Major slowdown in global wage growth, warns UN

A worker in India applying colour to strings used to fly kites. A UN report has revealed that global wage growth has slowed significantly, especially in developing nations. This has raised fears of growing inequality worldwide.
A worker in India applying colour to strings used to fly kites. A UN report has revealed that global wage growth has slowed significantly, especially in developing nations. This has raised fears of growing inequality worldwide.PHOTO: REUTERS

Decline could stoke inequality and undermine worldwide consumption, says report

GENEVA • Global wage growth has slowed significantly, a worrying development that could fuel further inequality and suppress consumption worldwide, a United Nations report has said.

A dramatic slowdown in the developing world was the key driver of the trend, the UN's International Labour Organisation (ILO) said.

The report, published every two years since 2008, looks at worker compensation in all regions and aims to offer a broad view of where the world is headed in terms of household income and consumer purchasing power.

Overall, "wage growth around the world has decelerated since 2012 from 2.5 per cent to 1.7 per cent in 2015, the lowest level in four years", the ILO said in a statement. ILO deputy director for policy Deborah Greenfield called those figures "a matter of major concern".

Following the 2008 financial crisis, global wage growth was sustained by strong performances in developing nations, most notably in places such as Brazil, India and South Africa.

That apparent "catching up" by poorer nations raised hopes of more global equality, said Ms Greenfield.

But that progress "has slowed down, perhaps even halted", she told reporters in Geneva, noting the exception of China where wages were still growing significantly faster than elsewhere.

Problems in developing nations have partly been driven by the collapse in oil and commodity prices, said the report's lead author, Mr Patrick Belser.

Wages in richer nations were growing at a better pace, the report found, although Ms Greenfield warned that progress there remained tenuous as "growing economic, social and political uncertainty" in the developed world could derail gains made.

The report also highlighted glaring gender pay gaps and discrepancies between executive and junior staff compensation.

In Europe, women were making 20 per cent less than men per hour on average, the ILO said. At the executive level, European women are paid roughly 50 per cent less than their male counterparts.

In an analysis of selected high-paying companies, the ILO found that the bottom 1 per cent of workers made an average of €7.10 (S$10.70) per hour, while the top 1 per cent of workers made €844 per hour.

"We don't see huge progress in dealing with inequality," Ms Greenfield said. "In fact, we see the reverse."

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 17, 2016, with the headline 'Major slowdown in global wage growth, warns UN'. Print Edition | Subscribe