Modi government urgently needs to address the unemployment crisis in the country
The ILO’s Global Report on Wages Around the World states that global monthly wages fell by -0.9 percent in real terms in the first half of the year, the first instance of negative growth this century. As a result, the purchasing power of middle-class households has declined, while low-income households have been particularly hard hit.
“The many global crises we are facing have resulted in a decline in real wages. This has put millions of workers in dire straits as they face growing uncertainties,” said ILO Director-General Gilbert F. Hongbo, warning of the possible consequences.
“If the purchasing power of the lowest wage earners is not maintained, income inequality and poverty will increase,” he said. “Moreover, a much-needed post-pandemic recovery could be put at risk. This could fuel further social unrest around the world and undermine the goal of achieving prosperity and peace for all.”
The report showed that the severe inflation crisis, combined with a slowdown in economic growth – fueled by the war in Ukraine and the global energy crisis – has affected pay packets around the world, including in the G20 leading industrialized nations.
It is estimated that in the first half of the year, real wages declined by -2.2 percent in advanced G20 countries and increased by 0.8 percent in emerging G20 countries. This is 2.6 percent lower than in 2019, which is the year before the COVID-19 pandemic.
Inflation has wiped out the real wages of the workers. Real wages in Asia and the Pacific grew by 3.5 percent in 2021 last year, slowing to 1.3 percent during the first six months of this year.
Rising inflation has a greater impact on poor households, as most of their disposable income is spent on essential goods and services, which typically experience higher price increases than non-essential goods. And in many countries, including India, inflation is also reducing the real value of the minimum wage.
It is in this context that the ILO has underlined the urgent need for well-designed policy measures to help salaried workers and their families maintain their purchasing power and standard of living.
They are vital to prevent the current levels of poverty, inequality and social unrest from deepening. “We must pay special attention
“Employees at the middle and lower end of the pay scale,” said Rosalia Vazquez-Alvarez, one of the report’s authors.
“Fighting against the decline in real wages can help sustain economic growth, which in turn can help recover employment levels seen before the pandemic. This can be an effective way to reduce the likelihood or depth of recession in all countries and regions.”
The ILO said an effective tool could be a substantial adjustment of minimum wage rates, noting that 90 percent of its 187 member states have minimum wage policies.
The recommendation is significant for India as its minimum wage is too low to be enough to feed workers, what to talk about meeting other essential expenses such as a healthy diet, medical needs and education of their children.
Collective bargaining and a ‘strong tripartite social dialogue’ – that is, between the government, employers and workers’ representatives – can also help achieve adequate wage adjustments during the crisis.
This is also a recommendation that the Modi government should heed to as it is ignoring all tripartite consultations even in the framework of the Indian Labor Conference (ILC).