The International Labour Organisation recently released the Global Wage Report 2018/19.
What are the highlights?
India recorded the highest average real wage growth in South Asia during 2008–17.
India led the average real wage growth in 2008–17 at 5.5 against a regional median of 3.7.
Following India was Nepal (4.7), Sri Lanka (4), Bangladesh (3.4), Pakistan (1.8) and Iran (0.4).
Workers in Asia and the Pacific have enjoyed the highest real wage growth among all regions over the period 2006–17.
This reflects more rapid economic growth than in other regions.
Countries such as China, India, Thailand and Vietnam are leading the way.
All emerging G20 countries except Mexico experienced significant positive growth in average real wages between 2008 and 2017.
Wage growth continues in Saudi Arabia, India and Indonesia, whereas in Turkey it declined to around 1% in 2017.
South Africa and Brazil have experienced positive wage growth starting from 2016.
This was notably after a phase of mostly zero growth during the period 2012–16, with negative growth in Brazil during 2015–16.
Russia suffered a significant drop in wage growth in 2015, owing to the decline in oil prices.
But since then, it has bounced back with moderate though positive wage growth.
The U.S. posted an unchanged 0.7% wage growth and Europe (excluding Eastern Europe) stalled at about zero last year.
Wages in developing countries are increasing more quickly than those in higher-income countries.
Pay rose by just 0.4% during last year in advanced economies, but grew at over 4% in developing countries.
The real wages almost tripled in the developing and emerging countries of the G20 between 1999 and 2017.
However, in the advanced economies of G20, the increase over the same period aggregated to a far lower 9%.
This is however seen positive in the sense of 'convergence' happening around the world.
Nevertheless, salaries are still far too low in the developing world.
The gaps are still significantly big as often the wage level is still not high enough for people to meet their basic needs.
Gender pay gap - For the first time, the ILO report also focuses on the global gender pay gap.
It notes that despite some significant regional differences, men continue to be paid around 20% more than women.
In high-income countries the gender pay gap is at its biggest in top-salaried positions.
In low and middle-income countries, however, the gap is widest among lower-paid workers.
Data suggests that traditional notions like differences in the levels of education play only a "limited" role in explaining gender pay gaps.
In many countries women are more highly educated than men but earn lower wages, even in the same occupational categories.
The wages of both men and women also tend to be lower in enterprises/occupations with a predominantly female workforce.
What was the driving factor for growth?
The report noted that a number of countries have recently undertaken measures to strengthen their minimum wage.
The prevailing view was to provide more adequate labour protection.
South Africa announced the introduction of a national minimum wage in 2018.
India is also considering extending the legal coverage of the current minimum wage from workers in ‘scheduled' occupations to all wage employees in the country.
What is the implication?
It is to be noted that the overall global wage growth declined to 1.8% in 2017 from 2.4% in 2016.
The obvious impact of this low pace of wage growth has been on global economic growth.
It's because the consumption demand was hurt by restrained spending by wage-earners.
So the acceleration of economic growth in high-income countries in 2017 was led mainly by higher investment spending rather than by private consumption.
There is intensification of competition in the wake of globalisation, accompanied by a worldwide decline in the bargaining power of workers.
This has resulted in a decoupling between wages and labour productivity.
The effect has been the weakening share of labour compensation in GDP across many countries, which remain substantially below those of the early 1990s.
Also, widening inequality is slowing demand and growth by shifting larger shares of income to rich households that save rather than spend.
For India, reaping the demographic dividend needs not only jobs, but wage expansion that is robust and equitable.
