International Wage Disparities, Resource Depletion and Human Rights: Are They Linked?

Citation: Diab, Osama (2023) ‘International Wage Disparities, Resource Depletion and Human Rights: Are They Linked?’, Rowaq Arabi 28 (3), pp. 10-22, DOI: 10.53833/VSQE5891.

Abstract

Despite a growing acknowledgement of inequality’s impact on the realisation of human rights, an international ‘equal pay for equal work’ principle is missing from human rights discourse, including the discourse of human rights practitioners and scholars who have highlighted human rights silence on vertical inequalities. The article asserts that this silence may be informed by the neoclassical assumption that disparities of wage are determined by the marginal productivity of labour. Moreover, the article argues that wage differential infringes on environmental rights, as it forces low-wage economies to exchange more of their resources for fewer resources through Ecologically Unequal Exchange (EUE).

Introduction

It has often been highlighted that international human rights law has no stated right to equality as such.[1] However, equality is at times mentioned indirectly in human rights instruments, or more directly in domains that are closely related to human rights, such as the Sustainable Development Goals (SDGs). Nonetheless, in these two instances, addressing inequality is laden with serious shortcomings that have been discussed extensively in critical human rights literature. This article argues that even the literature highlighting gaps concerning inequality in the human rights regime misses one crucial shortcoming, that is, the complete lack of any provision of ‘equal pay for equal work’ on an international level, and the environmental consequences resulting from such lack.

Neoclassical economics argue that the [marginal] productivity of labour explains disparities of income and wages.[2] However, this article uses a synthesis of datasets and data analyses to refute this argument, and to demonstrate that even under the same levels of productivity, international wage disparities would still be immense. I utilise two data analyses for this purpose, that is Samir Amin’s 1966 calculations of how much the ‘Third World’ loses because of real international wage disparities, along with Zak Cope’s 2010 calculations with a similar objective. I also use a dataset on the price elasticity of demand for primary commodities exports, in order to examine whether a convergence of international wages would lead to the loss of the Global South’s competitive ‘advantage’ of cheap and abundant labour.  Finally, to illustrate the environmental consequence of international wage disparities for low-wage economies, I use calculations from the Ecologically Unequal Exchange (EUE) tradition, which is itself based on the environmentally extended multi-regional input-output (EEMRIO) data.

Yet before we reach this point, let us start with reviewing the existing literature on inequality in international human rights law. Gillian MacNaughton, for example, argues that human rights law is more concerned with horizontal inequalities, while vertical inequalities are yet to be adequately addressed.[3] Horizontal inequalities are close to the more recognised concept of ‘non-discrimination’ and are defined as those inequalities ‘between culturally defined or socially constructed groups’, such as social groups based on gender, race, caste, religion or sexuality.

These inequalities are often addressed by treaties, such as the Convention on the Elimination of Racial Discrimination (CERD) and the Convention of the Elimination of Discrimination against Women (CEDAW); as well as non-discrimination provisions in more general human rights treaties, such as the International Covenant on Economic, Social and Cultural Rights (ICESCR) and the International Covenant on Civil and Political Rights (ICCPR).[4] This is contrasted with vertical inequalities, which refers to inequalities of wealth, income or social outcome, including inequalities in health, education, and housing.[5]

Balakrishnan et al. argue that this overlooking of vertical inequalities is a problem of interpretation and not inherent to human rights law, and hence they title their book The Radical Potential of Human Rights implying that a reinterpretation of human rights can alter its focus.[6] The overlooking of vertical inequalities, according to the authors, happens despite inequality having a real impact on the realisation of rights. To make this point, the authors demonstrate that low-income households are less capable of realising their basic rights in more unequal societies than their counterparts with similar income in less unequal societies.[7] This challenges the conventional wisdom in development economics informing a large part of the current interpretation of human rights provisions –that as long as poverty is reduced, it is irrelevant what happens at the top of the income/wealth pyramid.[8]

