Inflation combined with slowing economic growth has pushed real wages down in many countries for the first time in more than 20 years. These fell by 0.9% during the first six months of 2022, the ILO said on Wednesday in Geneva.
Inflation affects the purchasing power of the middle classes and affects more widely low-income households who spend a large part of their income on essential products. Among the G20 states, real wages fell by more than 2% in advanced countries, compared to an increase of 0.8% in emerging countries, i.e. 2.6% less than before the pandemic.
Rich countries have had to deal more with inflation. Among the regions where a decline has been observed, it ranges from 0.5% in Africa to more than 3% in the north of the American continent, passing through 2.5% in the countries of western and central Europe. Europe and more than 3% in Eastern Europe, according to the International Labor Organization (ILO). On the other hand, increases were observed in the Arab States, by 1.2%, in Asia/Pacific, by 1.3% and in Central and Western Asia, by 2.5%.
Calls to maintain purchasing power
“The multiple global crises we face are driving down real wages,” said ILO Director-General Gilbert Houngbo. “They have placed tens of millions of workers in a dire situation.” In 2020 and 2021, real wages have increased. But this situation is due to the fact that the lowest paid workers have often lost their jobs, increasing the number for those who remain in the labor market, an official of the organization, Manuela Tomei, told the press. .
And the director general to call on his side to maintain the purchasing power of the lowest salaries to avoid an increase in poverty. This problem might also jeopardize the recovery following the coronavirus. Especially since the pandemic has already caused significant losses for workers. Inflation also affects the purchasing power of people paid the minimum wage, a system applied in 90% of member states, the ILO report also states.
This calls for urgent measures such as the adjustment of the rates of these remunerations. Among the other possibilities, he mentions the distribution of vouchers for low-income households or the reduction of VAT. What work to reduce the threat of recessions or the importance of these, says the organization.
