Wage inequalities ‘stifling recovery’ – ILO

Downward pressures on wages are holding back economic recovery in the UK and other advanced countries, according to the latest edition of the International Labour Organization’s World of Work report. The ILO contrasts the position of most workers with that of top executives on 'elevated' pay packages, and calls for greater effort to tackle damaging inequalities.

Key findings

  • Income inequalities have increased in advanced economies over the past two years, against the backdrop of increasing global unemployment – predicted to rise from the current 200 million to nearly 208 million by 2015. Income inequalities rose between 2010 and 2011 in 14 of the 26 advanced economies surveyed, including France, Denmark, Spain and the United States. Inequality levels in seven of the remaining 12 countries were still higher than before the start of the crisis.
  • The size of middle-income groups in many advanced economies is shrinking, fuelled by long-term unemployment, weakening job quality and workers dropping out of the labour market altogether. On the other hand there is evidence that the pay of chief executive officers in many of those countries has once again soared, following a short pause in the immediate aftermath of the global crisis.
  • By contrast, most emerging and developing countries are experiencing rising employment and narrowing income inequalities compared with their high-income counterparts. However, the gap between the richest and poorest groups in most low- and middle-income countries remains wide. And many families who have managed to rise above the poverty line are at risk of lapsing back. This vulnerable 'floating group' – those just above the poverty level – increased from 1,117 million worldwide in 1999 to 1,925 million in 2010.
  • On the position in the UK, the ILO report expresses concern over rising long-term unemployment, and calls for action to strengthen the position of low-paid workers. It points out that real private sector wage growth has been negative since the onset of the crisis due to low nominal wage growth and high inflation: but that the pay of chief executives remains 'elevated' and close to levels attained in 2007. In 2011, CEOs of the 15 largest firms in the UK earned on average 238 times the annual earnings of the average worker.

The ILO Director-General, Guy Ryder, commented on the findings: 'These figures present a positive development in many parts of the developing world, but paint a disturbing picture in many high income countries, despite the economic recovery. The situation in some European countries in particular is beginning to strain their economic and social fabric. We need a global recovery focussed on jobs and productive investment, combined with better social protection for the poorest and most vulnerable groups. And we need to pay serious attention to closing the inequality gap that is widening in so many parts of the world'.

Source
World of Work Report 2013: Repairing the Economic and Social Fabric, International Labour Organization
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Publication date: 
Jun 3 2013