Real wages are falling globally — for the first time this century — and look set to fall for the entirety of 2022, an International Labour Organization (ILO) report shows. And there’s little or no evidence of wages pushing inflation up.
In the first Global Wages Report for two years, the ILO shows global monthly average wages in the first half of 2022 were 0.9% lower in real terms than a year earlier. Outside China, where wages have proven to be more resilient, the fall was 1.4%.
The fall was sharpest in the developed world, where inflation picked up earlier. Among G20 developed economies, which account for about 60% of the world’s waged employees, real wages had fallen 2.2% year on year.
The ILO noted that the latest erosion of real wages was compounding the losses many workers had incurred during the pandemic. It also pointed to the longer-term stagnation in living standards in a few countries, including the UK, one of four G20 economies where wages are still lower in real terms than they were in 2008 when the global financial crisis hit.
Looking at a longer period, real wage growth among all G20 countries between 2008 and 2022 was highest in China, where real monthly wages in 2022 were equivalent to about 2.6 times their real value in 2008. In four countries — Italy, Japan, Mexico and the United Kingdom of Great Britain and Northern Ireland — it appears that real wages were lower in 2022 than in 2008.
The report’s lead author Rosalia Vazquez-Alvarez said that with inflation still stubbornly high, despite aggressive action from central banks, global wages were also likely to fall in real terms over 2022 as a whole. “Labour’s share [of global income] is declining,” she said, noting that productivity growth, measured in terms of output per worker, had in 2022 outstripped wage growth by the biggest margin since 1999.
The ILO said that where productivity was now outpacing pay, governments could do more to protect workers from the cost of living crisis — in particular by mandating higher minimum wages — without running the risk of a wage-price spiral.
“This erosion of real wages comes on top of some significant wage losses incurred by workers and their families during the COVID-19 crisis,” Vazquez-Alvarez noted. “Although average wages increased globally by 1.5% in 2020 and by 1.8% in 2021, the increase in 2020 at the height of the pandemic was largely due to job losses and the change in the composition of employment in some large countries, such as the United States of America.
“In these countries, a majority of those who lost their jobs and hence their earnings during the pandemic were low-paid wage employees, while their higher-paid counterparts remained employed, thereby increasing the estimated average wage.”
Exacerbating the decline in real wages is the increasing prevalence of wage theft globally. A survey by ADP Research based on responses from 32,000 workers shows 24% report always or often being underpaid, up from 20% last year. That includes one in nine Australian workers reporting they are “always” underpaid, twice as many in 2021.
In its recent annual report, the Fair Work Ombudsman reported initiating nearly twice as many prosecutions in 2021-22 (137) compared to the previous year, and compared to just 23 in the last non-pandemic year, 2018-19.
Italy, Japan, Mexico and the United Kingdom of Great Britain and Northern Ireland — it appears that real wages were lower in 2022 than in 2008.- Does not match the headline “Wages falling worldwide, made worse by rising wage theft” .
Australia’s biggest problem, we always hear that we are better than the rest of the world – referring to the UK and/or the US. Or we are better or just as bad as Europe. Despite Europe not being ONE country. There are 44 counties in Europe, and 28 in the EU. All these countries are very different. Throwing then all in one pot is a real bugbear of mine and lazy journalism. If we want Australia to be a mature and progressive country, we need to learn form the countries that doing things better than Australia. Would any Olympian ever say that they are doing well, as some other competitors doing worse or that they doing okay because others are just as poor performer as them ?
Gee, somebody ought to tell the OECD that they shouldn’t be comparing all these different countries.
You have the comfort of David Littleproud agreeing with you. He is on the record as saying that we shouldn’t be comparing ourselves with overseas countries. He sought to avoid the political embarrassment such comparisons bring. However, some may venture that it provides context, which our journalists often overlook.
If you read what I said, I am against treating the OECD as ONE country!
Sure, we should compare ourselves with other countries, and we should learn from the countries that are doing better. But OECD members are not all the same. The Organization for Economic Co-operation and Development (OECD) is a unique forum where the governments of 37 democracies with market-based economies collaborate to develop policy standards to promote sustainable economic growth. Further, Europe has 44 countries, but not all of them are in the EU. I know, it can be very confusing.
To simplify it if you talk about the Quad – it
is a 4-nation group, and I am sure you would not think of them as one country. Same,
AUKUS is a trilateral security pact between Australia, the United Kingdom, and the United
States.
In Germany recently a large group of climate activist blocked the entire autobahn (not just one lane) and the ambulance had problems to get through the crowed to an accident. A person died, hence there was a big outcry that activist had hindered the ambulance resulting in a death of a person. The activist did not get a harsh jail sentence and the ambulance rectified the media’s news by saying that the person died not due to the delay of the ambulance.
I am aware that the UK is bringing in harsher penalties for activist. The UK is part of Europe, but the UK is no longer a member of the EU (OECD). There are some countries within Europe, even with in the OECD (EU) that do not allow any from of protest, such as Poland or Hungry. Though those countries have undergone significant democratic backsliding, and have now authoritarian governments. I hope this makes it a bit clearer, and you understand why I get annoyed when Europe or the EU are referred to as if they are a single country.
Productivity gains means wage rises for employees is as big an economic myth as the trickle down effect.
The only gains from increases in productivity is to shareholders and CEOs
And there’s little or no evidence of wages pushing inflation up. Most Oz economists happily relate our inflation to supply chain costs and the Ukraine War. Blind Freddie can see inflation in Oz certainly hasn’t come from nine years of stagnant wages.
So when peak employer group representatives rant and rave that the ALP’s new IR multi sector / single sector bargaining system will increase inflation, where is the national discussion that:
Our media the LNP and business groups have pummeled us for decades that wages cause inflation, nothing else. It is now exposed as one of the great lies of modern politics and our media says nothing.
Think UK & NI is due to Brexit, while Italy and Japan have ageing populations, but Japan only has limited immigration vs. Italy accessing EU mobility to prop up working age & tax base; Mexico don’t know?
Even locally some commentators question why Australia’s growth has been tepid in past years (ex. Covid), it’s related to ageing population whereby working age has passed the ‘demographic sweet spot’ for more retirees or seniors, but the latter have done their significant investment and spending already when in working age cohort…..
China made everything cheaper and brought all the industrial pollution associated onto it’s own shores then sent it all out in containers for world wide distribution, meaning we didn’t need wage rises. Until money printing started to stick to things that weren’t consumable, like houses.China will go on putrifying the world and its own shores and that will keep wages down.
The reaction to climate change from younger generations watching older folk s..t in the group nest for their own shorter lived prosperity is making some traditional forms of propaganda and consumption harder to sell.
Wages don’t have to go up, housing and rent have to come down via legislation.