Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

[op-ed snap] Wage drag: on ILO’s Global Wage Report


Mains Paper 3: Economy | Development & employment

From the UPSC perspective, the following things are important:

Prelims level: Global Wage Report, ILO

Mains level: Fall in wages of workers across the globe and its impact on overall economy


ILO report on wages

  1. The International Labour Organisation’s Global Wage Report has put into sharp relief one of the biggest drags on global economic momentum: slowing wage growth
  2. Global wage growth, adjusted for inflation, slowed to 1.8% in 2017, from 2.4% in 2016
  3. This is the lowest rate since 2008
  4. Across a majority of geographies and economic groupings, wage expansions were noticeably tepid last year

Impact of slow wage growth

  1. The obvious impact of this low pace has been on global economic growth with consumption demand hurt by restrained spending by wage-earners
  2. The acceleration of economic growth in high-income countries in 2017 was led mainly by higher investment spending rather than by private consumption
  3. In many low- and middle-income economies the average wage, in absolute terms, was so low it was still inadequate to cover the bare needs of the worker

Reasons for this phenomenon

  1. The intensification of competition in the wake of globalisation, accompanied by a worldwide decline in the bargaining power of workers has resulted in a decoupling between wages and labour productivity
  2. The share of labour compensation in GDP across many countries has been weakening
  3. The Washington-based Economic Policy Institute uses the U.S. example to buttress the argument that widening inequality is slowing demand and growth by shifting larger shares of income “to rich households that save rather than spend”

Way forward for India

  1. For India’s policymakers, the message is clear: to reap the demographic dividend we need not only jobs but wage expansion that is robust and equitable
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