Today ILO released the Global Wage Report 2014/15. It presents both the latest trends in average wages and an analysis of the role of wages in income inequality.
This ILO flagship report was produced by a large team of world experts under the direction of Philippe Marcadent, Patrick Belser, Kristen Sobeck and ultimately Sandra Polaski, ILO's Deputy Director General. The focus on inequality will make it interesting for many.
In most countries, the distribution of wages and paid employment has been a key factor in recent inequality trends. In developed economies where inequality increased most, this was frequently due to a combination of more wage inequality and job losses. In Spain and the United States, the two countries where this inequality between the top and bottom 10 per cent increased most, changes in the distribution of wages and job losses accounted for 90 per cent of the increase in inequality in Spain and 140 per cent of the increase in the United States. In developed countries where household income inequality increased, other income sources offset about one-third of the increase in inequality due to changes in wages and employment. A number of emerging and developing economies experienced declines in inequality. In these countries, a more equitable distribution of wages and paid employment was a predominant factor. In Argentina and Brazil, where inequality fell most, changes in the distribution of wages and paid employment accounted for 87 per cent of the decade-long reduction in top–bottom inequality in Argentina, as they did for 72 per cent in Brazil.
The growing gap between wages and productivity has translated into a declining share of GDP going to labour while an increasing share goes to capital, especially in developed economies. This trend means that workers and their households are getting a smaller share of economic growth while the owners of capital are benefitting more.
This highlights the importance of labour market institutions and policies – including minimum wages and collective bargaining – that have an effect on income distribution. They should be combined with other measures to reduce inquality, such as fiscal redistribution through taxes and social protection systems.
Coordinated strategies are also needed at the international level, given that many countries try to increase exports by repressing wages or reducing social benefits. Stagnant wage growth lowers demand, holds down economic growth, and increases the risk of deflation.
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.
From VOA: http://www.voanews.com/content/ilo-wage-growth-remains-below-pre-crisis-level/2546706.html