Wage Growth Slows Globally Despite Increases In Emerging Nations

ILO News– Wage growth remains far below pre-financial crisis levels globally and has fallen into the red in developed countries, despite continuing increases in emerging economies, according to an International Labour Organization (ILO)  report.

Global monthly wages* grew by 1.2% in 2011, down from 3% in 2007 and 2.1% in 2010, the Global Wage Report 2012/13 says.

These numbers are even lower if China is excluded from the calculations.

“This report clearly shows that in many countries, the crisis has had a strong impact on wages – and by extension, workers,” said ILO Director-General Guy

Guy Ryder

Guy Ryder. “But the impact was not uniform.”

The report points to huge differences between countries and regions, with wages generally growing faster in areas where economic growth is stronger.

While wage growth suffered a double-dip in developed economies – where it is forecast at zero% in 2012 – it remained positive throughout the crisis in Latin America and the Caribbean, as well as Africa, and even more so in Asia.

The biggest changes were seen in Eastern Europe and Central Asia, which went from double-digit pre-crisis rates to a hard landing in 2009.

In the Middle East, wages appear to have dropped since 2008, although the data is still incomplete.

Differences between the regions are particularly stark looking at wage growth from 2000 to 2011.

Globally, wages grew by just under a quarter. In Asia, wage growth almost doubled.

In Eastern Europe and Central Asia, they nearly tripled, although following significant declines in the 1990s. And in the developed world, they increased by just about 5%.

There are also considerable differences in wage levels across countries.

A worker in the manufacturing sector in the Philippines took home US$ 1.40 for every hour worked, compared to less than US$ 5.50 in Brazil, US$ 13 in Greece, US$ 23.30 in the United States and almost US$ 35 in Denmark.

The report highlights recent findings that show wages have grown at a slower pace than labour productivity – the value of goods and services produced per person employed – over the past decades in a majority of countries for which data is available.

This trend has resulted in a change in the distribution of income, meaning that workers are benefitting less from the fruits of their work while the owners of capital are benefitting more.

“Where it exists, this trend is undesirable and needs to be reversed,” said Ryder. “On a social and political level its clearest interpretation is that workers and their families are not receiving the fair share they deserve.”

In developed economies, labor productivity has increased more than twice as much as wages since 1999.

In the United States, hourly labor productivity in the non-farm business sector increased by about 85% while earnings only increased by about 35% since about 1980.

In Germany, labor productivity surged by almost a quarter over the past two decades while wages remained flat.

Even in China – a country where wages roughly tripled over the last decade – the labor share went down as GDP increased at a faster rate than the total wage bill.

The report warns that policy-makers should be careful not to promote “a race to the bottom” in labor shares in the hopes of gaining a competitive edge and exporting their way out of the recession.

*Wages adjusted for inflation, otherwise known as real average wages

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