Moreover, countries suffering from high levels of inequality have worse health outcomes compared to other countries with a similar gross domestic product (GDP) for households with the same levels of income. For example, there is a strong positive correlation between rates of child mortality and inequality among countries at similar levels of development. Moreover, inequality may impair the availability of adequate housing for low-income households.[9]

Philip Alston, former United Nations special rapporteur on extreme poverty and human rights, argues that ‘formal recognition of the fact that there are limits of some sort to the degrees of inequality that can be reconciled with notions of equality, dignity and commitments to human rights for everyone would be an important step forward’. He calls for ‘revitalizing the equality norm’ in international human rights law ‘to develop notions of distributive equality’.[10]

Economic rights advocates have also pointed to inequality as one of the major blind spots of the human rights regime. The Center for Economic and Social Rights, for example, argues that while inequality on grounds such as gender, race and disability have long been a core human rights concerns, gross inequalities in economic status remain largely unchallenged by human rights law and advocacy.[11] The UN General Assembly itself called the silence on inequality in the Millennium Development Goals as its biggest blind spot.[12]

Former UN Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky, mentions yet one more blind spot of economic rights: a facet of inequality that has been frequently neglected by the human rights community, that is, the nexus between economic inequality, sovereign debt crises, and human rights. He argues that there is widespread acknowledgement that debt crises and adjustment programmes frequently increase inequality and have a negative impact on the socioeconomic outcomes of vulnerable populations. But he likewise argues that inequality may also be an important contributing factor to the emergence of debt crises.[13]

Samuel Moyn also famously argues in his landmark book Not Enough: Human Rights in an Unequal World that human rights’ focus on sufficient protection has selectively emphasised one aspect of social justice, that is, improving the lot of the poor, scanting in the process the distributional victory of the rich. ‘It is as if in our highest ethics, material gains for the poor were all that could matter, either morally or strategically, when human rights placed any stress on material injustice at all’.

For Moyn, the human rights revolution starting in the 1970s was concurrent with the rise of neoliberalism. This synchroneity has coloured the human rights movement, making it focused on sufficiency while abandoning the postcolonial dream of equality and global distributive justice. He argues that ‘human rights conformed to the political economy of the age, not defining it but reflecting it’. Like other critics highlighting human rights’ focus on horizontal equalities and its neglect of vertical inequalities, Moyn emphasises human rights successes in promoting status equality, but also highlights the failure in promoting material equality.

All this reflects the neoliberal/neoclassical focus on lifting people out of poverty regardless of what happens at the top of the wealth pyramid, and it is reflected in the rapid increase of inequality levels. Human rights, according to Moyn, made itself compatible with this logic. For Moyn, although the number of poor have indeed declined, the rich have decisively won the battle of distribution, increasing inequality to levels that have not been witnessed since the end of World War II.[14]

Another issue concerning how human rights addresses inequality is that of prioritisation and an effective ‘hierarchy of human rights’.[15] Critical human rights literature repeatedly argues that economic rights are effectively second-class rights, as they are contingent upon ‘maximum available resources’ and ‘progressive realisation’, as well as being non-justiciable, and unenforceable.[16] The principles of progressive realisation and maximum available resources imply that these rights are an exclusive issue of the national economy. Moyn argues that welfare came to be nationally rather than internationally organised. Global governance of political economy emerged ‘only for the sake of avoiding catastrophe if individual states failed in their obligation to manage their own national economies, never for the sake of a global floor of protection, let alone a global ceiling on inequality’. However, the role of the global structural economy in limiting ‘maximum available resources’ and in keeping wages low preventing workers from realising their rights is largely neglected.

Inequality is sometimes evoked in the human rights domain only when it has a spillover effect on other more recognised rights. The UN Human Rights Council, for example, says that inequality implies a violation of rights only when it leads to a significant number of individuals within a society not enjoying minimum essential levels of each of the rights enumerated in the International Covenant on Economic, Social and Cultural Rights.[17]

MacNaughton also addresses inequalities between countries. She argues that human rights do not explicitly address such inequalities.

