Wage inequality declined in two-thirds of countries since 2000 amid persistent challenges: ILO report

GENEVA

Wage inequality has declined in two-thirds of countries since the start of the 21st century, while there are also persistent challenges, the International Labour Organization’s (ILO) latest report said on Thursday,

The report revealed that wage inequality has decreased globally at an annual rate of 0.5% to 1.7% since 2000, with low-income countries experiencing the sharpest reductions -- between 3.2% and 9.6% annually. However, high-income nations have seen slower progress, with annual declines ranging from just 0.3% to 0.7%.

According to the report, even though wage inequality narrowed overall, decreases were more significant among wage workers at the upper end of the pay scale.

"The return to positive real wage growth is a welcome development," ILO Director-General Gilbert Houngbo said. "However, we must not forget 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."

Uneven wage growth across regions

Global real wages grew by 1.8% in 2023 and are projected to rise by 2.7% in 2024, the highest growth in over 15 years, the report found.

Yet, regional variations persist. Emerging economies have outpaced advanced ones, the report said, with G20 emerging economies recording a 6.0% wage growth in 2023 compared to a 0.5% decline in advanced G20 economies.

Meanwhile, workers in Asia, the Pacific, Central and Western Asia, and Eastern Europe have seen faster wage growth than those in other regions.

Regarding the persistent challenges, the report highlighted stark wage inequality despite positive trends.

Globally, the lowest-paid 10% of workers earn only 0.5% of the global wage bill, while the top 10% command nearly 38%.

Inequality is most pronounced in low-income countries, according to the report, where 22% of wage workers are classified as low-paid.

Also, women and informal economy workers are disproportionately affected, earning less and facing greater job insecurity. Meanwhile, the report said, self-employed individuals in low- and middle-income countries -- excluded from traditional wage statistics -- contribute to even higher measured income inequality.

To address these challenges, the ILO recommended that states strengthen wage-setting mechanisms through collective bargaining and minimum wage systems, promote equality and address gender and sectoral pay gaps, formalize the informal economy to boost income security and utilize reliable data to guide informed policy decisions.

"National strategies to reduce inequalities require strengthening wage policies and institutions," said Giulia De Lazzari, ILO economist and one of the main authors of the report. "But equally important is to design policies that promote productivity, decent work, and the formalization of the informal economy."

The ILO report urged governments and stakeholders to prioritize inclusive economic policies to narrow wage gaps and improve living standards worldwide.