Erosion In Real Incomes

ILO Wage Report

Atanu Chakravarty

International Labour Organisation (ILO) has published its latest report: ‘Global Wage Report—2022-23, The impact of Inflation and COVID-19 on wages and purchasing power’. The 148- page report has vividly narrated the impact on wages and purchasing power across countries and regions. The most startling revelation in this report is, for the FIRST TIME IN THIS CENTURY, Global real wage growth has entered into the negative territory, while real productivity has continued to touch new heights! The global monthly wages fell in real terms to 0.9 per cent in the first half of 2022. If China, where wage growth is higher than in most other countries is excluded, the report mentions, the fall in real wages during the same period is estimated at 1.4 percent! The report continues, “2022 shows the largest gap recorded since 1999 between real productivity growth and real wage growth in high- income countries".

Among the G-20 countries, which account for some 60 percent of the world's wage employees, real wages in the first half of 2022 are estimated to have declined to 2.2 percent in advanced economies, while wage growth in emerging economies slowed but remained positive at 0.8 per cent. This stark reality is a pointer that nominal wages have not been adjusted sufficiently in the first half of 2022 to offset the rise in the cost of living. The fact of the matter is this erosion of real wages affects ALL WAGE EARNERS across the board. Greater impact fell upon the low-income people who spend a higher proportion of their disposable incomes on essential goods and services, the prices of which are increasing faster than of non-essential items in most countries.

The report has categorically mentioned the key factor behind the decline in the total wage bill, particularly during 2020 and the first quarter of 2021 was loss in employment. The groups that suffered most were low-wage earners, informal workers and women wage earners in particular. Furthermore, during the cruelest months of pandemic, the report finds, total wage bill declined most at the lower end and the households that were forced to go into debt for survival, now face the double whammy of repaying their debts at higher interest rates while facing sharp dip in incomes.

Between 2008 and 2022, real wage growth among all G-20 countries was highest in China, where real monthly wages in 2022 were equivalent to about 2.6 times their real value in 2008.

In all previous Global Wage Reports, ILO pointed out, average wage growth has lagged behind average labour productivity growth since early 1980's in several large developed economies. ILO has noted, in 52 high-income countries, real wage growth has been lower than productivity growth since 2000. In 2022, the gap between productivity growth and wage growth reached its widest point since the start of twenty-first century, with productivity growth 12.6 percentage points above wage growth.

Inflation has eaten up the real wages accompanied by significant wage losses incurred by workers and their family members during the pandemic. Coupled with job losses, shorten hours worked and adjustments in hourly wages during the crisis resulted in an accumulation of lost earnings for wage employees and their families in many countries. Wage employees in informal sector were worst affected in comparison to the employees in formal employment. ILO report also found employment losses (including jobs and hours worked) from 2020 to 2022 were greater among women, particularly during 2022.

Recently, the World Economic Forum ranked India at 134 out of 146 countries in its Global Gender Gap (GGG) Index for 2022. It is the worst performer in the world in the ''health and survival" sub index where it is ranked 146. India also ranks poorly among its neighbours and is behind Bangladesh (71), Nepal (96), Sri Lanka (110), Maldives (117) and Bhutan (126). Only Iran (143), Pakistan (145), and Afghanistan (146) perform worse than India in South Asia.

With great concern, ILO commented that the deterioration of workers’ real incomes will go on unabated and lead to a fall in aggregate demand, which in turn would increase the probability of deeper recession, endanger economic and employment recovery, further increasing inequalities and giving rise to social unrest.

To stem this rot, ILO has suggested that minimum wages must be adjusted regularly to take into account the needs of workers and their families, along with economic factors. Strong social dialogue, including collective bargaining, which the present Central Government in India has put in the back-burner, can be instrumental in achieving wage adjustments during a crisis, ILO emphasised.

Neo-liberal economy has exposed its real face. The global supply chain is under deep stress, and severe recession is looming large with more and more lay-offs, wage squeeze and curtailment of union rights.

Working people have to fight back for decent wage. They are fighting in Britain, France, Greece and elsewhere. Workers even in advanced countries are increasingly taking to streets and resorting to strikes to protest against decline in real wage and price rise of essential commodities.

Up to half a million teachers, university staff, train drivers and civil servants in the UK went on a strike in the largest co-ordinated action for years amid high inflation and disputes over pay.

What is happening in France deserves serious attention. The international media may say hardly a word, but that does not mean that these days France is not being shaken by the biggest social eruption of the last several decades! On January 31, the demonstrations against Macron’s notorious pension reform were the most massive in the century for 30 years (a total of 2.5 million protesters according to the unions) bigger even than those of the historic, victorious and enduring mobilisation of 1995 which accelerated the fall of Chirac! Today France looks like a volcano about to erupt. The persons in authority are more interested in promoting arms business against the backdrop of Ukraine-Russia war while keeping the police force on high alert all the time to tackle the demonstrators demanding better pay and social security. Workers’ movement in France means a lot to European wage earners in general. After all France has been for some centuries the permanent social and revolutionary “barometer” of the whole of Europe.

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Vol 55, No. 34, Feb 19 - 25, 2023