economy and politics

Wage inequality is decreasing, but the difference between what the best and lowest paid workers earn is abysmal

Wage inequality is decreasing, but the difference between what the best and lowest paid workers earn is abysmal

Wage inequality has decreased in about two-thirds of countries since 2000; however, Large pay gaps persist around the worldrevealed this Thursday a new report from the International Labor Organization (ILO).

The publication reports the growth of the average real world salary and the decrease in inflation, but clarifies that despite this positive trend, the levels of salary inequality are a “pressing political issue.”

According to the ILO, wage inequality decreased in many countries at an average rate between 0.5% and 1.7% annually, with the most significant declines in low-income countrieswhere they ranged between 3.2% and 9.6% in the last two decades.

In richer countries, however, the reduction is slowerfluctuating between 0.3% and 1.3% in upper-middle-income nations, and between 0.3% and 0.7% in high-income nations.

The decreases were more significant among salaried workers with higher incomes.

Inequality between regions

The study, which explains that Global wages have grown faster than inflationpoints to unequal wage growth between regions, with emerging economies ahead of advanced ones.

The ILO pointed out the salaried workers of Asia and the Pacific, Central and Western Asia, and Eastern Europe experienced their real wage increases at a faster rate than those in other parts of the world.

The director general of the ILO, Gilbert Houngbo, described the finding as positive, although he recalled that “millions of workers and their families continue to suffer from the cost of living crisis that has eroded their living standards, and that wage disparities between and within countries remain unacceptably high.”

Despite the progress made, the agency maintained that high levels of wage inequality continue to be a pressing problem.

The best paid 10% earn 38% of the salary mass, the lowest paid, 0.5%

The 10% of the lowest paid workers earn only 0.5% of the global wage bill, while the best paid 10% earn almost 38% of this wage bill. Wage inequality is greater in low-income countries, where about 22% of salaried workers are classified as poorly paid, the ILO said.

The study also details that women and wage workers in the informal economy are more likely to be among the lowest paidwhich “reinforces the need for specific actions to close wage and employment gaps and guarantee fair wages for all salaried workers.”

In other relevant information, the ILO indicated that one third of the workers are unsalaried workersand detailed that in most low- and middle-income countries, the majority are self-employed workers who only find opportunities to earn a living in the informal economy.

To address this reality, the organization advocates for national strategies aimed at reducing inequalities through strengthening wage policies and institutions. Equally important is designing policies that promote productivity, decent work and the formalization of the informal economy.

According to the report, reducing wage inequality requires both solid wage policies as structural support for equitable growth. “By addressing these challenges, countries can make real progress towards reducing wage gaps and promoting fair and sustainable economic growth for workers around the world,” he says.

Recommendations

In order to reduce wage inequality, the ILO recommended that countries:

  • Setting wages through social dialogue– Wages must be set and adjusted through collective bargaining or agreed minimum wage systems involving governments, workers and employers
  • Take a global approach: wage setting must take into account both the needs of workers and their families and economic factors
  • Promote equality and equal opportunities for treatment and results: salary policies must support gender equality, equity and non-discrimination
  • Use reliable data: Decisions must be based on reliable data and statistics
  • Address the root causes of low wages: National policies must reflect the specific context of each country and address the causes of low wages, such as informality, low productivity and the undervaluation of jobs in sectors such as the care economy

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