The Global Wage Report released by the International Labour Organisation (ILO) recently has painted a grim picture of the employment and wage situation in the world, at a time when living costs are rising. It has said that global wages fell for the first time since the financial crisis of 2008 in 2022 and this is bound to worsen inequality and create social unrest and other repercussions.
Living costs have increased because of disruptions caused by Covid and other situations like the Ukraine war, and because of inflation which has damaged the economies of all countries. Lower-income groups, which had suffered wage losses during the pandemic, have been hit harder. In many countries, the minimum wage actually fell in real terms in the current financial year, and in some others, the overall wages in real terms were lower than in 2008. According to the report, the fall in wages has come even when productivity showed an increase, with 2022 showing the biggest gap between real labour productivity growth and real wage growth in high-income countries since 1999.
Real monthly wages fell by 0.9 per cent in the first half of 2022. For the G20 countries, which account for 60 per cent of the world’s wage-earners, real wages fell by 2.2 per cent during this period. Wage inequality has also increased in most countries.
At the same time, labour has become increasingly informal and that has increased employment insecurity and reduced the bargaining power of workers. The prospects of economic growth in 2023 are becoming more uncertain and the best estimate does not place it above 3 per cent. India’s growth rates are expected to be higher but apart from continuing global uncertainties, there are fresh concerns arising from another pandemic threat.
The global average inflation rate is estimated to be 8.8 per cent this year, 6.5 per cent in 2023 and drop to 4.1 per cent in 2024. When economic recovery is weak and inflation is high, real earnings fall, particularly among low-income households.
India has greater vulnerability in this respect because it has higher levels of inequalities, and agencies and institutions for negotiations and reconciliation have weakened. ILO Director-General Gilbert F Houngbo has said that the deterioration in real wages would likely continue globally if there are no targeted policy responses by governments. He has warned of a deeper recession in developed countries, which will have an impact on others. He also has said the restrictive monetary policies adopted by central banks have increased the risks and that it is important to adopt policies that are specially designed to help the most vulnerable sections and to rebuild and strengthen people’s sense of social justice and social cohesion. Governments should heed the counsel.