ILO: Wage growth remains below pre-crisis level

The International Labor Organization’s newest research shows real wage growth in developed economies is flat and global wage growth is mainly due to emerging economies.

The report says global wage growth is one percent below the 3 percent rate experienced before the global economic crisis of 2008. It says wage growth has slowed to nearly zero in the developed economies in the last two years.

In contrast, emerging economies, like China and other Asian nations, are seeing wages grow by 6 percent. Eastern Europe and Central Asia did almost as well.

Despite this progress, the ILO report says rich nation wages are still about three times higher than in the poorer countries. It says workers in developed countries earn on average $3,000 a month compared to $1,000 a month in developing nations.

ILO’s Deputy Director-General for Policy, Sandra Polaski, says wages affect inequality differently in different economies.

“The report shows that in many countries, wages represent the largest source of income for households with at least one member of working age. In developed economies, wages account for about 60 to 80 percent of total income before households pay taxes. In emerging and developing economies, wages are about 30 to 60 percent of total household income. This reflects the fact that self-employment is more significant in most developing and emerging economies and more significant share of total income of households,” said Polaski.

In most nations with growing inequality, such as in the United States and Spain, the report says changes in wages and employment are the dominant factors. And, the converse is true. The report says in countries such as Brazil, Argentina and Russia, wages and increased employment have been a driving force in reducing inequality.

The ILO believes minimum wage policies can play a strong role in addressing poverty and inequality. Polaski disagrees with conservative critics who say higher minimum wages mean fewer jobs.

“What the evidence shows is that increases in minimum wages in the order of magnitude that we actually see, whether in the U.S. or in other economies, in fact do not have that negative effect on employment,” she said. “Instead, employers find ways of making up through increases in productivity, better work organization, etc., find ways of making up the added cost on the wage side to be able to maintain their cost structure
at an acceptable level.”

The International Labor Organization says the weakening of collective bargaining in many countries has eroded wages. The report says labor productivity continues to outstrip wage growth in developed economies. As a consequence, it says workers and their households are benefiting less from economic growth while the owners of capital are benefiting more.

A survey of 38 countries shows the wage gap between women and men not only persists, but widens as women move up on the pay scale ladder. It says women continue to earn less because of discrimination though their education and experience may be the same as that of men.