The story so far: The International Labor Organization (ILO) recently released two reports that give an indication of the global employment scenario post-pandemic. The “Global Wage Report 2022-2023: the impact of inflation and COVID-19 on wages and purchasing power” deals with the twin crises, inflation and the economic downturn, which has led to a “dramatic drop” in real monthly wages worldwide. The report attributes this to the war in Ukraine and the global energy crisis. Another report, “Asia-Pacific Employment and Social Outlook 2022: Rethinking sector strategies for a human-centered future of work”, indicates that the Asia-Pacific region lost around 22 million jobs in 2022. The Director General of the ILO, Gilbert F. Houngbo, said lower wages put millions of workers in dire straits. “Income inequality and poverty will increase if the purchasing power of the lowest earners is not maintained,” he warned.
What does the data show?
The ILO wage report looked at real and nominal wages of employees. The word “salary” has been defined as the total gross compensation, including regular bonuses, received by employees during a specified period for time worked (monthly for the report) as well as time not worked, such as annual leave paid and paid sick leave. Nominal wage data shows the figures adjusted after taking into account consumer price inflation, while real wage growth refers to the year-on-year change in real average monthly wages of all the employees. “In each edition of the Global Wage Report, the aim is to collect wage data from as many countries and territories (around 190) which are then grouped into five distinct regions,” the ILO said on the methodology of his report.
In India, nominal wages increased to ₹17,017 per month in 2021 from ₹4,398 in 2006. Data is from India’s Ministry of Statistics and Program Implementation. But when inflation is taken into account, real wage growth in India fell to -0.2% in 2021, from 9.3% in 2006. In China, growth fell to 5.6% in 2019 to 2% in 2022. In Pakistan, growth is -3.8%. Figures from Sri Lanka were not available. The negative growth in India started after the pandemic.
The report says the rising cost of living has the greatest impact on low-income people and their households, as they must spend most of their disposable income on essential goods and services, which typically experience increases in higher prices than non-essential items.
Are inequalities increasing?
At the Asia-Pacific level, only jobs in high-skilled occupations have seen a recovery from the COVID-19 crisis, which is true across all sub-regions. The ILO said it was raising concerns about rising inequality. Although there is an employment gain of 1.6% among high-skilled workers between 2019 and 2021, there is not as substantial a gain among low- to medium-skilled workers. Among the G-20 countries, the report notes a large gap in the average level of real wages between advanced G-20 countries and emerging G-20 countries like India. It is around $4,000 per month in advanced economies and around $1,800 per month in emerging economies.
What are the remedies of the ILO?
The report offers a set of policy options and responses to the cost of living crisis. Citing studies, the report says 75-95 million people have been pushed into extreme poverty during COVID-19. He said the negotiation process for future nominal wage adjustments should encompass a sufficiently broad but cautious price expectation. “This could help to preserve the standard of living of households – especially low-income households – against future unexpected increases in inflation, while avoiding an undesirable spiral of wage inflation,” he said. The report indicates that there is a need to strengthen labor market institutions and wage policies. The ILO states that the creation of decent formal wage jobs is a prerequisite for a fairer distribution of wages and income, and is a key factor for equitable and sustainable wage growth. He wants governments to focus on the gender pay gap because when women leave the workforce they are less likely to return than men. More importantly, the report indicates that a multilateral approach is the key to solving the crises around us. There is an urgent need to tackle the negative effects of climate change; growing inequalities; the poverty, discrimination, violence and exclusion suffered by millions of people, including the discrimination that women and girls continue to suffer in many parts of the world; the lack of vaccines and access to adequate sanitation and essential health care for all; and the growing digital divide between poor and rich countries.