Severe inflationary crisis brings striking fall in real wages to many countries: UN report

By Peter Kenny

GENEVA (AA) – Severe inflationary crisis combined with a global slowdown in economic growth -- driven partly by the Ukraine war and the global energy crisis -- is triggering a striking fall in real monthly wages in many countries, a UN report said Wednesday.

According to a new International Labour Organization (ILO) report, the crisis is reducing the purchasing power of the middle classes and hitting low-income households particularly hard.

The Global Wage Report 2022-2023: The Impact of Inflation and COVID-19 on Wages and Purchasing Power estimates that global monthly wages fell in real terms to minus 0.9% in the first half of 2022.

ILO said this is the first time in this century that real global wage growth has been negative.

“The multiple global crises we face have led to a decline in real wages. It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” said ILO Director-General Gilbert F. Houngbo.

- Income inequality

“Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained. In addition, a much-needed post-pandemic recovery could be put at risk,” he said.

Houngbo said this could fuel further social unrest worldwide and undermine the goal of achieving prosperity and peace for all.

Among advanced G20 countries, real wages in the first half of 2022 are estimated to have declined to minus 2.2%, whereas real wages in emerging G20 countries grew by 0.8%, 2.6% less than in 2019, the year before the COVID-19 pandemic.

The cost-of-living crisis comes from significant wage losses for workers and their families during the COVID-19 turmoil, which significantly impacted low-income groups in many countries.

The report shows that rising inflation has a greater cost-of-living impact on lower-income earners.

Those earners spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

The report says that inflation is also biting into the purchasing power of minimum wages.

Estimates show that despite minor adjustments, accelerating price inflation is quickly eroding the actual value of minimum wages in many countries for which data is available.

“We must place particular attention to workers at the middle and lower end of the pay scale,” said Rosalia Vazquez-Alvarez, one of the report’s authors, at a UN press conference.

“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic.”