Striking fall in wages could lead to social unrest, warns International Labour Organisation

The ILO report said average real wage index for India, in the category of emerging G20 economy, saw a decrease soon after the COVID-19 pandemic

December 02, 2022 09:25 am | Updated 09:26 am IST - New Delhi

Workers during a protest demanding implementation of minimum wages in Visakhapatnam. File photo

Workers during a protest demanding implementation of minimum wages in Visakhapatnam. File photo | Photo Credit: V. Raju

Inflation and a global slowdown in economic growth due to the war in Ukraine and global energy crisis are causing a “striking fall” in real monthly wages in many countries, says a report by the International Labour Organisation (ILO). In India too, the wages have come down from the pre-pandemic conditions, according to the data provided in the report. The crisis, the report said, was also reducing the purchasing power of the middle classes and hitting low-income households particularly hard.

The Global Wage Report 2022-23 on the impact of COVID-19 and inflation on wages and purchasing power, prepared by the ILO, was released in Geneva on Wednesday. The report said average real wage index for India, in the category of emerging G20 economy, saw a decrease soon after the pandemic. “Among the emerging G20 economies, China continues to dominate the ranking in real wage growth, with estimates showing that monthly wages there in 2022 were about 2.6 times their real value in 2008. Except for Mexico, in 2022 all emerging G20 economies exhibit average monthly wages that are higher in real terms than the baseline (2008),” the report said.

It added that despite more rapid wage growth among emerging G20 economies, there was still a significant gap between their average level of real wages and that of advanced G20 economies. “Conversion of all the G20 countries’ average wages into US dollars using exchange rates based on purchasing power parity yields a simple average wage of about US$ 4,000 per month in the advanced economies and about US$ 1,800 per month in the emerging economies,” it said.

The ILO estimated that global monthly wages fell in real terms to minus 0.9% in the first half of 2022. The United Nations body noted that it was for the first time in this century that real global wage growth has been negative. “Among advanced G20 countries, real wages in the first half of 2022 are estimated to have declined to minus 2.2%, whereas real wages in emerging G20 countries grew by 0.8%, 2.6% less than in 2019, the year before the COVID-19 pandemic,” the ILO said.

ILO Director-General, Gilbert F. Houngbo said multiple global crises had led to a decline in real wages. “It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” he said. “Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained. In addition, a much-needed post pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all,” he added.

The report said inflation was the major reason for decrease in income and the greatest impact was on low-income groups. Rising inflation had a greater cost-of-living impact on lower-income earners, the ILO said adding that they had to spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items. “Inflation is also biting into the purchasing power of minimum wages,” the report said.

“Although the recent health crisis and the war in Ukraine seem to be the key drivers of uncertainty at present, the fact is that over the past two decades the world has arguably been drifting in a direction that endangers the prospect of achieving prosperity and peace for all, as called for by the United Nations 2030 Agenda for Sustainable Development,” it added.

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