Better Global Assessment of Worker Inequality: Comment on “The Employment Footprints of Nations”

Abstract

Summary This commentary responds to the previously published Journal of Industrial Ecology article “The Employment Footprints of Nations: Uncovering Master‐Servant Relationships” by Alsamawi and colleagues. Their article uses extended input‐output analysis to calculate employment and income footprints and, consequently, quantifies and provides an analysis of the average wages embodied in consumption of countries in comparison with the wages received by domestic workers. In effect, Alsamawi and colleagues show the extent of inequality in labor income, especially between developed and developing economies, traced throughout the global supply chains, but ignore the price differentials existing between countries in their discussion of the welfare implications of global trade on workers. This commentary contends the appropriateness of adjusting nominal compensation of workers to purchasing power parity (PPP) when undertaking global comparisons that pertain to well‐being and recalculates the employment footprints and income footprints of nations with PPP adjustment. The price adjustment in this work is intended to show a more accurate depiction of the disparity among workers of different nations when their labor incomes are deflated by the index price of consumption goods in their country. Using observations covering 189 countries and 14,839 sectors for the period 1990–2011, the results of the adjustment reveal that the ratio of domestic wages to foreign wages paid in support of a country's consumption (footprint wages) tends to be underestimated for labor‐exporting countries (developing economies with relatively cheaper consumption goods) and overestimated for labor‐importing countries (developed economies with more expensive consumption goods), thus demonstrating, generally, relatively less income inequality than previously exposed.

International Attitudes Toward Global Policies

“…Drawing on the labor theory of value, some economists have argued that global inequalities arise from unequal exchange in international trade (Arghiri 1972). Indeed, the stark disparity in wages between countries implies that one unit of labor exported by an American commands five units of labor embodied in imported goods, whereas Ethiopians need to export 50 units of labor to obtain one unit through imports (Alsamawi et al 2014;Reyes et al 2017). Taking stock, Hickel (2017) proposes to globally establish minimum wages at 50% of the local median wage.…”