Rather, they are generally claims of individuals, families, communities, unions and peoples against the government of a country. While human rights generally address intra-state issues, inequalities between countries may have substantial impact on the realisation of human rights as well as the achievement of sustainable development. Therefore, these inequalities must also be considered ‘human rights issues.’[18]

MacNaughton argues that the Sustainable Development Goal 10, or SDG 10, which aims to ‘reduce inequality within and among countries’, does not include a target for the reduction of economic or vertical inequalities, the raison d’etre of the SDG. She also asserts that the SDG’s targets are vague and immeasurable. Similarly, Winkler and Williams argue that there are no human rights standards on vertical inequalities to inform SDG 10, and that the SDG’s targets insufficiently address vertical inequalities.[19]

While highlighting global inequality as a human rights issue is a valid concern, the focus is never linked to the ‘equal pay for equal work’ principle, which is the concern of this article. Instead, global inequality is often discussed with gaps in average GDP per capita in mind, or it is linked to the growing amount of wealth and income controlled by the wealthiest segments of the world population, among other foci.

However, based on neoclassical arguments, such disparities could be ‘easily’ explained away by issues such as labour and capital productivity, as well as the relative abundance/scarcity (i.e. supply and demand) of labour in a specific economy. Therefore, while it is important to engage with the productivity arguments as justifications for the massive and increasing disparities in wealth, it is imperative when discussing global inequality to also speak of the disparity of wages for equal work. This will be the topic of the next section.

Are Wages Unequal for Equal Work?

As discussed above, wage inequality on an international scale is completely neglected even as a potential blind spot. Human rights discourse has been criticised for treating economic rights as second generation non-justiciable rights subordinate to justiciable first-generation civil and political rights.[20] Moreover, the regime has been criticised for being insensitive to vertical inequalities while overwhelmingly focusing on ‘inequality on grounds such as gender, race and disability’ as discussed above.[21]

This section explains how both the inequality discourse of human rights–as well as issues of sustainability and environmental justice-require us to look at the global scale of inequality, as severe global wage inequality leads to resource depletion and environmental degradation in low-wage countries.

Dependency theorists such as Samir Amin and Arghiri Emmanuel have argued that global wage disparities are the key dynamic of the spatial redistribution of value through global trade.

In this regard, Amin argues that an hour of work in ‘developed’ countries can buy more products on the international market than an hour of equal work in less ‘developed’ countries.[22] According to Emmanuel, the absence of competition in the labour market at the international level results in differential national wages for workers with similar skills and productivity due to the inability of human labour to move freely between countries. Emmanuel argues that the changing level of national wages must be explained by recourse to extra-economic political factors. Among these political factors is the bargaining power of trade unions, which, according to him, is the primary political and institutional factor in determining international wage differentials.[23]

Since trade unions are stronger in richer countries due to their specific historical and political development, wages directly reflect the uneven development of capitalism at the global level. As for the weakness of trade union power in so-called developing countries, Emmanuel identifies the repressive policy of colonial and neo-colonial regimes as the main reason for the weak bargaining power of workers in the Global South.[24]

Emmanuel reaches two conclusions from these premises. First, workers in peripheral economies are exploited more severely than workers in the centre of the global economic system. Second, due to the international equalisation of profit rates and a deep international division of labour, a change in the wage level in a country increases the output price of goods produced in that country, and therefore, the terms of trade are directly linked to the national wage level.

The international equalisation of profit rates is the tendency of profit rates to converge on an international level between various economic sectors, and therefore the increase in wages will be passed on to consumers instead of the profit rate being reduced. This, therefore, involves value transfers from low-wage countries to high-wage countries through unequal exchange. In other words, higher wages in peripheral economies would lead to the increase in the price of their commodities (i.e. passed on to the consumer), making more of the value created stay within the borders of the peripheral economy. However, it could be argued that as cheap and abundant labour power is a competitive ‘advantage’ for low-wage economies, increases in wages would harm these economies.

