Inequality in the Developing World

Santiago Centro Civico Teatro Municipal Las Condes

Civic Centre in Las Condes, Santiago de Chile.

Today Chile raised its minimum wage slightly. Conservative government officials argue that due to the size of Chile’s economy they can’t raise the minimum wage further or the country would see unemployment and stagnate in growth.

Countries all over the world are constantly being subjected to this rhetoric by powerful elites that would rather play the ‘safe’ card than strive for social progress.

We ought to remember that when the size of Canada’s economy was equivalent to Chile’s back in time (you have to go back all the way to 1965 for that), the minimum wage in Canadian provinces was over twice as much. The gross levels of inequality you see in developing countries today are caused to a great extent by the unwillingness of elites to redistribute wealth as they try to catch up with the world’s richest nations by growing at faster rates than they do.

If many of these ‘almost developed’ countries spent more time coming up with creative ways to improve well-being and less time obsessing about neoliberal dogma, the affordable workers that are truly building them up would get their fair share of the reward.

As things stand:

Minimum wage Ontario (Canada): 2012 US$5.30 / hour in 1965
Income per person (inflation and PPP adjusted) Canada (1965): 2005 US$ 15,198

Minimum wage Chile: 2012 US$ 2.20 / hour in 2012
Income per person (inflation and PPP adjusted) Chile (2012): 2005 US$ 14,621

Note: 2012 Canadian Big Mac = 1.14 Chilean Big Macs.

Sources:
Ontario 1965 Minimum Wage: Caledon Institute for Social Policy
Minimum wage Chile: Gobierno de Chile
Big Mac Index: The Economist
Income per person (Canada and Chile): IMF via Gapminder World
Historic conversion rates: Bank of Canada

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7 Responses to Inequality in the Developing World

  1. everythinghk says:

    Actually this assumption is incorrect. The rapid separation of classes with the collapse of the middle class is quite complex but it’s not about pay. You might want to take a peek at some of Buckminster Fullers writings. He speaks about rapid technology shifts “ephemeralization” ( I know I spelled that wrong) replacing the need to labor.

    In my opinion the separation is being cause by many peoples lack of willingness to continually re-educate themselves.
    HK

    • front65 says:

      I quote Buckminster Fuller in a previous article, and I’m familiar with the concepts you mention. Assigning individual responsibility to widespread social problems is useless, however. While the middle class is disappearing in the united states it’s still to a great extent healthy and well in Canada. With a minimum wage of $10 an Ontarian working at McDonalds can still afford to live in a decent apartment and carry out a normal happy life. This among other reasons means crime is much less pronounced than south of the border.

      You could just say individual Canadians are nicer and less violent than americans, but the truth is that there’s a system that shaped them that way and that, among other things, can also enhance or decrease their dynamism if tuned properly.

      Gross inequality is what happens when people who are born at the bottom of the socioeconomic pyramid are not equipped to climb up.

      • everythinghk says:

        I love Canada, culturally Canada has not been diminished like here in the US.

        But again I have to point to education and the willingness to continue to educate yourself.

        I all my travels I have never seen such contempt for education like here int he United States.

        Why wife has a cousin that’s top of here class as a high school senior…..she could not multiple 6 x 3

        Secondly population density has a lot to do with why Canada is doing to well and the US is struggling.

        Yes here in the US you can rent an apartment and do ok for yourself at $10 but there are limits to how many $10 laborers you can have in a population. Raise that wage to $12 to $15 even to $20 the problem still exists.

        HK

      • everythinghk says:

        I hate when I type a long winded reply and it disappears.

        Anyway this all still boils down to education.

        A person earning $10/hour here can still afford an apartment here. In fact the extended stay apartments are safe and include all utilities for as low as $300/month.

        Culturally Canadians are way different than Americans. Every time I go to Canada it reminds me on how the US used to be in the 70′s and 80′s.

