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ILO: COVID-19 Drives Wages Down and Increases Inequality

People collect food donated by volunteers and members of the Catholic Servants of Jesus congregation in Madrid, Spain, Oct. 8, 2020.
People collect food donated by volunteers and members of the Catholic Servants of Jesus congregation in Madrid, Spain, Oct. 8, 2020.

The International Labor Organization says wages plunged during the first six months of the year due to the COVID-19 pandemic, with women and lower paid workers among the biggest losers. Its report is based on data from 30 major economies in Africa, the Americas, Asia and Europe.

A survey of 28 European countries finds that without wage subsidies, women would have lost 8.1 percent of their wages in the second quarter of this year compared to 5.4 percent for men. The data indicates 50 percent of those in lower-skilled jobs would have lost more than 17 percent of their wages without subsidies.

The International Labor Organization says the unequal impact of the pandemic on wage earners in wealthy societies is relevant to developing countries, where workers in the formal sectors have been particularly hard hit.

Despite the bleak picture, ILO Director-General Guy Ryder said there is some positive news.

“We estimate that the wage subsidies, which have been introduced in many countries have compensated for 40 percent of the total wage bill lost…and because wage subsidies are more likely to benefit low-paid workers, it is also likely that these policies have helped to mitigate the upward trend in inequality,” he said.

ILO economists warn the COVID-19 crisis is likely to greatly increase poverty and inequality. World Bank figures indicate the number of people falling into extreme poverty because of the pandemic could be between 88 and 115 million.

Ryder notes 90 percent of the ILO’s 187 member states have some form of minimum wage. That, he said, can serve to lessen the impact of the pandemic on workers.

“Our report suggests that adequate minimum wages have significant potential to reduce both inequality and poverty. Our studies show that they could reduce household income inequality by as much as 10 percent at the national level. In addition, minimum wages can also play an important role in creating a recovery that is human centered,” he said.

ILO chief Ryder notes the pandemic has rendered an unprecedented blow to the world at work. He said he expects the aftermath will be long-lasting, turbulent and full of uncertainty.

He said government subsidies and interventions will be reduced over time, putting downward pressure on wages. He said there must be an appropriate and balanced approach to wages in the recovery process to stop a resurgence of poverty and prevent a further widening of existing inequality. And last, but not least, to keep the economy moving.