Global wage growth in 2017 fell to its lowest rate since 2008, far below levels before the global financial crisis, according to a new International Labour Organisation (ILO) report.
The ILO Global Wage Report 2018/19 examines the evolution of real wages around the world, giving a unique picture of wage trends globally and by region. The findings are based on data from 136 countries.
The report finds that in real terms – adjusted for price inflation – global wage growth declined to 1.8% in 2017 from 2.4% in 2016.
In analysing wage growth, the report finds that in advanced G20 countries, real wage growth declined from 0.9% in 2016 to 0.4% in 2017. By contrast, in emerging and developing G20 countries, real wage growth fluctuated between 4.9% in 2016 and 4.3% in 2017.
“It’s puzzling that in high-income economies we see slow wage growth alongside a recovery in GDP growth and falling unemployment. And early indications suggest that slow wage growth continues in 2018,” said ILO director-general Guy Ryder.
“Such stagnating wages are an obstacle to economic growth and rising living standards. Countries should explore, with their social partners, ways to achieve socially and economically sustainable wage growth.”
In the last 20 years, average real wages have almost tripled in emerging and developing G20 countries, while in advanced G20 countries they have increased by just 9%, the report showed. But, in many low- and middle-income economies, wage inequality remains high and wages are frequently insufficient to cover the needs of workers and their families.
Among advanced economies, the Republic of Korea leads, where wage growth has increased most rapidly and by a total of 15% in the period 2008–17. It is followed in second place by Germany.
Australia, the US, France and Canada have also posted positive wage growth in the period leading up to 2017, although with more modest aggregate outcomes.
Italy and the UK have suffered losses in real wage growth of about 5% over the period 2008–17, while in Japan, overall wage growth over the period has been close to zero, the report said.
The report showed the marked and continuing rising trajectory of China among emerging economies, where average real wages almost doubled between 2008 and 2017. In fact, all emerging G20 countries except Mexico experienced significant positive growth in average real wages
over this period.
Wage growth continues in Saudi Arabia, India and Indonesia, whereas in Turkey it declined to around 1% in 2017.
South Africa and Brazil have experienced positive wage growth starting from 2016 after a phase of mostly zero growth during the period 2012–16.
Over a 10 year period, through to the end of 2017, the report shows how poorly South Africa has performed, compared to its peers in Sub-Saharan Africa.
It also showed how the country’s nominal wage has increased over the last five years:
- 2013: R15 070
- 2014: R15 959
- 2015: R16 957
- 2016: R18 035
- 2017: R19 571
As at May 2018, that number has grown to R20 176, according to StatsSA.
The report also identified the inequality that exists in wages, as represented by the Gini coefficient, using survey data on wages from 64 countries which, together, reflect the wage distribution from some 75% of the world’s wage employees.
The data illustrates wage inequality, comparing countries to others at a similar level of economic development. The Gini coefficient summarises the relative distribution of wages in the population, with lower values (closer to zero) indicating lower levels of inequality and higher values (closer to 100) indicating higher levels of wage inequality.
There is also some variation within groupings: among high-income countries, the Gini coefficient ranges from a low of 19.5 for Sweden to a high of 38.7 for Chile. Among low-income countries, the United Republic of Tanzania has a Gini coefficient of 53.6, while South Africa – classified as upper-middle income – scores a Gini coefficient of 63.9.
According to these estimates, South Africa, Namibia, the United Republic of Tanzania and Malawi are the countries with the highest levels of wage inequality among the 64 countries considered.
The report did note however, that South Africa has announced the introduction of a national minimum wage in 2018, with a view to providing more adequate labour protection.