Global Monthly Wages Fell In Real Terms To 0.9% in Q1 2022 -Report

The International Labour Organization (ILO) in its latest report has revealed that a severe inflationary crisis combined with a global slowdown in economic growth driven in part by the war in Ukraine and the global energy crisis is causing a striking fall in real monthly wages in many countries.

According to the report, the crisis is reducing the purchasing power of the middle classes and hitting low-income households particularly hard.

The Global Wage Report 2022-2023: The Impact of inflation and COVID-19 on wages and purchasing power, estimates that global monthly wages fell in real terms to minus 0.9 per cent in the first half of 2022 the first time this century that real global wage growth has been negative.

Among advanced G20 countries, real wages in the first half of 2022 are estimated to have declined to minus 2.2 per cent, whereas real wages in emerging G20 countries grew by 0.8 per cent, 2.6 per cent less than in 2019, the year before the COVID-19 pandemic.

“The multiple global crises we are facing have led to a decline in real wages. It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” said ILO Director-General, Gilbert F. Houngbo. “Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.

In addition, a much-needed post-pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”

On inflation which has a greater impact on low-wage earners, the report noted that the cost-of-living crisis comes on top of significant wage losses for workers and their families during the COVID-19 crisis, which in many countries had the greatest impact on low-income groups.

The report shows that rising inflation has a greater cost-of-living impact on lower-income earners. This is because they spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

Inflation is also biting into the purchasing power of minimum wages, the report says. Estimates show that despite nominal adjustments taking place, accelerating price inflation is quickly eroding the real value of minimum wages in many countries for which data is available.