The good news is that it is possible for Global South economies to exchange fewer exports for more money due to the lower price elasticity of demand for commodities exported from the Global South. Under neoclassical value theory and ideal free market conditions, low elasticity of demand provides an opportunity for producers to increase the prices of their goods. However, prices are not only determined by neutral ‘free market’ forces, but also by the political and material ability to maximise the value of goods sold and minimise the value of goods purchased from various economic actors. Jason Hickel argues that prices do not reflect value or utility in any objective way. Rather, they reflect, among other things, the (im)balance of power between market agents, such as capital and labour, core and periphery, and lead firms and their suppliers, etc.[25]

For example, if the price elasticity of demand for Global South exports is -0.5, then a wage increase that inflates export prices by thirty per cent will result in a decrease in demand for these exports by only fifteen per cent, which in turn implies a decrease of  fifteen per cent in the use of human and material resources along with a fifteen per cent increase in cash revenues. Looking at Table 2, we can conclude that the price elasticity of demand of -0.5 is a conservative estimate and that in fact, exports from Global South countries have even lower price elasticity. While these figures are based on 1987 estimates, more recent studies show that this still holds true. For example, a 2018 study by the US National Bureau of Economic Research, which conducts a meta-analysis of numerous studies of primary commodities’ price elasticity of demand, confirms these results. This time gap confirms the long-term trend and effects of these economic dynamics.[26]

In that respect, Emmanuel argued that the phenomenon of ‘labour aristocracy’ could not be entirely attributed to a state of ‘false consciousness’ of the more advantaged workers as orthodox Marxist economists often assume; it was rooted in the real material interests of most of the working class in the ‘advanced’ capitalist countries.

According to Emmanuel, if the income of the ‘centre’ workers were universalised, the sum of total wages would be greater than the world national income. Therefore, the ‘centre’ workers and all capitalists jointly participate in the exploitation of the peripheral workers as the sole producers of surplus value throughout the world. To prove his point, Emmanuel multiplied the average wage of a worker in the United States by the total number of workers in the world in 1969, and since the result was greater than the world’s total income, Emmanuel concluded that the American worker was a net extractor of surplus value.

Emmanuel’s calculation led to some confusion among economists, including those with a Marxist bent because of the division this might cause between workers of the Global North and the Global South. Perhaps among the most famous of these arguments was the one that arose between Emmanuel on the one hand and Charles Bettelheim and Samir Amin on the other.[29]

Samir Amin pointed out that the difference in wages must consider the difference in productivity because unequal exchange can only occur in the case of equal productivity and different wages. Otherwise, higher wages may simply be the result of higher productivity. This is one of the key arguments of neoclassical economics, often arguing that productivity is what explains wage differential. The next paragraphs will examine whether this is indeed the case.

Labour productivity according to mainstream economics is measured in monetary terms, where the value added of economic activity is divided by the hours of work expended in this activity. A similar argument to that of Amin is used by Bettelheim, who argues that a higher rate of productivity would mean that the rate of exploitation and extraction of surplus value from Global North workers would be greater despite their higher wages and quality of life relative to their Global South counterparts.[30] Considering that measuring productivity levels is not an easy task, Ricci argues that what needs to be compared is real physical productivity and not nominal productivity, because the latter is calculated by observable market prices formed based on already distorted wages.[31]

However, real productivity, measured in terms of physical quantities, can only be compared within a given industry that produces goods of the same type and quality, while it cannot be compared between different industries because there would be no common unit of measurement. For example, the productivity of a cotton farmer and a music composer cannot be compared. Therefore, it is challenging to empirically validate productivity differences. Nevertheless, not everyone agreed that the task of measuring unequal exchange through wage differentials in different economies producing different goods was impossible.