        The big cultural divide between Canada and the US is that student going through our public school systems have absolute contempt for education. The more ignorant you are the better.

        The horror stories my wife has (as a teacher) are frightening. Teaching 18 ear old inner city kids the alphabet. Here cousin in the top of her glass and a high school senior could not multiply 3 x 6 without the use of a calculator.

        So it doesn’t really make a difference whether people like this make $10, $20 or $30/hour as they are virtually unemployable. I wrote a great blog about the unemployables.

        Secondly you are not taking into account population density. If a disproportional number of people in a given area are uneducated the jobs are less and it keep them from advancing.

        This is still the United States and people can do anything as long a they work hard.

        Two months ago I met an award winning Church’s Chicken franchise operator. His story is a great on. Quote ” When I got here in 1982, I didn’t speak english and worked for minimum wage a a Church’s Fried Chicken as a janitor. In one week, earning minimum wage, I earned more than a months worth of salary on Pakistan. Three years later I bought my first Church’s, two years after that I owned 5 units, today in 2012 I own 130 units and am worth 150M. I love this country!”

        This guy was never handed anything. My wife got off the plane from Bogota Colombia with $50 in here pocket. WIthin 6 months she got a work permit as a teacher and started earning $32K a year. WIthin the first year she owned a car and rented her apartment on the beach. Within 6 years she started a vending company. Year 7 owns a real estate company. She has never stopped learning.

        Successful people never got that way from income redistribution. In fact it has quite the oposite effect.

        HK

      • front65 says:

        In a capitalist system there needs to be different strata in society. There will generally be poor and rich in most situations.

        I would personally prefer to live in a society that takes care of these ‘inevitably poor people’ that it requires to function properly. I want the janitor at my local restaurant to be able to come home and have fun doing something he enjoys. I would rather sacrifice some of my ‘millionaire potential’ in exchange of a place where uneducated/lazy people can turn their lives around more easily.

        Education is of course the key to it all, but believe me, it is easier to educate people in a more socially inclusive society than it is when you have the rich people relying solely on private schools and the poor stuck with a malfunctioning public system – for example.

        Social policies (of all kinds) can drastically increase well-being and education levels in a given population.

      • everythinghk says:

        The concept you are explaining the majority of the poor people will not grasp. There have been many books written about this. It goes something like this ” Poor people tend to remain poor even when given the opportunity to improve themselves”

        It’s the whole give a man a fish and he’ll eat for a day, teach a man to fish and he’ll eat for the rest of his life argument.

        In the United States we have what called Section 8 housing which is Government housing for the poor. Years ago these dwelling were the most filthy rat infested dumps.

        These days the Government pays 20% to 30% more for market rents than an average apartment. Real Estate companies have caught onto this and have build what amounts to luxury apartments that you would swear was a resort o no people were in them.
        Their food is paid for, electricity, healthcare, education, cel phones, internet. Basically a 100% free luxury ride. Using your logic these people would automatically improve themselves given the fact that they have no cost of living.

        Instead these are some of the highest crime, drug infested areas of the city because the people live in a consequence free environment.

        Charity has always had it’s place in the United States who’s population is extremely generous. Just look who donates the most when a natural disaster strikes.

        My Wife and I donate both privately and through our church. (this is on the goods and money side) but the biggest impact we have ever had on poor peoples lives is when we teach them about business, finance, and investing. The leaps forward are tremendous.

        HK

  2. Patricia Johnson says:

    Getting back to the original article, and currently visiting in Guatemala, my husband and I found it interesting – though not unsurprising – that 2 per cent of the population owns 60per cent of the land. More disturbing, property taxes are based on self-declared property values. While education is free for the first 6 years, attendance requires the ability to provide for books, supplies and uniforms. As well, the poor too often discourage children from education (especially girls) as their help is required to earn money for the family. Having said this, one can only speculate as to what good focused and committed social programs would accomplish: governments here are amorphous and largely unaccountable… That doesn’t sound familiar, does it?

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