A new report from the International Labour Organization (ILO) reveals encouraging progress in reducing wage inequality, yet significant disparities persist. According to the Global Wage Report 2024-25, wage inequality has decreased in two-thirds of countries since 2000. Still, these gains are not equally shared, and inequality remains a critical issue worldwide.
From 2000 onward, wage inequality has steadily decreased in many countries, with reductions ranging from 0.5% to 1.7% annually. This trend is particularly noticeable in low-income nations, where inequality has dropped by an average of 3.2% to 9.6% per year over the past two decades. Yet, in wealthier countries, the pace of improvement has been much slower, with annual reductions between 0.3% and 1.3%.
Despite overall progress, wage inequality is still pronounced. The wealthiest 10% of workers earn nearly 38% of the global wage bill, while the lowest 10% earn just 0.5%. In low-income countries, nearly a quarter of workers are considered low-paid, highlighting the stark contrast in earnings.
THE GENDER AND INFORMAL ECONOMY DIVIDE
Women and workers in the informal economy are disproportionately affected by wage inequality. They are more likely to occupy low-paying jobs. This reinforces the need for targeted policies that address gender gaps. These policies must ensure fair wages for all workers, including those in non-traditional employment.
THE INFORMAL ECONOMY: A KEY FACTOR IN WAGE INEQUALITY
The ILO report also underscores the significance of the informal economy, particularly in low- and middle-income countries. In these regions, many workers are self-employed, with limited access to formal job markets. As a result, labour income inequality in these areas is higher than in countries where wage workers dominate. This issue is broader and requires a comprehensive approach. The approach must include both wage workers and the self-employed.
REAL WAGE GROWTH: POSITIVE BUT UNEVEN GLOBALLY
The report also highlights a global rise in real wages, with a 1.8% increase in 2023 and a projected 2.7% growth for 2024. This marks the highest wage growth in over 15 years, after a decline of 0.9% in 2022 when inflation outpaced wages. Despite this global recovery, wage growth has been uneven. Emerging economies, particularly those in the G20, have seen robust wage increases, with real wages rising by 6.0% in 2023. Conversely, advanced G20 economies experienced wage declines for two consecutive years, underscoring the gap between developing and developed regions.
REGIONAL WAGE GROWTH: DISPARITIES ACROSS CONTINENTS
Wage growth patterns differ significantly by region. Wage workers in Asia and the Pacific saw the fastest increases in real wages. Those in Central and Western Asia and Eastern Europe also experienced rapid growth. Meanwhile, other regions, like Northern and Southern Europe, continue to grapple with slow or negative wage growth. The report stresses that the return to positive real wage growth is a welcome sign. Yet, millions of workers continue to suffer from a rising cost of living. This rise undermines their gains.
POLICY RECOMMENDATIONS: REDUCING INEQUALITY THROUGH INCLUSIVE GROWTH
The ILO stresses the importance of targeted wage policies to address inequality and ensure inclusive economic growth. Key recommendations include:
- Social Dialogue in Wage Setting: Wages should be determined through collective bargaining. Alternatively, agreed minimum wage systems should involve governments, employers, and workers.
- Informed Wage Decisions: Wage-setting must consider both the economic climate and workers’ needs.
- Promoting Gender and Equality: Policies should focus on gender equality and non-discrimination in the workplace.
- Using Strong Data: Wage policies should be based on reliable statistics and data to ensure fairness.
- Addressing Low Pay Causes: Countries should tailor national policies to tackle issues such as informality, low productivity, and under-compensated sectors like the care economy.