In his attempt to overcome this dilemma, Samir Amin tried to measure exchange by other means, such as comparing modern capitalist sectors in peripheral economies with the same sectors in central economies and trying to calculate the cost of goods in ‘traditional’ sectors in peripheral economies if we assumed their use of modern European technologies. Amin finds that of the total exports from ‘developing’ countries in 1966, which at that time amounted to about $35 billion, the ultra-modern capitalist sector (e.g., oil, mining, mineral processing, and modern plantations) represented no less than three-quarters of the value of exports, that is, $26 billion. Amin says that if these products were provided by developed countries, with the same technologies and therefore the same productivity, they would be worth at least $34 billion. Therefore, according to Amin’s calculations, the transfer of value from the peripheries to the centre under this category alone amounts to $8 billion in 1966.

Regarding other ‘Third World’ exports, supplied by low-productivity sectors, such as agricultural products produced according to traditional farming practices that no longer exist in Global North economies, the situation becomes a little more complex. Amin admits that the technological gap of these sectors complicates the calculations, especially since the products in question are not comparable. Tea, coffee, cotton and cocoa, for example, are produced only in the periphery. However, Amin says that wages in the periphery are much less than the difference in productivity. Amin gives the example of an African peasant who, in exchange for one hundred days of hard work each year, receives imported manufactured goods requiring twenty days of simple labour from a European worker. Amin calculated that if this farmer had laboured using modern European techniques, he would work three hundred days a year and obtain a product six times greater, meaning that his productivity per hour would double at best, while the gap in wages would be fivefold.

The value of these products, if the reward of labour was proportional to their productivity, would be about $23 billion, instead of $9 billion. Thus, the value transfer from the periphery to the centre, according to Amin, amounts to $14 billion in the case of low productivity sectors, to be added to the $8 billion of the modern sector.

In other words, if exports from the periphery were about $35 billion, their value, if labour compensation were equivalent to what they are in the centre with the same productivity, would be about $57 billion. This simply means that the wage disparity amounts to a loss for the ‘Third World’ of about $22 billion at the time.

Although Amin’s model is old, there are strong reasons to believe that this pattern of income loss for Global South economies has continued and even exacerbated. Zak Cope calculated the value transfer based on wage inequality in 2010 and valued it at $2.8 trillion.[32] This is a much larger amount than Amin’s calculation even when adjusting it for inflation, which makes Amin’s value equal to $387 billion in 2010. This disparity could be explained by population and economic growth in the Global South, as well as the deepening of foreign trade in recent decades. Trade has grown from 25 per cent of global GDP in 1966 when Amin conducted his exercise to nearly 57 per cent in 2010 when Cope carried out his.[33] On that Zak Cope writes:

In a world where labour could travel between countries as freely as capital is able to, wage levels would converge and the alleged greater ‘productivity’ of European, North American and Japanese workers would be revealed for what it is, namely, a by-product of militarised borders and superwages. At the same time, were monopoly rents accruing to transnational corporate and finance capital attenuated by means of various measures undertaken to prevent leakages in the domestic production of the countries of the global South, the attendant and hitherto ‘Westernised’ capital gains would be more widely diffused at the global level. To that extent, we are justified in gauging unequal exchange solely on the basis of wage differentials alone, that is, in not thereby accounting for alleged ‘productivity’ differentials between core and ‘periphery’ countries, these being inexorably established by underlying wage and capital differentials.

To sum up, if we assume an equivalence of wages (i.e., equal pay for equal work) on a global level, the Global South, where most of the global poverty and hunger is concentrated, will earn an extra $2.8 trillion a year in 2010 prices. The impact this would have on the social and economic rights of hundreds of millions of people will be immense. To put things into perspective, the world needs about $175 billion a year to eradicate extreme poverty.[34] This figure is admittedly based on very conservative estimates of poverty; there has been extensive research showing that the international poverty lines set by the World Bank are in fact far from sufficient to lift households from poverty.[35] However, given that losses resulting from the international wage gap cost sixteen times this figure, it can be safely assumed that even a partial bridging of global wages could contribute greatly to lifting people out of poverty, and realising the full range of their socioeconomic rights.

