ILO’s report says Covid-19 pushed wage inequality further

Even before the COVID pandemic hit, hundreds of millions of workers worldwide were being paid less than the minimum wage.

The latest biennial wage report by the International Labor Organization (ILO) on recent trends in wages and the impact that the pandemic has had on wages, found that monthly pay fell broadly in two-thirds of countries for which official data was available. The daily work wages of women and low-paid workers were disproportionately affected by the crisis.

In the remaining one-third of countries, including Brazil, Canada, France, Italy, and the US, the average wages show a major wage inequality. A substantial number of lower-paid workers lost their jobs and, therefore, were no longer included in the data for wage-earners. It also says that state subsidies and current minimum wage policies will only play a small part in mitigating the pandemic’s effects in the long term.

In countries where strong measures were taken to preserve employment, the effects of the crisis were felt primarily as falls in wages rather than massive job losses.

Daily wage workers fighting income inequality due to the pandemic.

Daily wagers suffer further with increased pay gap and wage inequality due to the economic impact of the COVID-19 pandemic. Will there be an end to this ever? (Image credit: Freepik)

Women have suffered more than men. A wage sample of 28 European countries finds that, without wage subsidies, women would have lost 8.1 percent of their wages in the second quarter of 2020, compared to 5.4 percent for men.

Those in low paid jobs lost more working hours than higher-paying managerial and professional jobs. The report based on the findings from the 28 European countries found that, without temporary subsidies, the lowest-paid 50 percent of workers would have lost an estimated 17.3 percent of their daily wages.

Without subsidies, the average pay gap would have been 6.5 percent in total. However, wage subsidies compensated for 40 percent of this amount.

“The growth in wage inequality created by the COVID-19 crisis threatens a legacy of poverty, social and economic instability that would be devastating,” said ILO Director-General Guy Ryder. “Our recovery strategy must be human-centered. 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.”

Better compliance to close wage inequality?

The report says that a minimum wage system can help in mitigating the income inequality that has deepened due to the loss in earning capacities of the masses that have suffered most. Minimum wages are currently in place in some form in 90 percent of ILO Member States.

The report says that even before the pandemic’s onset, over 266 million people – 15 percent of all wage earners worldwide – were earning less than the hourly minimum wage, mostly due to non-compliance or because in some countries some labor classes are excluded from the minimum wage criteria. The report says an estimated 327 million workers globally are paid at their countries’ minimum wage or below. This represents about 19% of the world’s wage earners and includes 152 million women.

“Adequate minimum wages can protect workers against low pay and reduce wage 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. In developing and emerging countries, better compliance will require moving people away from informal work and into the formal sector”.

Global wage trends which depict wage inequality

The report’s analysis of global wage trends in 136 countries in the four years preceding the pandemic found that global pay fluctuated between 1.6 and 2.2 percent. Real wages increased most rapidly in Asia and the Pacific and Eastern Europe and much more slowly in North America and northern, southern and western Europe.

Great income inequality was also seen in the earnings of the top 10 percent compared with the lowest 10 percent earners. The biggest disparity was seen in Ireland, Portugal and Spain.

The economic and labor market crisis due to COVID-19 has hurt vulnerable groups. The emerging economies, for which no data is available, will be more stiffly affected by pay gap and wage inequality as the informal and unorganized workers were hit hard by the shutdowns and closing of businesses. 

Christy Gren
Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine she enjoys writing about Unicorns, Silicon Valley, Startups, Business Leaders and Innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B.

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