Rising inflation causes value of wages to fall – ILO




Well-designed policy measures are needed urgently to prevent the deepening of existing levels of poverty, inequality and social unrest, according to the latest ILO report on global wages.

The severe inflationary crisis combined with a global slowdown in economic growth, driven in part by the war in Ukraine and the global energy crisis are causing a striking fall in real monthly wages in many countries.

According to a new International Labour Organization (ILO) report, the crisis is reducing the purchasing power of the middle classes and hitting low-income households particularly hard.

The Global Wage Report 2022-2023: The Impact of inflation and COVID-19 on wages and purchasing power , estimates that global monthly wages fell in real terms to minus 0.9 per cent in the first half of 2022 – the first time this century that real global wage growth has been negative.

Among advanced G20 countries, real wages in the first half of 2022 are estimated to have declined to minus 2.2 per cent, whereas real wages in emerging G20 countries grew by 0.8 per cent, 2.6 per cent less than in 2019, the year before the COVID-19 pandemic.

“The multiple global crises we are facing have led to a decline in real wages. It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” said ILO Director-General, Gilbert F. Houngbo.

“Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained. In addition, a much-needed post pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”

The cost-of-living crisis comes on top of significant wage losses for workers and their families during the COVID-19 crisis, which in many countries had the greatest impact on low-income groups.

The report shows that rising inflation has a greater cost-of-living impact on lower-income earners. This is because they spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

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