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Ensuring decent wages

Nov 26, 2008

Owing to economic slowdown, people at the bottom of the wage ladder will be squeezed hardest by decreasing rates of pay, says ILO’s Global Wage Report 2008/09. It calls for complementing minimum wages with collective bargaining policies to protect the purchasing power of the most vulnerable.

Global Wage Report 2008/09: Minimum Wages and Collective Bargaining - Towards Policy Coherence

Publisher: International Labour Organization (ILO), 2008

The global economic crisis is expected to lead to painful cuts in the wages of millions of workers worldwide in the coming year, according to the ILO's Global Wage Report 2008/09.

Based on latest IMF growth figures, the ILO forecasts that the global growth in real wages will at best reach 1.1 per cent in 2009, compared to 1.7 per cent in 2008, but wages are expected to decline in a large number of countries, including major economies. Overall, wage growth in industrialised countries is expected to fall, from 0.8 per cent in 2008 to -0.5 per cent in 2009.

Global wage report 2008.jpg

While inflation was low and the global economy grew at a four per cent annual rate between 2001 and 2007, growth in wages lagged behind, increasing by less than two percent per year in half of the world’s countries, the report says.

There were wide regional differences. The growth in real wages was about one per cent per year or less in most developed and Latin America countries, but reached 10 per cent or more in China, Russia and a number of other transition countries.

The report also shows that since 1995, inequality between the highest and lowest wages has increased in more than two-thirds of the countries surveyed, often reaching socially unsustainable levels.

Among developed countries, Germany, Poland and the United States are amongst the countries where the gap between top and bottom wages has increased most rapidly. In other regions, inequality has also increased sharply, particularly in Argentina, China and Thailand.

Some of the countries which have succeeded in reducing wage inequality include France and Spain, as well as Brazil and Indonesia, though in these latter two countries inequality remains at a high level.

The pay gap between genders is still high and closing only very slowly. Although about 80 per cent of the countries for which data are available have seen an increase in the ratio of female to male average wages, the size of change is small and in some cases negligible.

In the majority of countries, women’s wages represent on average between 70 per cent and 90 per cent of men’s wages, but it is not uncommon to find much lower ratios in other parts of the world, particularly in Asia.

Low coverage of collective bargaining remains a challenge, and the current minimum wage systems leave much room for improvement. In countries like India and Pakistan, the minimum wage systems have not functioned as intended. 

The report recommends the following measures:

  • Workers and employers organisations' should be encouraged to negotiate. The share of workers wages in GDP has been falling while the returns on capital have been rising. This pattern of rising inequality cannot continue.
  • Minimum wage levels should be increased wherever possible to protect the most vulnerable workers.
  • Minimum wages and wage bargaining should be complemented by income support measures, such as food subsidies and cash transfers.
Source : ILO
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