Pandemic will push down global wage levels

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The Covid-19 crisis will inflict ‘massive downward pressure’ on wage levels globally, according to research from the International Labour Organisation.

The ILO found that in countries where strong measures were taken to preserve employment, the impact tended to be a drop in wages rather than large numbers of job losses.

In a third of countries for which data is available, wage levels appeared to increase, although the ILO said this was largely a result of many low-paid workers losing their jobs, skewing the average.

Women and low-paid workers have been disproportionately affected, it added. Based on a sample of 28 European countries, women lost 8.1% of wages during the second quarter of 2020, compared to 5.4% for men.

Those in lower-skilled occupations lost more working hours than those in managerial positions, the ILO found. Without temporary subsidies such as the UK’s furlough scheme, they would have lost around 17.3% of their wages.

The ILO calculated that in 10 of the European countries it looked at, wage protection schemes compensated for 40% of total wage bill loss, and 51% of the loss in earnings caused by a reduction in working hours.

ILO director-general Guy Ryder said the growing wage inequality caused by the pandemic “threatens a legacy of poverty and social and economic instability that would be devastating”.

“Our recovery strategy must be human-centred. We need adequate wage policies that take into account the sustainability of jobs and enterprises, and also address inequalities and the need to sustain demand.

“If we are going to build a better future we must also deal with some uncomfortable questions about why jobs with high social value, like carers and teachers, are very often linked to low pay.”

The ILO argues that minimum wage systems could play an important role in economic recovery.

It found that minimum wages are currently in place in 90% of ILO member states, although even prior to the pandemic 266 million people were earning less than this level, equivalent to 15% of all wage earners worldwide.

“Adequate minimum wages can protect workers against low pay and reduce inequality,” said Rosalia Vazquez-Alvarez, one of the authors of the report.

“But ensuring that minimum wage policies are effective requires a comprehensive and inclusive package of measures. It means better compliance, extending coverage to more workers, and setting minimum wages at an adequate, up-to-date level that allows people to build a better life for themselves and their families.”

She added that better compliance in developing and emerging countries would mean moving people away from informal work arrangements into formal work.

The ILO said that over the next decade, wage policy reform could make a significant contribution to countering the negative impact of the pandemic.

It could also be an “accelerator” for a number of the United Nations’ Sustainable Development Goals, including ending discrimination against women, bringing more of the world’s population above international and national poverty lines and halting child labour.