Workers around the world have been fighting for fair wages and rights for centuries. But the past two decades have seen some glimmers of hope in the long history of wage inequality. Wage inequality is falling in two-thirds of the world's countries. Underneath this positive trend, inequality and precariousness of workers' lives are still buried.
International Labor Organization (ILO) 'Global Wage Report 2024-25: Is Global Wage Inequality Reducing?' Such information has come out in the titled report.
According to the ILO report, since the beginning of 2000, wage inequality has declined in many countries from an average of 0.5 to 1.7 percent per year. Here is a comparison between high and low wage earners.
The ILO reported that wage inequality in low-income countries has fallen by an average annual rate of 3.2 to 9.6 percent over the past two decades, much higher than the global rate.
On the other hand, the rate of decline has been relatively slow in rich countries. Inequality fell from 0.3 to 1.3 percent annually in upper-middle-income countries and from 0.3 to 0.7 percent in high-income countries.
The report also found that while overall wage inequality has narrowed, high-wage earners are ahead. Low-income people remain the same.
In reality, regional differences persisted even as wages rose
According to the report, global wage growth has been faster than inflation in recent times. Global real wages are expected to grow by 1.8 percent in 2023 and are projected to grow by 2.7 percent in 2024, the highest in 15 years.
This increase is particularly significant from 0.9 percent inflationary wage growth in 2022. However, the rate of wage growth is still uneven regionally. Wage growth rates in emerging economies are higher than in advanced economies.
In advanced G20 countries, real wages declined for two years in 2022 and 2023. 2.8 percent in 2022 and 0.5 percent in 2023. However, real wage growth rates were positive in the emerging G20 economies during this period. 1.8 percent in 2022 and 6.0 percent in 2023.
Real wages grew faster in Asia and the Pacific, Central and Western Asia, and Eastern Europe than in other regions.
“The rebound in real wage growth is certainly positive,” said ILO Director-General Gilbert F. Huangbo. But we must not forget that millions of workers and their families still live in poor conditions due to the high cost of living. Wage gaps between countries are still at unacceptable levels.'
Permanent wage inequality
Despite recent progress, high levels of wage inequality remain a serious problem. The report found that the world's lowest-paid 10 percent of workers receive just 0.5 percent of total global wages. On the other hand, the top 10 percent of workers earn about 38 percent.
Wage inequality is most pronounced in low-income countries. About 22 percent of workers in these countries receive low wages. Women and workers in the informal sector are generally at risk of receiving the lowest wages.
These data highlight the need for targeted action. In order to eliminate the gap in wages and employment and ensure fair wages for all workers.
Wage inequality exists in all countries and regions of the world. One-third of workers worldwide are unpaid workers. Most people in most low- and middle-income countries are self-employed. They earn a living in the informal economy.
This is why the ILO report also includes self-employment for low and middle income countries. It found that the wages of the self-employed in these regions increased significantly over the wages of salaried workers.
“National strategies to reduce inequality must emphasize strong wage policies and institutions,” said ILO economist and one of the report's lead authors, Giulia De Lazzari. Apart from this, policy formulation for increasing productivity, job creation and formalization of the informal economy is equally important.'
Strengthening wage policy to reduce inequality
The report emphasized the need for targeted policies for inclusive economic growth. It said reducing wage inequality requires strong wage policies and structural support for equitable growth.
By addressing these challenges, countries can reduce wage inequality, ensure fairer and sustainable economic growth for workers.
ILO recommendations
The report made several important recommendations to reduce wage inequality. These include:
Wage determination through social dialogue: Wage determination and adjustment should be implemented through collective bargaining or a minimum wage system. Where government, workers and employers will participate.
Adopting an information-based approach: Wage determination should take into account the needs of workers and their families and economic factors.
Promoting equality and equal opportunities: Wage policies must ensure gender equality, equity and non-discrimination.
Use of correct information: Reliable data and statistics should be used in decision making.
Identifying the root causes of low wages: National policy should be formulated according to the specific context of each country. The root causes of low wages, such as informality, low productivity and undervaluation of service sector work, need to be tackled.
