Global Wage Report 2022-2023 – UPSC Notes

The International Labour Organization (ILO) recently released the Global Wage Report 2022-2023. This ILO flagship report examines the evolution of real wages, giving a unique picture of wage trends globally and by region.

About the Global Wage Report 2022-2023

On 30 November 2022, the ILO released one of its flagship reports titled: “Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power“.

This year’s Global Wage Report, the eighth in the series, shows an in-depth observed analysis of how the COVID-19 pandemic crisis, followed by the cost-of-living crisis, has impacted wages and purchasing power across countries and regions.

The 2022-23 edition included evidence on how wages have evolved through the COVID-19 pandemic and how the current inflationary context is biting into real wage growth in most regions of the world.

The report shows that for the first time in the 21st century, real wage growth has fallen to negative values, while at the same time, the gap between real productivity growth and real wage growth continues to widen.

The Global Wage Report 2022-23 analysis the evolution of the Real total wage bill from 2019 to 2020 to present how its different components (nominal wages, employment, and inflation) have changed during the COVID-19 pandemic and the cost-of-living crisis.

The 2022-23 report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 have contributed to rising income inequality in several regions of the world.

Key Findings of the Global Wage Report 2022-23

Since the previous edition of the Global Wage Report published two years ago, the world has been confronted with several overlapping crises: the COVID-19 pandemic, the rise in the cost of living that began in 2021 and the outbreak of war in Ukraine in 2022.

Impact of Inflation

This cost-of-living crisis comes on top of significant losses in the total wage bill for workers and their families during the COVID-19 pandemic, which in several nations had a tremendous impact on low-income groups.

The available evidence for 2022 proposed that rising inflation is causing real wage growth to drop into negative figures in several countries, reducing the purchasing power of the middle class and hitting low-income groups particularly hard.

Increasing inflation has a greater cost-of-living impact on lower-income earners because they spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

Global Wage Trends

The 2022-23 report estimates that global monthly wages declined in real terms to -0.9% in the first half of 2022, the first negative global wage growth recorded since the first edition of the Global Wage Report in 2008. This drop is the first negative growth of real global wages in the 21st century.

If China, where the wage rate is higher than most other countries, is excluded from the global computation, the drop in real wages is estimated at -1.4% during the first half of 2022.

Among the G20 countries, which account for around 60% of global wage employees, the real wages in the first half of 2022 are estimated to have dropped to -2.2% in advanced economies. In contrast, the wage growth in emerging economies slowed but remained positive at 0.8%.

The year 2022 recorded the Biggest gap between real labour productivity growth and real wage growth in high-income countries since 1999.

Regional Wage Trends

The Global Wage Report 2022-23 shows that in the first half of 2022, inflation rose proportionately faster in high-income countries than in low-and middle-income countries (LMIC), leading to the following Regional Real wage trends:

  • In Northern America (Canada and the United States), the average real wage growth slid to zero in 2021 and declined to -3.2% in the first half of 2022.
  • In Latin America and the Caribbean, the real wage growth dropped to -1.4% in 2021 and -1.7% in the first half of 2022.
  • In the European Union, where job retention schemes and wage subsidies largely protected employment and wage levels during the COVID-19 pandemic, the real wage growth rose to 1.3% in 2021 but dropped to -2.4% in the first half of 2022.
  • In Eastern Europe, the real wage growth slowed down to 4.0% in 2020 and 3.3% in 2021 and dropped to -3.3% in the first half of 2022.
  • In Asia and the Pacific, the real wage growth increased to 3.5% in 2021 and slowed down to 1.3% in the first half of 2022.
    • When China is excluded from the computations (considering the considerable weight the country has in the region), the real wage growth increased by much less, at 0.3% in 2021 and 0.7% in the first half of 2022.
  • In Central and Western Asia, the real wage growth increased strongly by 12.4% in 2021 but slowed down to 2.5% in the first half of 2022.
  • In Africa, evidence suggests a drop in real wage growth to -1.4% in 2021 and a decline to -0.5% in the first half of 2022.
  • In the Arab States, wage trends are tentative, but estimates point to low wage growth of 0.5% in 2021 and 1.2% in 2022.

Gender Pay Gaps

The Overall gender pay gap does not seem to have changed significantly since the years immediately before the COVID-19 pandemic outbreak. The estimates presented in the Global Wage Report 2018-19 showed a global average gap of about 20%, based on data from 80 countries.

The 2021-22 Global Wage Report examines the evolution of gender pay gaps among 22 countries, finding very little change between 2019 and 2021-22.

As the Gender pay gap remains persistently high across countries and regions, more efforts are required to tackle gender inequalities in the labour market.

Measures to maintain living standards

The study shows an urgent need to apply well-designed policy measures to help maintain the purchasing power and living standards of wage workers and their families.

Adequate adjustments of minimum wage rates could be an effective tool, given that 90% of ILO Member States have minimum wage systems in place.

Other policies that can ease the impact of cost-of-living crises on households include measures targeting specific groups, such as offering vouchers to low-income families to help them buy essential goods or cutting Value Added Tax (VAT) on these goods to reduce the burden inflation places on households while also helping to bring down inflation.

Source: International Labour Organization (ILO)

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