- Recently, the International Labour Organization(ILO) published the Global Wage Report 2020-21, which revealed the shocking facts of wage impact due to Covid-19 pandemic.
- The Global Wage Report – the seventh in the series – looks at recent trends in wages, the global economic and labour market context, and the impact that the pandemic has had on wages.
- The report also includes a number of policy recommendations to mitigate the negative impact of the crisis.
Recent Trends in Wages
- In the four years preceding the COVID-19 pandemic (2016–19), global wage growth fluctuated between 1.6 and 2.2 percent; when China is excluded from the sample, real wage growth in those four years fluctuated at a lower level, between 0.9 and 1.6 percent.
- In the first half of 2020, as a result of the COVID-19 crisis, a downward pressure on the level or growth rate of average wages was observed in two thirds of the countries; in other countries average wages increased, largely artificially as a reflection of the substantial job losses among lower-paid workers.
- The crisis disproportionately affected lower-paid workers, thereby increasing wage inequalities.
Minimum Wages and Inequality
- The extent to which a minimum wage may reduce wage and income inequality depends on at least three key factors: the effectiveness of minimum wages, the level at which minimum wages are set, and the characteristics of minimum wage earners.
- The report shows that minimum wages, statutory or negotiated, exist in 90 per cent of the 187 ILO Member States.
- The groups most frequently excluded from legal coverage of minimum wage systems are agricultural workers and domestic workers.
- Globally, the majority of wage earners paid at or below the hourly minimum wage are located in the lower tail of the distribution of household incomes, but the characteristics of minimum wage earners vary by country and by region.
Impact on Women Workforce
- The impact of the crisis had been different for women and men. Low-paid workers, disproportionately women, were the most affected by loss of working hours.
- The report estimated that women workers in a selection of European countries would have faced an 8.1% reduction in wages between the first and second quarters of 2020, as opposed to 5.4% for men without payment of wage subsidies.
- Such a discrepancy was mainly caused by reduced working hours, more than by the difference in the number of lay-offs. The wage bill lost as a result of the drop in working hours was 6.9 percent for women compared to 4.7 percent for men.
- Furthermore, women have also suffered from the unequal sharing of household work, exacerbated by the increased child-care needs during the pandemic
India Related Findings
- Informal workers in India suffered a 22.6% fall in wages, even as formal sector employees had their salaries cut by 3.6% on an average. Those in lower-skilled occupations lost more working hours than higher-paying managerial and professional jobs.
- Real wage growth in India was one of the lowest in the Asia Pacific, lower than even Pakistan, Sri Lanka, and Vietnam, according to the global report, Wage and minimum wage in the time of covid-19.
Suggestive Policy Measures
- In the near future, the economic and employment consequences of the COVID-19 crisis are likely to exert massive downward pressure on workers’ wages. Hence, adequately balanced wage adjustments, taking into account relevant social and economic factors, will be required to safeguard jobs and ensure the sustainability of enterprises.
- Adequate and balanced wage policies through strong and inclusive social dialogue, are needed to mitigate the impact of the crisis and support economic recovery.
- Adjustments to the rates to compensate for price inflation are essential for ensuring that low-paid workers and their families are able to maintain their living standards.
- In establishing adequate minimum wages, governments should make every effort to ensure the full consultation and, as far as possible, the direct participation, on an equal basis, of the social partners in the establishment and functioning of minimum wage systems.
- Furthermore, to be most effective, minimum wages must be accompanied by other policy measures that support the formalization of the informal economy, the creation of paid employment and the growth of productivity among sustainable enterprises. Minimum wages are only one in a set of policies – which include social protection and fiscal policies – that can be used to promote economic growth with social justice.
ILO’s Initiative against Minimum Wage
- In 2019, the ILO adopted the Centenary Declaration for the Future of Work, which calls for a human-centred approach to the future of work and, as part of this, for adequate wages for workers. The Declaration calls for the institutions of work to be strengthened to ensure adequate protection of all workers, and reaffirms the continued relevance of the employment relationship, while recognizing the extent of informality and the need to achieve transition to formality.
- The Minimum Wage Fixing Convention, 1970 (No. 131), setting an adequate minimum wage level should involve social dialogue and take into account the needs of workers and their families as well as economic factors.
Source: Civil Services Chronicle February 2021