Wage drag

Wage drag

News

1. International Labour Organisations has recently released Global Wage Report for 2018/19

Important facts

2. Key finding of the report

• Global wage growth, adjusted for inflation, slowed to 1.8% in 2017, from 2.4% in 2016. this is the lowest rate since 2008.
• In the advanced G20 countries the pace eased to 0.4%, with the U.S. posting an unchanged 0.7% growth and Europe (excluding Eastern Europe) stalling at about zero.
• In the emerging and developing economies in G20, growth in wages slowing to 4.3%, from 4.9% in 2016.
• In the Asia and Pacific nations, where workers had enjoyed the biggest real wage growth worldwide between 2006 and 2017, it slid to 3.5% from the previous year’s 4.8%.
• During 2008-17, real wage growth in India stood at 5.5 per cent, highest among all the countries in southern Asia
• India and Pakistan had the highest gap of 34.5 per cent and 34 per cent respectively between what men and women earn. This wage gap was the worst among all the 73 countries for which data was compiled.

3. On growth:The ILO report observes that the acceleration of economic growth in high-income countries in 2017 was led mainly by higher investment spending rather than by private consumption.
4. On condition of workers in low- and middle-income countries:It reveals that real wages almost tripled in the developing and emerging countries of the G20 between 1999 and 2017, while in the advanced economies the increase over the same period aggregated to a far lower 9%. And yet, in many low- and middle-income economies the average wage, in absolute terms, was so low it was still inadequate to cover the bare needs of workers.
5. Impact of globalisation:The report also finds that due to intensification of competition in era of globalisation there is worldwide decline in bargaining power of labour.
6. ILO also finds the weakening share of labour compensation in GDP across many countries that “remain substantially below those of the early 1990s”.
7. The Washington-based Economic Policy Institute uses the U.S. example to argue that widening inequality is slowing demand and growth by shifting larger shares of income “to rich households that save rather than spend”.
8. Author also suggests that to reap the demographic dividend India need not only jobs, but wage expansion that is robust and equitable.