Conditions of Work and Employment Branch (TRAVAIL)
22 March 2013
Sangheon Lee
Research and Policy Coordinator
International Labour Office

The Global Wage Report 2012/13 is the third edition of the
ILO’s biennial ILO flagship report on wages
 Part I presents global and regional estimates of growth in average wages, and also highlights other relevant trends.
 Part II is on “equitable growth” and analyses the causes and consequences of trends in “labour income share”
(the share of labour compensation in national income)
 Research undertaken by an international project group lead by
Marc Lavoie and Engelbert Stockhammer
 With critical inputs from Ozlem Onaran
 Part III discusses possible policy implications.
Conditions of Work and Employment Branch (TRAVAIL)

Conditions of Work and Employment Branch (TRAVAIL)

 Weakening recovery from the global economic crisis
 Stark differences between weaker advanced and better-performing emerging economies
Annual average growth rates, 1995-2012
(GDP at constant prices)
Conditions of Work and Employment Branch (TRAVAIL)

 Negative repercussions of the global financial crisis for labour markets
Total unemployment rates in the world and in developed economies, 2005–11 (as % of labour force)
 Unemployment in developed economies remains high.
Conditions of Work and Employment Branch (TRAVAIL)

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We look at real average monthly wages – or the gross remuneration of paid employees.
All wage data are in real terms (adjusted for inflation).
Our data-base contains wage data for 124 countries and territories that account for 94.3 % of the world’s employees and
97.7% of the global wage bill.
Regional and global growth rates are a weighted average of the national real growth rates.
The ‘size weight’ is the country’s share in the global wage bill.
Response weights correct for non-response bias.
Conditions of Work and Employment Branch (TRAVAIL)

Annual average global real wage growth, 2006–11 (%)
 Global wage growth remains far below precrisis level
 If China is excluded, global wages have been almost flat in
2008, 2009 and 2011.
* Annual growth rates published as "provisional estimates” (based on coverage of c.75 %).
Note: Global wage growth is calculated as a weighted average of year-on-year growth in real average monthly wages in 124 countries, covering 94.3% of all employees in the world
(for a description of the methodology, see the Technical appendix IV).
Source: ILO Global Wage Database.
Conditions of Work and Employment Branch (TRAVAIL)

 “Double-dip” in developed economies with falling real wages in
2009 & 2011.
 Solid performance in Asia and other developed regions.
Conditions of Work and Employment Branch (TRAVAIL)
Annual average real wage growth by region,
2006–11 (%)

 China’s wage growth carries big weight in the Asia figure.
 If China is excluded, real wages in the rest of Asia are below
2007 level.
 Some questionmarks about
India’s data.
Annual average real wage growth in Asia, 2006–11 (%)
Conditions of Work and Employment Branch (TRAVAIL)

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Are wages “overshooting” (higher than labour productivity)?
But the labour income share is falling?
This puzzle is related to wage statistics in China
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Real growth rates of 12.9 % (2006),
13.4 % (2007), 10.7 % (2008), 12.6 %
(2009) and 9.8 % (2010).
But they refer to average wages of employed persons in urban units.
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Coverage is ca. 130.5 million workers in urban units (as of 2010).
Wage series excludes 158.9 million workers in Township and Village
Enterprises (as of 2010).
Conditions of Work and Employment Branch (TRAVAIL)

Some caveats in interpreting global and regional trends:
 National Statistical Offices use different concepts and methodologies, so wage levels are not always comparable (though this has less impact on trends).
 Bias due to a composition effect: If low-wage workers lose their jobs, average wages rise – even if no individual worker obtained a pay rise.
 Changes in monthly average wages reflect (a) changes in the hourly wage rate, and (b) changes in the number of hours worked.
Conditions of Work and Employment Branch (TRAVAIL)

Conditions of Work and Employment Branch (TRAVAIL)

Conditions of Work and Employment Branch (TRAVAIL)

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The broken linkage is translated into declining labour income share
It may affect negatively economic growth:
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Level
Stability
Conditions of Work and Employment Branch (TRAVAIL)

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What happened? Labour income share tends to decline in both developed and developing countries
Why? A wide range of factors played a role, but policy changes
(towards deregulation and financialization) as well as globalization are particularly important. These changes contributed to weakening workers’ bargaining power
What economic consequences?: Falling labour income share tends to lower and unstable economic growth with some country exception (e.g., China), but, globally this is not a viable option
Then, what to do? “Rebalancing” is needed at both national and global levels, which requires strengthening labour market and social security policies as well as taxation and financial regulation
Conditions of Work and Employment Branch (TRAVAIL)

 Reconnecting wages and productivity
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Coordinated policy actions at multiple levels (including global coordination)
Strengthening labour market institutions
 Beyond labour markets
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Financial regulation
Taxation and social security
 For developing countries
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Reaching other earners (self-employed and informal)
Improving productivity
Implementing social security schemes
Conditions of Work and Employment Branch (TRAVAIL)

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The report does NOT argue for “unconditional” wage growth, BUT the need for re-linking wages and productivity
 GWR examines the economic consequences of the “broken linkage”
The much-needed “re-balancing” in the labour income share does not mean ONLY wage increases
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Labour income share is the sum of wages and EMPLOYMENT
Also the dimension of distribution or inequality
 Reforms in other markets (including financial) are critical
Conditions of Work and Employment Branch (TRAVAIL)