Globalization reduces inequality

But since then, the opposite has happened. The overall direction is one toward better jobs, higher wages, safer workplaces, and less child labor, and it has happened the fastest in the countries that have opened the most and are most integrated in global supply chains.

Astonishingly, these data are ignored by officials in the United States and elsewhere who—parroting Stiglitz two decades ago—still cling to the race‐​to‐​the‐​bottom narrative and decry a “colonial” and extractive economic model supposedly fueled by “traditional free trade agreements,” as U.S. Trade Representative Katherine Tai put it in a recent speech on supply chain resilience. It’s long past time for them and other globalization skeptics to update their script.

What Has Happened to Work?

One typical op‐​ed in the New York Times asserted in 2015 that the race to the bottom encourages corporations to “relocate production to the lowest‐​cost country,” employ children because they are paid less, and neglect safety measures, resulting in the deaths of more workers. This has always been a theoretical possibility, but empirical data have stubbornly refused to cooperate with it.

The International Labour Organization considers the share of the labor force in elementary and lesser‐​skilled jobs as a proxy for low incomes and bad working conditions. This share has declined by more than 10 percentage points globally from 1994 to 2019. The decline was 6 percentage points in low‐​income countries and as much as 20 percentage points in upper‐​middle‐​income countries, the group of countries that have taken the greatest leaps to integrate with the global economy.

The number of working poor has declined very fast. Between 1994 and 2022, the share of employed persons worldwide who live in extreme poverty (receiving an income below $1.90 adjusted for inflation and local purchasing power) declined by more than three‐​quarters, from 31.6 percent to 6.4 percent—a reduction of more than half a billion people despite setbacks during the pandemic (Figure 1). The share of workers in moderate poverty (earning between $1.90–$3.20) also declined, from more than 21 percent to around 12 percent. Poverty is strongly correlated with gross domestic product (GDP) per capita, and in upper‐​middle‐​income countries, the share of extreme working poor was less than 1 percent in 2022.

In East Asia, the developing region that has globalized the most, the share of workers in extreme poverty was just 0.5 percent in 2022. In contrast, the region with the least foreign investment and participation in supply chains, sub‐​Saharan Africa, had a rate of 38 percent.