The global decline in worker wages in heavily industrialized economies may be linked — at least temporarily — to technological advancements such as automation and artificial intelligence in the workplace, according to a recent report by the United Nations International Labour Organization (ILO).

“Global labor income share, which is the proportion of total global income that goes to workers, is shrinking,” stated Celeste Drake, Deputy Director-General of the ILO.

“This means that even as workers contribute to a growing global economy, they’re taking home a smaller share of that growth. This needs to be changed because it’s increasing inequality, which will have a disproportionate effect on working people.”
Celeste Drake

The ILO’s latest data, drawn from 36 countries, reveals a concerning trend: total income globally declined by 0.6 percentage points between 2019 and 2022 and has since remained stagnant.

Although this drop may seem modest, it translates into an annual income shortfall of approximately $2.4 trillion. This decline aligns with a longer-term trend, showing a 1.6 percent decrease in income between 2004 and 2024.

Economic Inequality Poses Growing Challenges

Nearly 40 percent of this income reduction occurred during the COVID-19 pandemic between 2020 and 2022. Despite a surge in production output over the last two decades, incomes have not kept pace.

Between 2004 and 2024, workers’ output per hour increased globally by an impressive 58 percent. However, income grew by only 53 percent over the same period, creating a gap that contributes to the shrinking labor income share.

Steven Kapsos, Head of the Data Production and Analysis Unit at the UN agency, acknowledged this disparity: “That’s a very positive trend, that’s a big output,” he noted, but cautioned that the five percentage point gap between productivity growth and labor income growth is driving the decline in labor income share.

The ILO’s World Employment and Social Outlook report highlights the potential risks associated with this trend, particularly if governments fail to intervene with appropriate policies. The report warns that without such intervention, advancements in generative AI could further depress wages, exacerbating existing inequalities.

Kapsos emphasized the importance of aligning efforts to reduce these inequalities with the Sustainable Development Goals (SDGs) set by the international community. He pointed out that despite inflation rates decreasing over the past two years, labor income has remained stagnant, with no corresponding increase in income share as inflation eased.

To address this rising inequality by 2030, in line with the SDGs, the ILO recommends several policy actions. These include offering universal social protection to workers and establishing a decent minimum wage.

The organization also advocates for promoting policies that support freedom of association and collective bargaining, enabling workers and employers to negotiate how productivity gains are shared.

Youth Unemployment Remains High

The ILO report also sheds light on the persistent issue of youth unemployment. While the global rate of young people not employed has decreased slightly, from 21.3 percent in 2015 to 20.4 percent this year, the situation remains dire in certain regions.

The Arab States have the highest youth unemployment rate, with one in three young workers unable to find a job. In Africa, nearly one in four young people are unemployed, a figure that has remained unchanged for two decades.

Other regions facing significant youth unemployment include Asia and the Pacific, Latin America and the Caribbean, Europe and Central Asia, and Northern America.

A gender gap in youth unemployment is also evident, with nearly one in three young women unemployed, compared to almost one in eight young men.

As technological advancements continue to reshape the global economy, addressing these disparities and ensuring that workers receive a fair share of economic growth will be crucial to fostering a more equitable future.