Crisis to take toll on pay: ILO

Crisis to take toll on pay: ILO


Stop the pain!: A worker, holds a cardboard of a screaming mouth, during the weekly demonstration over the global financial crisis in central Reykjavik on November 22. The ILO said the economic downturn will erode the wages of millions of workers. Picture: AFP
GENEVA

Thursday, November 27, 2008

ECONOMIC turmoil will erode the wages of millions of workers in 2009, fanning the flames of global recession, the International Labour Organisation (ILO) yesterday said.

Inflation-adjusted pay in rich nations will fall 0.5 per cent in the coming year the first wage decrease since before 2001 after having increased 0.8 per cent this year, according to new estimates from the United Nations agency.

Developing country wages should prove more resilient, led by continued gains in China and India, the ILO said.

On a global basis, it estimated real wages will rise 1.1 per cent in 2009, compared with 1.7 per cent in 2008.

"For the world's 1.5 billion wage earners, difficult times lie ahead," ILO Director-General Juan Somavia said in the Global Wage Report, whose comparable data only stretches back to 2001.

Somavia, a Chilean, called for strong collective bargaining to counter any decrease in wages linked to the world's financial and economic crises that the ILO has previously said will wipe out 20 million jobs by the end of 2009.

In previous periods of contraction, every one percentage point drop in gross domestic product (GDP) per capita brought about a 1.55 percentage point decline in average wages, making it even harder for people to spend and invest, according to ILO data.

"If this pattern were to be followed in the rapidly spreading global downturn, it would deepen the recession and delay the recovery," Somavia said.

But even when economic growth rates were buoyant, the ILO report said wages have failed to keep pace.

For each one percentage point of GDP growth from 1995 to 2007, average wages only increased 0.75 percentage points, with pay rates largely failing to increase in line with productivity growth levels, it found.

Inequalities between top and bottom wages have also risen, most notably in the US, Germany, Poland, Argentina, China and Thailand, the ILO said.

France, Spain, Brazil and Indonesia were found to have reduced those gaps somewhat in recent years.

Women's wages represent an average of 70 to 90 per cent of men's wages in most major economies, though some Asian nations have larger disparities, the report said.

People at the bottom of the wage ladder will be squeezed hardest by decreasing rates of pay in the coming period of economic contraction, according to ILO expert Manuela Tomei.

"If they fall too much, this will make the crisis even worse," she told a news briefing in Geneva.

Greater efforts to empower workers and enact minimum wage laws should help more people weather the coming storm, the ILO concluded.

"We think that it is important to encourage collective bargaining and social dialogue," Tomei said.

There have been a spate of job cuts from companies worldwide who have been hit hard by the financial turmoil.

International recruitment company Manpower had said employee numbers will be cut sharply in many Western nations as companies pare costs to survive the global financial crisis.

Reuters, AFP