Can multinational companies help to reduce inequality around the world?
Context
Inequality has heightened across the globe in recent decades. While hundreds of millions of people have moved out of absolute poverty, there are growing disparities of income, with a vast increase in the share of wealth accruing to the top one percent. These trends are translated into variegated patterns of atypical and precarious work, unequal opportunities for health and education, and exclusions from good jobs on the basis of gender, race and migration status, and historical patterns of colonisation.
So far, research has focussed mainly on governments and non-governmental organizations addressing inequality and its effects. The role of private sector firms has received much less attention despite them having an incentive and the means to address the challenges that inequality presents. Indeed, there is little consensus whether companies are part of the problem or might be part of the solution.
Are companies part of the problem or might they be part of the solution?
What we know
There is evidence that multinational companies exacerbate inequality within and across nations. Some argue that they contribute to wage inequality, profit from differential trade arrangements in their supply chains, withdraw from or weaken labour market institutions and engage in tax avoidance. As a whole, this is a powerful set of drivers of inequality.
Yet, there is also evidence of their countervailing impact. As drivers of globalization and the diffusion of new technologies and practices across borders, they can contribute to productivity growth and rises in real wages, make investments through contributions to the educational and skill ecosystems, and can engage in the economic and social upgrading of their supply chains.
In other words, there is also good evidence that MNCs are engaged, be it reactively or proactively, in a range of social innovation initiatives on the core social divides that characterize increasing inequality.