The International Labour Organisation (ILO)
warned Tuesday that millions of workers worldwide would likely see an erosion
of their wages in 2009 due to the global financial crisis, dpa reported.
In industrialized countries, wages would likely decline by 0.5 per cent. That
compares to growth of 0.8 per cent in 2008.
Adding to the bad news, the ILO reported that wages fall at a faster rate than
gross domestic product (GDP) contraction in bad economic years, but grow at a
slower rate than GDP in good years. Indeed, for every 1 percentage point of GDP
growth, salaries only increased by 0.75 percentage point.
"In years of expansion, wages grow slower than GDP," said Manuela
Tomei, one of the authors of the ILO's Global Wage Report. "In years of
contraction, wages decline faster than GDP," she continued.
If wages were to fall, she warned, purchasing power would be decreased, further
adding to the world's economic woes.
The global economy grew at a 4 per cent annual rate between 2001 and 2007, but
wages only increased by 1.9 percent or less in half the world's countries, the
report said.
In China, Russia, and other so-called "transition countries," growth
in real wages reached 10 per cent or more during that period. In the United States, Japan and Spain, real wage growth was close to zero.
During that period, globally, minimum wages rose by an average 5.7 per cent
annually in real terms.
However, inequalities between the rich and poor inside countries continued to
grow. Germany, Poland and the United States led the way among developed
nations, with the gap between their rich and poor widening. China also showed increased signs of a widening gap.
Women also continued to make less than men, especially in Asia, the report
stated.
The ILO called for steps to "prevent a further deterioration in the share
of wages relative to the share of profits in GDP."
It also said effective minimum wages, which need to be enforced, should be
instituted to protect "the most vulnerable" and that collective
bargaining was a good tool to ensure wages were more aligned with overall
growth.
The report noted that collective bargaining power has decreased in many
countries in recent years.
"The legitimacy of globalization," said Juan Somavia, the ILO's
chief, depends on "greater fairness in outcomes."
Last week the organization warned that unemployment next year would rise
globally and that the number of "working poor," those who have jobs
but make less than 2 dollars a day, would also increase.
The Organisation for Economic Co-operation and Development's latest outlook
projected that member countries would see 8 million more unemployed people next
year and a drop in overall economic activity.