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.
