Warning of fall in real wages from 'multiple global crises'

International Labour Organisation says middle-class purchasing power has been reduced, with low-income households hit particularly hard

Director-General of the International Labour Organisation Gilbert Houngbo, speaks in Berlin. Getty Images

A slowdown in economic growth at a time of rising inflation, driven in part by the war in Ukraine and the global energy crisis, has triggered a striking fall in real monthly wages in many countries.

A report from the International Labour Organisation said on Wednesday that the crisis is reducing the purchasing power of the middle classes and hitting low-income households particularly hard.

Manuela Tomei, the body's assistant director-general for governance, rights and dialogue; and Rosalia Vazquez-Alvarez, an ILO econometrician and wage specialist, presented the annual wage findings at a press briefing.

In advanced Group of 20 countries, real wages in the first half of 2022 are estimated to have declined to minus 2.2 per cent.

Meanwhile, real wages in emerging G20 countries grew by 0.8 per cent, 2.6 per cent less than in 2019, the year before the Covid-19 pandemic.

“The multiple global crises we are facing have led to a decline in real wages. It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” said ILO Director-General Gilbert Houngbo.

“Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.

“In addition, a much-needed post pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”

Last year, the ILO warned of the disparity of the response to the pandemic and the long-run scarring that could result.

It said vaccination delays around the world could cut working hours by 4.6 per cent, or the equivalent of 130 million full-time jobs, compared with the fourth quarter of 2019.

An optimistic scenario forecasts a 1.3 per cent decline if the pandemic is controlled and consumer and business confidence continue to improve.

“The signs of recovery we see are encouraging but they are fragile and highly uncertain, and we must remember that no country or group can recover alone,” said former ILO director-general Guy Ryder.

The tentative signs of a labour market recovery come after the pandemic shut workplaces, forcing many to work from home. The slowdown affected incomes, led to job losses and pushed millions into poverty.

The ILO is promoting a Global Accelerator that aims to galvanise the creation of 400 million jobs, including in the green, digital and care economies, and the extension of adequate social protection to the four billion people currently without coverage.

This would support a shift to a proactive approach to managing economic, social and environmental crises, and the just transition required to tackle climate change.

Guy Ryder speaks at the World Government Summit in Dubai. Victor Besa / The National

Its 2021 analysis, “Covid-19 and the world of work”, said that the Covid-19 pandemic is set to cut working hours by 3 per cent, the equivalent of 90 million full-time jobs, compared with pre-pandemic levels.