Another possible argumentation for wage differential is the abundant supply of labour that is often characteristic of low-wage economies. While this is indeed the case, there is nothing natural about this. In an increasingly globalised economy, there is nothing that calls for the free movement of capital, assets and goods from where they are abundant to where they are scarce, leading to them having an international value while at the same time preventing labour from having that same free movement. Zak Cope writes that the ‘miserably low wage rates’ in so-called peripheral economies is predicated—among other things—on militarised borders preventing workers from moving to the core countries, and hence preventing an international equalisation of wages.[36]

Environmental Implications of Wage Differential

Losses due to wage differential should not only be considered in monetary terms since it has a severe impact on the ecological capital of low-wage countries, which means it also becomes an issue of environmental rights. In established human rights discourse, the problem with low income is that it does not allow its earners to enjoy the full range of economic rights enshrined in international human rights law. Another impact that will be discussed in this section is the environmental degradation of low-wage economies.

The undervaluation of Global South wages and resource-intensive products means simply that Global South economies need to exchange more of their resources for fewer resources and services from the Global North in physical terms. Furthermore, the current international division of labour is designed in a way where low-wage/Global South economies specialise in resource-intensive products–whether agricultural or industrial–whereas high-wage economies increasingly specialise in intangible products and services.[37]

This leads to what many scholars call ‘Ecologically Unequal Exchange (EUE)’. EUE is similar in its logic to Unequal Exchange, but instead of looking at unequal exchange in monetary terms, it endeavours to measure the exchange of natural resources through international trade. Using evidence from environmentally extended input-output data, a 2022 study by Hickel et al. demonstrates that in 2015, high-wage economies appropriated in net terms from low-wage economies twelve billion tons of embodied raw material equivalents (RMEs), 822 million hectares of embodied land, twenty-one exajoules of embodied energy (equal to 3.4 billion barrels of oil), and 188 million person-years of embodied labour. According to the study’s authors, this is worth $10.8 trillion in Global North prices, which, according to them, is enough to end extreme poverty seventy times over.[38]

Infante-Amate and Krausmann argue that EUE places great pressure on domestic extractions of materials. At the other end of the exchange, favourable terms of trade can motivate wealthy countries to outsource environmental impact and they can use this advantage to better preserve their own ecological capital.[39]

The issue of emissions is also crucial here as many of the resource-intensive polluting industries have moved en masse to the Global South. In low-wage economies, production-based emissions are higher than consumption-based emissions, while in high-wage economies this is reversed. As we can see from Table 2 below, for all countries of the world, except for high-income countries, production-based emissions are higher than consumption-based emissions, indicating that most of their production is consumed elsewhere. This gap gets progressively larger the more you go down the income ladder. This also means that they are left with the environmental consequence of production without enjoying its fruits.

Additionally, while the per capita figure of production is still higher for high-income countries than other countries, despite it being smaller than consumption-based figures, this is not reflected in resource depletion since even production that takes place in high-wage countries mostly uses materials from the Global South. Moreover, a lot of this emission is connected to transport; so while this has a negative consequence on climate change, it has less of a direct consequence on resource depletion. Transport’s share of total national GHG emissions range from up to thirty per cent in high-wage economies to less than three per cent in low-wage economies.[40]

Conclusion

Despite increasing discussion about inequality in human rights spaces, the issue of international wage disparities for equal work has been completely neglected. The article argued that this neglect is likely attributable to the neoclassical assumption that wage disparity is based on marginal productivity of labour. This assumption, however, has been repeatedly refuted by old and new scholarship, such as that of Samir Amin and Zak Cope, discussed in this article.

Using statistical evidence, the article shows that bridging the wage gap for equal work will be essential for the realisation of socioeconomic rights for hundreds of millions of people. Additionally, the article argues that this bridging could help maintain the ecological capital of low-wage countries and lead to sustainable and evenly distributed economic growth in the economies that most desperately need it.

This article is admittedly more of a discussion opener than a conclusive and final proposition, and it can be considered an invitation to other scholars and to myself for further research aimed at exploring the themes presented in this article.

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