Global Wage Report 2020/21

Context: Recently released report by the International Labour Organisation, revealed the shocking facts of wage impact due to Covid-19 pandemic.

Background: The Global Wage Report looks at recent trends in wages, the global economic and labour market context, and the impact that the pandemic has had on wages. The report also includes a number of policy recommendations to mitigate the negative impact of the crisis.

In the four years preceding the COVID-19 pandemic ( Ie 2016–19), global wage growth fluctuated between 1.6 and 2.2 per cent, when China is excluded from the sample, real wage growth in those four years fluctuated at a lower level between 0.9 and 1.6 per cent. In the advanced G20 economies, real wage growth fluctuated between 0.4 and 0.9 per cent, while in emerging G20 countries , it was rising more rapidly, between 3.5 and 4.5 per cent annually.

Wages & Inequality

In the first half of 2020, as a result of the COVID-19 crisis, a downward pressure on the level or growth rate of average wages was observed in two thirds of the countries for which recent data are available, in other countries average wages increased, largely artificially as a reflection of the substantial job losses among lower-paid workers.

In times of crisis, average wages can be significantly skewed by sharp changes in the composition of employment. The impacts of the crisis on total wages have fallen differently on men and women, the latter being disproportionately affected.

Women and lower-paid workers have disproportionately borne the brunt of the decrease in wages due to the COVID-19 crisis as their working hours were reduced, according to the Report 2020-2021.

The global wage growth fluctuated between 1.6% and 2.2% in the four years preceding the pandemic, that is 2016 to 2019.

The report stated that globally, 266 million people (15 per cent of all wage earners) were earning less than the hourly minimum wage even before the onset of the COVID-19 pandemic.

This was partly because many countries excluded agricultural and domestic workers from their coverage and partly because of the large numbers working informally where the rules are not enforced.

Impact on Women Workforce

The average wages in two-third countries fell or grew more slowly in the first six months of 2020 due to the novel coronavirus disease (COVID-19) pandemic. Low-paid workers, disproportionately women, were the most affected by loss of working hours, according to a report.

The ILO report said the impact of the crisis had been different for women and men. The report estimated that women workers in a selection of European countries would have faced an 8.1% reduction in wages between the first and second quarters of 2020, as opposed to 5.4% for men without payment of wage subsidies.

Such a discrepancy was mainly caused by reduced working hours, more than by the difference in the number of lay-offs. The wage bill lost as a result of the drop in working hours was 6.9 per cent for women compared to 4.7 per cent for men.

Impact on Informal workers

The report said that the Informal workers in India suffered a 22.6% fall in wages, even as formal sector employees had their salaries cut by 3.6% on an average.

Report found that not all workers were equally affected by the crisis. Those in lower-skilled occupations lost more working hours than higher-paying managerial and professional jobs.

Real wage growth in India was one of the lowest in the Asia Pacific, lower than even Pakistan, Sri Lanka, and Vietnam, according to the global report, Wage and minimum wage in the time of covid-19.

Countries the world over, or parts thereof, either delayed, froze or rolled back announcements of a minimum wage hike in 2020, ILO said by citing Punjab’s decision to withdraw its announcement on minimum wage.

Using data from the group of 28 European countries, the report showed that without temporary subsidies, the lowest paid 50 per cent of workers would have lost an estimated 17.3 per cent of their wages.

The impact on women was worse than that on men, stated by the report. Estimates found that without wage subsidies, women would have lost 8.1 per cent of their wages in the second quarter of 2020 compared to 5.4 per cent for men. Such a discrepancy was mainly caused by reduced working hours more than by the difference in the number of lay-offs.

Women were over-represented among workers earning minimum wage or less. Sectors such as leisure, tourism and hospitality, which were among the worst hit, typically employ more women.

Adequacy of Minimum Wage Levels

The Minimum Wage Fixing Convention, 1970 (No. 131), setting an adequate minimum wage level should involve social dialogue and take into account the needs of workers and their families as well as economic factors.

The report also looked at wage trends in 136 countries in the four years (2016-19) preceding the pandemic. It found that global wage growth fluctuated between 1.6 and 2.2 per cent.

Wages increased most rapidly in Asia and the Pacific and Eastern Europe and slowly in North America and northern, southern and western Europe.

In countries where strong measures were taken to preserve employment, the effects of the crisis were felt primarily as falls in wages rather than massive job losses. However, Temporary wage subsidies put in place by governments have helped in limit the rise in inequality, but in the 10 countries for which figures were available.

Conclusion & Way forward

Adequate and balanced wage policies through strong and inclusive social dialogue, are needed to mitigate the impact of the crisis and support economic recovery.

In the near future, the economic and employment consequences of the COVID-19 crisis are likely to exert massive downward pressure on workers’ wages. Hence, adequately balanced wage adjustments, taking into account relevant social and economic factors, will be required to safeguard jobs and ensure the sustainability of enterprises.

While at the same time protecting the incomes of workers and their families, sustaining demand and avoiding deflationary situations.

Adjustments to the rates to compensate for price inflation are essential for ensuring that low-paid workers and their families are able to maintain their living standards.

Connecting the Article

Question for Prelims : Which of the following report published by the International Labour Organization ?

1. World Employment and Social Outlook
2. World Social Protection Report
3. Global Wage Report

Select the correct answer using the code given below:

(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Question for Mains : What are the main functions of International Labour Organization ? Explain its significance for the good governance in India.