Wage inequality drops in two-thirds of countries since 2000: ILO

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 percent to 1.7 percent since 2000, with low-income countries experiencing the sharpest reductions — between 3.2 percent and 9.6 percent annually.

High-income nations, on the other hand, have seen slower progress, with annual declines ranging from just 0.3 percent to 0.7 percent.

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."

Stark wage inequality

Global real wages grew by 1.8 percent in 2023 and are projected to rise by 2.7 percent 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 percent wage growth in 2023 compared to a 0.5 percent 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 percent of workers earn only 0.5 percent of the global wage bill, while the top 10 percent command nearly 38 percent.

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

Inclusive economic policies

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, formalise the informal economy to boost income security and utilise 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 prioritise inclusive economic policies to narrow wage gaps and improve living standards worldwide.