UN warns of social unrest after staggering drop in global wages

Global wages fell in 2022 for the first time since the global financial crisis due to soaring living costs, threatening to worsen inequality and drive social unrest, the United Nations labour agency has warned.

Monthly wages dropped 0.9 percent in real terms in the first half of 2022 – the first negative wage growth since 2008, the International Labour Organization (ILO) said in its latest global wage report released on Wednesday.

Lower-income groups have been hit especially hard after suffering significant wage losses during the COVID-19 pandemic, according to the ILO’s Global Wage Report 2022–23.

Despite rises to keep up with inflation, the minimum wage fell in real terms from 2020-2022 in Bulgaria, Spain, Sri Lanka, South Korea, the United Kingdom and the United States, the ILO said.

Meanwhile, overall wages were lower in real terms in 2022 than in 2008 in Italy, Japan, Mexico and the UK.

The slump in wages comes despite rising productivity, with 2022 showing the biggest gap between real labour productivity growth and real wage growth in high-income countries since 1999, according to the report.
ILO Director-General Gilbert F Houngbo said the deterioration in real wages would likely continue without targeted policy responses by governments.

“This would increase the probability of a deeper recession, a risk that is already worsening due to the restrictive monetary policies adopted by central banks in their efforts to bring down inflation,” Houngbo said.

“This in turn would endanger the economic and employment recovery, further increasing inequalities and fuelling social unrest. In this time of growing social and economic uncertainties and insecurity, it is vital to rebuild and strengthen people’s sense of social justice and social cohesion.”

The war in Ukraine and pandemic-related supply chain bottlenecks have pushed up food and energy costs, sending inflation in many countries to its highest level in 40 years.Global inflation is expected to hit 8.8 percent by the end of 2022, according to the International Monetary Fund, before declining to 6.5 per cent in 2023 and 4.1 per cent in 2024.

By region, Eastern Europe and North America saw the sharpest declines in purchasing power, with real wages falling 3.3 percent and 3.2 percent, respectively, in the first half of 2022.

The European Union saw real wages fall 2.4 percent, while Latin America and the Caribbean recorded a 1.7 percent decline. Africa saw real wages shrink by 0.5 percent.

Asia and the Pacific, Central and Western Asia, and the Arab states saw wage growth rise by between 1.2 and 2.5 percent.

Several regions recorded real wage growth on paper during the height of the pandemic in 2020 and 2021, although the rise was largely driven by job losses among lower-income workers.

The ILO made a number of policy recommendations to tackle falling wages, including pay increases to match rising productivity, more generous adjustments to the minimum wage and greater international cooperation on global challenges such as climate change, essential healthcare and discrimination against women and girls.

“Shaping coherent policy responses within the multilateral system is indispensable to making progress toward more inclusive, resilient and equitable societies,” Houngbo said.

(Aljazeera)