Wage cuts for millions likely next year, UN labour agency warns

Wages for millions of workers around the world will be slashed next year because of the current global financial turmoil, the United Nations International Labour Office (ILO) cautioned in a new report today.

“For the world’s 1.5 billion wage-earners, difficult times lie ahead,” said ILO Director-General Juan Somavia, with a slowdown in growth and volatile food and energy prices dampening the real wages of many workers, both poor and middle class.

Tensions could intensify over the pay cuts, the “Global Wage Report 2008/2009” warned, with wages expected to decline in many countries, including major economies.

The ILO forecasts that real wage growth will reach 1.1 per cent at best next year, with growth in industrialized countries predicted to drop from a slight rise of 0.8 per cent this year to a fall of 0.5 per cent in 2009.

The agency said that this wage downturn comes on the heels of a decade where wages did not keep pace with economic growth. Between 1995 and 2007, wages only rose 0.75 per cent for every 1 per cent of annual GDP growth per capita.

The report also reported that the gap between the highest and lowest wages has shot up in more than two-thirds of countries surveyed, in many cases reaching socially unsustainable levels. Germany, Poland and the United States are among the countries where the disparity between the top and bottom incomes has widened the most.

The gap in wages between men and women is still large and narrowing very slowly, the ILO reported. In most nations, women’s pay averages between 70 and 90 per cent of that of men, but much lower ratios are not uncommon in places such as Asia.