Declining wages and purchasing power

(MainsGS3: Inclusive growth and issues arising from it.)

Context:

• The International Labour Organisation (ILO) recently released two reports that gave an indication of the global employment scenario post-pandemic.
• ILO Director-General Gilbert F. Houngbo said Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.

Global Wage Report :

• The ‘Global Wage Report 2022-2023: The Impact of inflation and COVID-19 on wages and purchasing power’ discuss the twin crises, inflation and economic slowdown, which created a “striking fall” in real monthly wages around the globe. 
• The ILO report on wages looked at the real and nominal wages of employees.
• In India, the nominal wages rose to ₹17,017 per month in 2021 from ₹4,398 in 2006. The data was taken from the Government of India’s Ministry of Statistics and Programme Implementation. 
• But when inflation is factored in, the real wage growth in India plunged to -0.2% in 2021 from 9.3% in 2006. 
• The report said the increasing cost of living has the greatest impact on lower-income earners and their households as they have to spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

Rising inequality:

• Another report, the ‘Asia-Pacific Employment and Social Outlook 2022: Rethinking sectoral strategies for a human-centred future of work’ stated that the Asia-Pacific region lost about 22 million jobs in 2022. 
• At the Asia-Pacific level, only the jobs in high-skill occupations saw a recovery from the COVID-19 crisis, which is true across all subregions.
•  The ILO said while there is an employment gain of 1.6% among high-skill workers between 2019 and 2021, there is no such substantial gain among low-to-medium-skill workers. 
• Among the G-20 countries, the report noted a significant gap in the average level of real wages between advanced G-20 countries and emerging G-20 countries such as India. 
• It is on the level of about $4,000 per month in advanced economies and about $1,800 per month in emerging economies.

Way forward:

• Citing studies, the report said that 75 to 95 million people were pushed into extreme poverty during COVID-19. 
• It said the bargaining process for future nominal wage adjustments should embrace a sufficiently large but prudent price expectation.
• This could contribute to safeguarding the standard of living of households  (particularly low-income households) against unexpected future inflation hikes, while avoiding an undesirable wage-inflation spiral.
• The ILO states that the creation of decent formal wage employment is a prerequisite for a more equitable distribution of wages and income, and is a key contributor to equitable and sustainable wage growth. 
• There is an urgent need to address the negative effects of climate change; increasing inequalities; the poverty, discrimination, violence and exclusion endured by millions of people.
• Further steps required to tackle the discrimination that women and girls continue to suffer in many parts of the world; the lack of vaccines and access to adequate sanitation and essential healthcare for all; and the growing digital divide between poor and wealthier countries.