Thing #3 - Most People in rich countries are paid more than they should be

Source: 23 Things they dont tell you about capitalism, Ha-Joon Chang

In a market economy, it is said that people are rewarded according to their productivity. Fact remains, a Swede gets paid fifty times what an Indian gets paid for the same job, but that is reflection of their relative productivities. People will tell you that introducing minimum wage legislations will reduce differences to wage in repute to productivity. This will only lead to unjust and insufficient rewarding of individuals talents and efforts - as such in India.

The wage gaps between rich and poor countries exist not primarily because of differences in individual productivity but mainly because of immigration control. If there were free migration, most workers in rich countries could be, would be, replaced by workers from poor countries, many of whom can outcompete their counterparts in rich countries.

On the other hand, poor countries are poor not because of their poor people but because of the greed of their rich people – people in power.

Wages are largely politically determined because of Protectionism – workers are protected from competition from the workers of poor countries through immigration control. Using the example above, a Swede bus driver gets fifty times the wage an Indian bus driver would get even though(realistically speaking) the Indian bus driver would have to negotiate his way almost every minute of his driving through bullock carts, rickshaws and bicycles  stacked three metres high with crates compared to the Swedes straight drive. According to free-market logic, the Indian bus driver would have achieved greater productivity and ought to be paid more, not the other way around.

It is genuinely dishonest to state that people are rich and paid more because they are cleverer and better educated thus a hundred times more productive than their counterparts in poor countries. They (rich people) achieve this because they live in economies that have better technologies, better organised firms, better institutions and better physical infrastructure and because their tight immigration laws disadvantage(s) many knowledgeable people in poor economies to be employed in rich economic countries.

Therefore, what an individual is paid is not fully a reflection of their worth. It is not simply because of their brilliance and hard work that they are as productive as they are yet most people in poor and rich countries get paid what they do only because there is immigration control and because of the socio-economic system they are operating in (which determines greater wage over workers in developing countries).