Global wages have experienced a steady rise over the past year, with the average pay increasing by 1.8% in 2023 and a further 2.7% in the first half of 2024, according to a report by the UN International Labour Organization (ILO).
This marks the most significant wage growth in over 15 years, driven by a robust global economic recovery post-COVID.
“If this trend is confirmed, it will be the largest gain in more than 15 years,” noted ILO Director-General Gilbert Houngbo at the launch of the ILO’s Global Wage Report in Geneva.
However, he cautioned that this positive trend is unevenly distributed across regions, reflecting significant disparities in economic progress.
Wage growth has varied dramatically between high-income and emerging economies. In advanced economies, pay increases were relatively subdued, averaging just 0.9% in 2023.
By contrast, emerging economies saw a nearly 6% rise in wages last year, following a modest 1.8% increase in 2022. This upward trajectory in emerging markets has continued into 2024, highlighting a faster recovery from the pandemic’s economic disruptions.
Despite these gains, low-income households remain burdened by persistently high inflation, which has outpaced wage growth in several regions. “Inflation – albeit reduced – remains a harsh reality in many emerging and developing countries,” Houngbo said, emphasizing that the cost of living continues to strain household budgets.
Globally, wage growth trends have diverged significantly by region. Average wages in Asia and the Pacific, Central and Western Asia, and Eastern Europe saw faster increases compared to other areas.
In 2022, while wages rose in Africa, Asia, and Central and Western Asia, declines were recorded in all other regions. Europe, for example, experienced real wage decreases of up to 3.7% in its northern, southern, and western areas.
By 2023, most regions saw a return to positive wage growth, except for Africa, Northern America, and parts of Europe.
In 2024, wages rose in all regions except African and Arab States, where they remained stable. Central and Western Asia led the way with a remarkable 17.9% increase, compared to a modest 0.3% rise in Northern America.
The Productivity-Wage Gap
While wage growth is evident, the ILO report highlights a troubling disconnect between productivity and pay.
In high-income countries, productivity gains outpaced wage increases by a significant margin between 1999 and 2024. Over this period, productivity rose by 29%, while wages increased by only 15%.
This disparity was particularly pronounced during global economic downturns, such as the 2008 financial crisis and the COVID-19 pandemic.
The imbalance underscores a structural issue where workers’ pay does not adequately reflect their contributions to economic output.
Encouragingly, wage inequality has declined in two-thirds of the countries surveyed by the ILO since the early 2000s. The report notes that low-income nations have seen the most significant reductions, with inequality decreasing at an annual rate of 3.2% to 9.6% over the past two decades.
In contrast, wage inequality in wealthier nations has remained relatively stable, decreasing annually by just 0.3% to 0.7%. These reductions were primarily observed among workers at the upper end of the pay scale, suggesting limited progress in addressing income disparities among lower-wage earners.
As such, as global economies navigate the challenges of inflation and recovery, the ILO’s findings underscore the need for targeted policies to ensure equitable wage growth and reduce inequality. The report also calls for continued efforts to align wages with productivity gains, particularly in wealthier nations where the gap remains stark.
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