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New Global Wage Report 2010/11 is available!

Asian wage growth remains positive despite economic crisis - But country-level picture mixed, concern about growing inequality, “flying” top and “collapsing bottom” – New ILO report says

BANGKOK (ILO News) – The worldwide financial and economic crisis cut global wage growth by half in 2008 and 2009, however in Asia wage growth slowed but remained positive, says a new report by the International Labour Office (ILO).

Growth in average monthly real wages in Asia fell from 7.2 per cent in 2007 to 7.1 per cent in 2008. In 2009 the provisional estimate for wage growth is 8 per cent – which would be by far the best performance of any region in the world.

However these figures are heavily influenced by China (which accounts for more than half of total wage employment in Asia); other countries had a much more mixed experience. For example, Japan saw real wages fall nearly 2.0 per cent in both 2008 and 2009. In the Philippines and Malaysia real wages fell by more than 4 per cent in 2008, and in Thailand they fell by almost 2 per cent in 2009.

Globally, growth in average monthly wages slowed from 2.8 per cent in 2007 (the eve of the crisis) to 1.5 per cent in 2008 and 1.6 per cent in 2009. If China is excluded, the global average wage growth drops to 0.8 per cent in 2008 and 0.7 per cent in 2009.

The “Global Wage Report 2010/2011 – Wage policies in times of crisis” analyzes data from 115 countries and territories, covering 94 per cent of the approximately 1.4 billion wage earners worldwide. In Asia wage earners account for about 35 per cent of the employed population.

The report – the second issued by the ILO on wages since 2008 – says that the overall short-term impact of the crisis on wages should be looked at within the context of a long-term decline in the share of wages in total income, a growing disconnect between productivity growth and wages, as well as widespread and growing wage inequality.

The largest part of this increase in inequality is due to top earners “flying away”, but another part was due to the “collapsing bottom”, where the gap between median and low-paid (defined as less than two-thirds of median wages) workers increased.

Many countries have seen an increase in the share of low-wage employment in the past 15 years, including Australia, China (among non-migrant workers), Indonesia, Japan, Korea and New Zealand and the Philippines. In Korea 25 per cent of full-time workers are now in low wage employment and in the Philippines 15 per cent of all employees are in low wage employment.

Low pay also tends to be concentrated in certain groups, such as those with low education levels, insecure jobs, workers in small enterprises, youth, women and minorities – ethnically, racially or immigrants. In China migrant workers are more than three times as likely to be low paid than local workers.

Consequently, the Report says, “there is a risk that a large number of people will feel left behind. This, in turn, may lead to increased social tensions, particularly if certain groups of people consider that they have paid a high price during the crisis while the benefits of the earlier expansionary period – and perhaps future recovery – have been unevenly shared”.

“This study shows another face of the lingering employment crisis”, said ILO Director-General Juan Somavia. “The recession has not only been dramatic for the millions who lost their jobs, but has also affected those who remained in employment by severely reducing their purchasing power and their general well-being.”

Looking ahead, the report says the pace of the recovery will depend, at least partly, on the extent to which households are able to use their wage to increase consumption, boosting aggregate demand. It points out that both collective bargaining and minimum wages can help to achieve more inclusive labour markets, and balanced and sustainable recovery.

“Wage stagnation was an important trigger of the crisis and continues to weaken recovery in many economies”, added Mr Somavia. “We are facing a world of deficient aggregate demand amidst large unmet needs and continued high unemployment. Policy makers must turn their attention to employment and to wage determination to strengthen the tepid recovery and address longer term social and economic imbalances”.

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