation of resource poor urban communities.
Operation Florian is one international humanitarian organisation working on these issues, through the provision of equipment and training to improve firefighting and rescue capabilities in communities abroad. Whilst operating from an ostensibly technical perspective, Operation Florian has increasingly come to recognise the importance and potential for incorporating a bottom-up perspective in its work with communities and partners. This desire to develop a more grounded approach led to a successful proposal for a North West Doctoral Training Centre ESRC CASE PhD studentship project, led by Tanja Müller (GDI), Alfredo Stein (PEM) and Steve Jordan (Operation Florian), exploring fire risks, well-being, bottom-up politics and pathways towards community involvement in fire and rescue services in resource poor urban settlements.
Operation Florian training exercise in Macedonia
I began work on the project in September last year, and I have since been getting to grips with the functioning of fire and rescue services and the work of Operation Florian. Whilst Zimbabwe is the case study for my empirical research, in November 2015 I joined an Operation Florian team on a project visit to Macedonia, where the organisation has been working for the last eight years, to learn more about the NGO’s approach, methodology and achievements, as well as about specific issues in terms of fire risk and response faced in the country.
A week living in a volunteer fire station in Sveti Nikole, and driving across the country visiting a range of fire services as well as observing meetings with different ministries to discuss future work, provided a rich overview of the work being done by Operation Florian. I was able to see first-hand the achievements and challenges encountered at different levels by fire services, and by Operation Florian as an external humanitarian actor, and a glimpse of potential entry points for ongoing work. Operation Florian has delivered an impressive set of technical and capacity building programmes supporting fire and rescue services throughout the country as well as engaging in national level networking and policy work in a context of delegated decentralisation and fractured responsibility for such services.
For me though, perhaps the most interesting entry point for future engagement from a bottom up perspective, are the volunteer fire services (DPDs) that are scattered around Macedonia. These services support professional fire services and have traditionally carried out the bulk of community safety work. The position they occupy between civil society organisation and service provider provides opportunities for local participation and engagement of communities. This has been employed to great effect in the capital Skopje, where Operation Florian has worked with a volunteer fire service to carry out participatory risk assessments, successfully bringing together diverse groups of citizens to work and lobby on certain issues. The DPDs seem to me to be an important entry point for improving and developing community engagement work and fire safety for both professional fire services and Operation Florian but also for supporting wider, ongoing processes of democratic and participatory decentralisation in Macedonia.
Tetovo fire fighters and Operation Florian volunteers with a donated vehicle
My report reflecting on Operation Florian’s work in Macedonia elaborates on the context of Operation Florian’s work there, its outcomes and future engagement. At the same time it is hoped that this learning can support Operation Florian to think about how it seeks to engage with and support community-led processes in its work more widely. I had the opportunity to discuss some of these issues with members at the Operation Florian annual general meeting in January, where I presented the findings of my report. The importance of taking into account complex political contexts in the country of operation was considered, and discussion arose around how a very specific, (and to-date) technically based NGO could engage with this. The difficulty of working in a country with fragmented public services was also highlighted, and raised discussion around how Operation Florian could strategically work within this context to support local citizens and their demands. The opportunity to share my work, and receive feedback was invaluable at this stage in the research, grounding my findings and providing new information and ideas. The report has also since been shared with Fire Aid, a network of UK based organisations involved in providing fire and rescue aid and training to over 30 countries.
My exposure to the work in Macedonia has been a great first step in the collaborative process of working with Operation Florian. As the project progresses with a closer focus on the context of Zimbabwe and an investigation into everyday fire risk, community involvement and the role of fire and rescue services, I’m looking forward to working closely with Operation Florian to make sure my research can feed into their organisational learning and development of new methodologies that allow for pathways of community participation in reducing fire risk in resource poor communities.
Operation Florian has a long-standing engagement with fire and rescue services in Zimbabwe, in Bulawayo since 2011, and in Harare since 2013.
Laura Hirst presenting at the Operation Florian AGM
Laura Hirst is a first year PhD student at the Global Development Institute, investigating fire risks, well-being and pathways towards community involvement in fire and rescue services in resource poor urban settlements. Her research is funded by a North West Doctoral Training Centre ESRC CASE studentship, in partnership with Operation Florian. Laura has a background in community-led development and participatory urban planning in the Global South. Prior to joining GDI in September 2015, she worked at the UCL Development Planning Unit and UCL Urban Laboratory, and with the Philippine Alliance, a partnership between five organisations working with resource poor urban communities to provide sustainable housing solutions across the Philippines.