TNAG-0531-FCO40-626-Application-of-International-Labour-Convention-to-Hong-Kong-1975 — Page 137

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differences related to skill and status. When measured by the usual methods for such statistics and compared internationally, market economies have also attained as good a distributive pattern for labour earnings as China's.1

before

Serious questions arise with respect to the effect of social security benefits on income distribution in developing countries during the phase of evolution full compensatory justice is approximated by the social security system. During this phase, coverage under the heading of a recognised contingency is incomplete, and contingencies subject to protection by social security are accorded different priorities. In other words, compensatory justice is partial, and it is always a good question whether partial justice is justice at all. There are different kinds of partiality. (1) Damages are not fully compensated for, although all persons are covered for all contingencies. Resources are too thinly spread over too broad a front of programmes and coverages. (2) Protection is limited to certain persons (public employees only, for example) over a wide range of contingencies. This has unintended consequences quite contrary to the concept of equitable income distribution. There are many mixtures of partiality between these polar cases. The essence of the problem here is how society chooses and implements priorities.

The governments of many developing countries tend to go all the way toward a full package of social security schemes for their employees and industrial Workers in larger establishments. One of the unintended consequences is the creation of a peculiar kind of inequality called "economic dualism". When incomes of all sectors of a given developing country are considered, it is often found that the average income of the modern sector workers protected by social security is much higher than the incomes of other groups left to their own devices as far as their economic security is concerned. As money economy invades all sectors of society and the vagaries of the market engulf everybody, the traditional sector has long since ceased to be a safe haven for secure life in many developing countries. The process of economic development approved or encouraged by the government has done extensive damages to the traditional sector, but compensatory justice is not done to the Feople of this sector as it is done to the modern sector workers. Under these circumstances, modern sector employment is a highly attractive way of obtaining a high, secure income, creating a situation in which the modern sector is overloaded with job seekers. How to absorb them into productive employment at the level of productivity that justifies modern sector wages becomes a real problem.

Industrial workers are not the richest or most esteemed group of people in developing countries, but they are not the poorest. They are in the "middle", although it seems premature to call them a "middle class". (In this connection, one would profit enormously from an ingenious chart or urban stratification accompanying an article by John Friedmann and Flora Sullivan.) 2 In terms of income and status, they are below entrepreneurs, managers, professionals, and technicians, but above many peasants, shopkeepers, artisans, domestics, and day labourers. The masses below the level of industrial workers are helplessly exposed to the vagaries of the market with no protection from social security sources.

The size distribution of income, which is a frequency distribution of income recipients by level of income, should find industrial workers somewhere in the middle of the scale. Whether the income differentials between this group and all other lower-income groups should be considered a case of acceptable inequality is an embarrassing question. Compared with these lower-income groups whose economic conditions are miserable and insecure, industrial workers covered by social security enjoy enormously higher and more stable incomes.3 Under the circumstances, the social insurance method of financing social security benefits is at least one way in which the embarrassment of the covered workers is mitigated, because a social insurance is distributionally neutral and industrial workers may not be accused of receiving income transfers from poorer sections of the population through social security financed by regressive taxes. Another consolation is that the groups with

1 Christopher Hower, Wage Patterns and Wage Policy in Modern China 1919-1972 (Cambridge, UK: University Press, 1973).

2 John Friedmann and Flora Sullivan, "The absorption of labor in the urban economy: The case of developing countries", Economic Development and Cultural Change, Vol. 22, No. 3 (April 1974), p. 388.

3 Koji Taira, "The relation between wages and income from self-employment: estimates and international comparisons", Manchester School (May 1966), pp. 159-177.

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