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Considering New Solution to Global Income Inequality

August 20, 2017
Global income inequality has gotten a lot of attention in recent years. The gap between the world’s haves and have-nots is increasing; the persistent disadvantage that some individuals face violates the fundamental intuitions of fairness and justice.

High and sustained levels of inequality, especially inequality of opportunity, can significantly undermine individuals’ ability to achieve their potential and contribute to global development. Global instability, in the form of economic turmoil, natural disaster, and war, also disproportionately impacts individuals in developed countries and contributes to global inequality. Modified immigration policies, or even temporary work programs, would do more to reduce global inequality than traditional foreign aid spending.

Due to displacement caused by war, famine, and environmental destruction, the international community is now facing one of the largest refugee crises since WWII. Particularly, the UN estimates that the Syrian civil war and ISIS have collectively either killed or displaced 11 million individuals. [1] Instead of facilitating global migration and increasing access to refugee resettlement programs, the developed world is increasingly restricting opportunities for immigration. Immigration was a polarizing topic during the 2016 Presidential Election; well-regarded concerns over terrorist activity as well as desires to protect the well-being of domestic citizens complicate the topic. However, restrictive immigration policies have proven to fuel domestic intolerance and perpetuate the economic and social discontentment that serves as propaganda for radicalization. Economists believe that immigrants and domestic workers are imperfect substitutes for each other, suggesting that immigrants do not disproportionately overtake job markets from native workers and can even increase domestic GDP growth.

Difficulties faced by global inhabitants obviously do not undercut domestic economic issues. There is a legitimate reason to assume that US policy efforts should focus on relieving issues of poverty, inequality, and lack of mobility within the US. However, the poorest 5% of US citizens continue to receive incomes that exceed per-person earnings of 60% of the global population. [2] Global income inequality is largely due to wealth gaps between countries rather than within countries. While there is evidence that low-skill immigrates coming from developing countries can contribute to domestic income inequality, [3] there is little evidence to suggest that immigration will adversely affect US citizens and domestic workers. [4]

Image: Iker Velasquez Holds US Flag in Washington on May 18th. Source: The Associated Press.

Image: Iker Velasquez Holds US Flag in Washington on May 18th. Source: The Associated Press.

Restrictive immigration policies penalize individuals for the arbitrary borders they were born in and prevents them from accessing opportunities offered in developed countries. Improving the economic situation through international aid efforts undoubtedly has a substantial effect on the well-being for individuals these aid efforts reach. However, there is little historical evidence to suggest that the transfer of aid from developed to developing countries has prevented the movement towards increasing global inequality. Developed countries maintain large amounts of capital, which facilitates further development. Meanwhile, the world’s poorest countries are stuck with little means to created opportunity or wealth. Glen Weyl, a senior researcher at Microsoft Research New York City, built empirical models that suggest the optimal transfers of aid to developing countries should amount to $30000 per US citizen. The current amount of aid the US is transferring to developing countries amounts to about $100 per US citizen. [1] Rather than rely on wealthy countries to facilitate transfers of charity, it simply is more efficient for individuals to travel to where opportunities, infrastructure, and capital are already present.

Eric Posner, a law and economics professor at the University of Chicago, and Weyl suggest that wealthy countries in the Gulf Corporation Counsel, such as Qatar, Saudi Arabia, and the United Arab Emirates, contribute more to combating global inequality than the US. [2] Internally, these countries are among the most unequal in the world, but they also accept larger numbers of migrant workers. Despite the widespread human rights abuses and lack of permanent residency promises, migrant workers leave places like Bangladesh and Afghanistan to search for work in these Gulf countries. They will make around five times the amount they do in their home countries. [2] A large portion of this income often gets sent back home to family members, increasing the amount of capital in some of the poorest nations and providing further opportunities for education or investments.

The type of humanitarianism proposed by Posner and Weyl is certainly not ideal and arguably not humanitarianism at all. It is a far cry from the development programs and human rights campaigns conducted by Western NGOs. The Gulf countries do not serve as an outstanding model for combating global inequality, and vulnerable foreign workers need to be afforded workplace protections. Developed countries, nevertheless, also must acknowledge that there is something hypocritical about of preaching human rights while remaining adamantly unwilling to open their borders to the people they claim to be protecting. Facilitating the movement of people, rather than resources, and providing skills development for new immigrants, rather than for villages in Africa, is an alternative solution that should receive consideration.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1] “Quick Facts: What You Need to Know About the Syrian Refugee Crisis” MercyCorps (2017)

  [2] Eric Posner and Glen Weyl, “A Radical Solution to Global Income Inequality: Make the U.S. More Like Qatar,” New Republic (2014)

  [3] Ping Xu and James Garand, “Imported Inequality? Immigration and Income Inequality in the American States,” State Politics & Policy Quarterly 16, no. 2 (2015): 149

  [4] Amelie F. Constant, “Do Migrants Take the Jobs of Native Workers?” IZA World of Labor (2014)

  [5] Glen Weyl, “The Openness-Equality Trade-Off in Global Redistribution: Openness v Equality in Redistribution,” The Economic Journal, Forthcoming (2016)

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