Context:
According to a recent report by the International Labour Organization (ILO), there has been a promising decline in wage inequality in two-thirds of countries since 2000.
More on the News
- The report is titled ‘Global Wage Report 2024-25: Is wage inequality decreasing globally?’.
- It gives a unique picture of wage trends globally, by region and at the country level.
Key Findings
Global real wage growth:
- It grew by 1.8% in 2023, with projections for 2024 showing a 2.7% increase.
Regional differences:
- Emerging G20 economies saw real wages rising by 6.0% in 2023.
- Advanced G20 economies experienced a decline in real wages by 0.5% in 2023.
Global decline in wage inequality:
- It decreased at an average annual rate of 0.5 to 1.7 %.
Regional differences:
- Low-Income Countries: Significant reductions in wage inequality were seen, with annual decreases ranging from 3.2% to 9.6%.
- Wealthier Countries: In high and upper-middle-income countries, reductions in wage inequality were slower, ranging from 0.3% to 1.3% annually.
Persistent wage disparities:
- The lowest-paid 10% of workers earn just 0.5% of the global wage bill, while the highest paid 10% earn nearly 38%.
- High-wage earners saw a higher rate of decrease in wage inequality compared to low-wage earners.
- Wage inequality highest in low-income countries, with 22% of wage workers are classified as low-paid.
Decoupling between productivity and wages:
- Despite a 29% rise in productivity in high-income countries between 1999 and 2024, real wages have only risen by 15%, highlighting a failure to share productivity gains equitably with workers.
Minimum Wage Adjustments:
- Around 60% of countries adjusted their minimum wage in 2022, but only about 25% of these increases kept pace with inflation.
- In 2023, 55% of countries saw real increases in minimum wages, though many did not fully compensate for past declines.
Persistent gender wage gap:
- Women, especially in lower-middle-income countries, remain disproportionately affected by wage inequality due to overrepresentation in informal, precarious and low-paid work.
Indian Scenario:
- Between 2008 and 2018, the share of low-paid wage workers in India declined at an average annual rate of 6.3%, while low-paid non-wage workers decreased by 12.7%.
- Combined, both categories saw a decline of 11.1% annually over the 10 years.
- The share of low-paid wage workers — those earning less than 50% of the median hourly wage in the country — stands at 9.5% in India. On the other hand, it is Pakistan (9.4%), Nepal (10.5%), Bangladesh (11.2%), Bhutan (13.7%), and much higher in Sri Lanka (25.9%).
The Palma ratio
- The report employs the Palma ratio to measure wage inequality.
- It is calculated by dividing the share received by the richest 10% by the share of the poorest 40%.
- The lower the ratio is, the lower the inequality is.
International Labour Organization (ILO)
- A specialized agency of the United Nations promoting social justice, human rights, and labour rights.
- Created in 1919 as part of the Treaty of Versailles that ended World War I.
- It became the first specialized agency of the UN in 1946.
- Its unique tripartite structure gives an equal voice to workers, employers and governments providing a unique platform for promoting decent work for all women and men.