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Economic meltdown to result in wage cuts: ILO

Special Correspondent

NEW DELHI: 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 a new report released by the International Labour Office (ILO).

“For the world’s 1.5 billion wage-earners, difficult times lie ahead,” says ILO Director-General Juan Somavia.

“Slow or negative economic growth, combined with highly volatile food and energy prices, will erode the real wages of many workers, particularly the low-wage and poorer households. The middle classes will also be seriously affected.”

The report, entitled the Global Wage Report 2008-09, warns that tensions are likely to intensify over wages. Based on the 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. The report shows that this bleak outlook follows a decade in which wages failed to advance in lockstep with economic growth.

According to the report, between 1995 and 2007, each additional 1 per cent in the annual growth of GDP per capita led to on average only a 0.75 per cent increase in the annual growth of wages. As a result, in almost three-quarters of countries worldwide the labour share in GDP has declined.

While inflation was low and the global economy grew at a 4 per cent annual rate between 2001 and 2007, growth in wages lagged behind, increasing by less than 2 per cent per year in half of the world’s countries.

There were wide regional differences. The growth in real wages was about 1 per cent per year or less in most developed and Latin American 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.

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