February 9 2006
Fields Presents Research in New Delhi
Professor Gary Fields is one of the most passionate labor & development economists you will ever meet. With a career in teaching & research spanning over thirty years, the last twenty-eight of them at Cornell, Gary has authored books and papers that deal with economic issues facing developing countries as diverse as India, Argentina, South Africa and Albania.
In January 2006 Gary visited New Delhi, India, to take part in a conference on the economic liberalization of India and China. He presented his paper “Could a Higher Minimum Wages Reduce Poverty” that he coauthored with Ravi Kanbur. The paper deals with the issue of minimum wages and its effects in stimulating employment opportunities and lifting poverty levels in a country. As we all know poverty is the bane of a majority of developing countries today. While most labor unions argue for higher wages by asserting that it allows workers to have a better standard of living, Gary believes that higher minimum wages will have another, more negative effect which is to lower employment opportunities. He firmly believes in the benefits of higher employment and asserts that “the fight against international poverty will only be won through improved workplace opportunities”.
One of the concepts that the paper analyzes is that of “Income Sharing”. This works as a system managed by either a government or a private body in charge of collecting a share of the income of a number of employed individuals within a group/community/region. This amount is then earmarked and distributed evenly among the other members of the group who have not been able to find any kind of employment opportunity. This is similar to the taxation systems of most countries; however the concept by Gary also talks of “implicit taxes”.
Implicit taxes is a concept at the micro level. Here each family is classified as a unit and collects a share of the income from the members who are employed. This sum is then availed of to help improve the overall standards of living of the family and thus help them grow as a unit. It is an informal system and is wholly managed by the individual family members rather than having a formal agency administer the program.
One of the conclusions of this study was that there is no single answer or cookie cutter solution that will work in every situation. One needs to consider the prevailing tax rate, the wage rate relative to the poverty line and the extent to which there is job loss before determining the effect of changes on the minimum wages to the levels of poverty in a particular country.
Development Economics was not Gary’s first choice while he was doing his PhD at the University at Michigan. He was trained as a labor economist, a subject he teaches at Cornell today. However a year in Kenya changed all of that. The experience in Nairobi transformed the way he felt about economics and he realized the potential of Labor Economics in finding solutions to vitally important issues such as reducing the levels of poverty across the globe. While in Kenya, he immediately cut short the PhD thesis he had been working on on “the returns to the quality and quantity of US education” and has since then, never looked back. Professor Fields now teaches a very popular graduate course on Labor Markets and Income Distribution in Developing Economies at the ILR School.
Anil De Costa