Salaries shrinking in developed countries, rising in developing world, though gap remains worrisome

GENEVA – A sluggish global economy hit world wage growth hard last year, taking an especially harsh toll on workers in developed countries, who saw their salaries shrink, the International Labour Organization said Friday.

“The global crisis has had significant negative repercussions for labour markets in many parts of the world,” said ILO director general Guy Ryder.

In its Global Wage Report, the UN’s labour agency said that monthly average wages adjusted for inflation grew globally by just 1.2 percent last year, down from 2.1 percent in 2010 and 3.0 percent in 2007.

It added that if China – a country where wages roughly tripled over the past decade – was omitted from the equation, global wages grew by just 0.2 percent last year from 1.3 percent in 2010 and 2.3 percent in 2007.

Developed countries, many of them suffering from the eurozone debt crisis, had been especially hard-hit with average salaries slipping by 0.5 percent in 2011 compared with the year before, the report said.

Ryder pointed out to reporters in Geneva that in developed economies, the crisis led to a “double dip” in wages, with average salaries falling into the red first in 2008 and again last year.
“And the trend seems to be for zero growth in 2012,” he said.

Other regions of the world fared far better, with Asia seeing wages jump 5.0 percent, as salaries grew 5.2 percent in Eastern Europe and Central Asia and 2.2 percent in Latin America and the Caribbean, the report showed.

In a longer perspective, the ILO report pointed out that since 2000, average global wages had grown by nearly a quarter, although the regional differences again were striking.

Salaries in Asia had for instance almost doubled over the 11-year-period, while developed countries saw a mere 5.0 percent increase in wages.

But although wages were falling in developed countries as they grew in developing nations the wage gap between them remained overwhelming, Ryder said.

While a worker in the manufacturing sector in the Philippines on average took home $1.40 an hour last year, a US worker earned $23.30 and in Denmark the hourly pay was $34.80, he said.

In its analysis of wage developments, the ILO underscored that salary increases in recent years have not kept pace with labour productivity and that workers have seen their share of national incomes shrink as a result.

“There is a break in the linkage between wages and labour productivity,” Ryder lamented, pointing out that this basically means that “workers and their families are not receiving the fair share they deserve.”

This is true both in countries where wages have long been stagnant, and perhaps more surprisingly in countries where wages have grown significantly, like China, he said.

In developed countries, labour productivity — or the amount of goods and services produced compared to the number of hours worked — has increased roughly twice as fast as wages since 1999, the report showed.

And since the 1970s, workers in these countries have seen their share of the countries’ national income slip from 75 percent to around 65 percent.
In Germany, for instance, labour productivity surged by nearly 25 percent in the past two decades, while salaries remained flat, the report showed.

This trend is not only bad for employees, it is also bad for national economies, it cautioned.
“A decrease in the labour share not only affects perceptions of what is fair… It also hurts household consumption,” the report pointed out.
In this time of crisis, it also cautioned against over-zealous austerity and the “simplistic view that countries can cut their way out of the recession” in terms of wages.

Instead, Ryder insisted, countries should invest in setting minimum wages at a level that allows workers to “live in reasonable dignity.” –Agence France-Presse