In News:

A new report from the International Labour Organization (ILO) reveals that wage inequality has decreased in about two-thirds of all countries since 2000. Despite this positive trend, significant wage differentials persist worldwide.

Global Wage Inequality Trends:

• Wage inequality has decreased in about two-thirds of all countries since 2000.
• Average Annual Decrease in Wage Inequality:
  • Ranges from 0.5 to 1.7% globally, depending on the measure used.
  • More significant reductions have been observed in low-income countries, where the decrease has ranged from 3.2 to 9.6% over the past two decades.
• Wealthier Countries: Wage inequality has decreased at a slower pace:
  • Upper-middle-income countries: annual decrease of 0.3 to 1.3%.
  • High-income countries: annual decrease of 0.3 to 0.7%.

Global Real Wage Growth:

• Global real wages grew by 1.8% in 2023, with projections reaching 2.7% growth in 2024 (highest increase in over 15 years).
• This marks a recovery from the negative global wage growth of -0.9% in 2022 due to high inflation rates.

Regional Wage Growth:

• Emerging Economies: Saw stronger wage growth than advanced economies.
  • Emerging G20 economies: 1.8% growth in 2022 and 6.0% growth in 2023.
• Advanced Economies: Faced real wage declines.
  • G20 advanced economies: Declined by -2.8% in 2022 and -0.5% in 2023.
• Fastest Wage Growth: Observed in regions like Asia-Pacific, Central and Western Asia, and Eastern Europe.

Wage Inequality Persistence:

• Income Distribution: The lowest-paid 10% of workers earn just 0.5% of the global wage bill, while the highest-paid 10% earn nearly 38%.
• Wage Inequality in Low-Income Countries: Particularly high, with nearly 22% of wage workers classified as low-paid.
• Women and Informal Economy Workers: More likely to be among the lowest-paid workers, underscoring the need for targeted actions to close wage and employment gaps.

Non-Wage Workers:

• Globally, one in every three workers is a non-wage worker.
• In low- and middle-income countries, many workers are self-employed in the informal economy, which skews overall income inequality measures.
• Income inequality in these regions is higher when including self-employed workers, especially those in informal employment.

Policy Recommendations:

• Targeted Policies: To reduce wage inequality, countries need stronger wage policies and structural support for equitable growth.
• Focus Areas:
  • Promote productivity and decent work.
  • Formalization of the informal economy to help reduce income inequality.
• Inclusive Growth: The ILO emphasizes that national strategies should aim for inclusive economic growth to achieve fair wages and reduce wage gaps.

Key ILO recommendations include: 

• Setting wages through social dialogue: wages should be set and adjusted through collective bargaining or agreed minimum wage systems involving governments, workers and employers.
• Taking an informed approach: wage-setting should take into account both the needs of workers and their families and economic factors.
• Promoting equality, and equal opportunity of treatment and outcomes: wage policies should support gender equality, equity and non-discrimination.
• Using strong data: decisions should be based on reliable data and statistics.
• Addressing root causes of low pay: national policies should reflect each country’s specific context and address the causes of low pay such as informality, low productivity and the under-valuing of jobs in sectors such as the care economy.