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December 07, 2012

Wage Growth Slows Worldwide

by Lisa Schlein

A new report finds wage growth remains far below pre-economic crisis levels around the world.  The International Labor Organization's (ILO) annual Global Wage Report finds wages in the emerging and developing world generally have been more resilient than in the developed world.

The report finds huge differences between countries and regions, with wages generally growing faster in areas where economic growth is stronger.  It describes wage growth in the developed world as anemic, where it is forecast at zero percent in 2012.

By contrast, the report sees robust wage growth in Asia, especially in China, more modest, and positive growth in Latin America and the Caribbean, as well as in Africa.  The biggest changes are in Eastern Europe and Central Asia, which have seen higher wage growth than in the past, but from a lower base.

ILO Director-General Guy Ryder, says the differences in real absolute wage levels remain very large.

"Here I am going to talk about hourly earnings in manufacturing," said Ryder.  "They can be as low as $2 an hour in countries like the Philippines, India and China, which compares to $23 in the U.S. and $35 in Denmark.  So convergence, if you want to follow that line, has to be seen in this context of very large inter-regional differentials."

The report highlights recent findings that show wages have grown at a slower pace than labor productivity.  In other words, the report says workers are benefiting less from the fruits of their labor, while the owners of capital are benefiting more.

ILO chief Ryder says this downward trend can be seen in the majority of countries.  He says this is true in countries such as the United States and Germany, where wage stagnation exists.  But, it also happens, in countries where wages have grown, for example in China.

"Wages have grown very quickly, but the wage share of overall production has nevertheless gone down," Ryder noted.  "And, I believe and we believe that this diminution of the labor share of national income does have important consequences for the major policy discussions taking place in the world today.  It has generated greater inequality in societies and it has contributed to the external and internal imbalances in the global economy."  

Ryder says this trend is undesirable and needs to be reversed.   Ryder adds that says workers and their families are not receiving the fair share they deserve.

The International Labor Organization is calling on governments to adopt minimum wage policies as a way of reducing working poverty and providing social protection for vulnerable employees.

It says minimum wages help protect low-paid workers and prevent a fall in their purchasing power.  It warns the economy also suffers when people do not have money to spend.