Explained | The lingering crisis of labour post-pandemic

What are the crises recognised by two reports on declining wages and purchasing power as well as unemployment? Who has the increased cost of living affected the most? Has the pandemic further contributed to wage inequality? What has the International Labour Organisation suggested as policy measures?

The story so far: The International Labour Organisation (ILO) recently released two reports that gave an indication of the global employment scenario post-pandemic. The ‘Global Wage Report 2022-2023: The Impact of inflation and COVID-19 on wages and purchasing power’ discuss the twin crises, inflation and economic slowdown, which created a “striking fall” in real monthly wages around the globe. The report blames the war in Ukraine and the global energy crisis for this situation. Another report, the ‘Asia-Pacific Employment and Social Outlook 2022: Rethinking sectoral strategies for a human-centred future of work’ stated that the Asia-Pacific region lost about 22 million jobs in 2022. ILO Director-General Gilbert F. Houngbo said the decrease in wages is placing millions of workers in a dire situation. “Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained,” he warned.

The ILO report on wages looked at the real and nominal wages of employees. The word “wage”, was defined as the total gross remuneration including regular bonuses received by employees during a specified period for time (monthly for the report) worked as well as for time not worked, such as paid annual leave and paid sick leave. The nominal wage data shows the adjusted figures after accounting for consumer price inflation while real wage growth refers to the year-on-year change in real average monthly wages of all employees. “In each edition of the Global Wage Report the objective is to collect wage data from as many countries and territories (about 190) which are then grouped into five separate regions,” the ILO said on the methodology of its report.

In India, the nominal wages rose to ₹17,017 per month in 2021 from ₹4,398 in 2006. The data was taken from the Government of India’s Ministry of Statistics and Programme Implementation. But when inflation is factored in, the real wage growth in India plunged to -0.2% in 2021 from 9.3% in 2006. In China, the growth decreased from 5.6% in 2019 to 2% in 2022. In Pakistan, the growth is -3.8%. Figures of Sri Lanka were not available. The negative growth in India started after the pandemic.

The report said the increasing cost of living has the greatest impact on lower-income earners and their households as they have to spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.

At the Asia-Pacific level, only the jobs in high-skill occupations saw a recovery from the COVID-19 crisis, which is true across all subregions. The ILO said it is raising concerns about increased inequality. While there is an employment gain of 1.6% among high-skill workers between 2019 and 2021, there is no such substantial gain among low-to-medium-skill workers. Among the G-20 countries, the report noted a significant gap in the average level of real wages between advanced G-20 countries and emerging G-20 countries such as India. It is on the level of about $4,000 per month in advanced economies and about $1,800 per month in emerging economies.

The report suggests a set of policy options and responses to the cost-of-living crisis. Citing studies, the report said that 75 to 95 million people were pushed into extreme poverty during COVID-19. It said the bargaining process for future nominal wage adjustments should embrace a sufficiently large but prudent price expectation. “This could contribute to safeguarding the standard of living of households — particularly low-income households — against unexpected future inflation hikes, while avoiding an undesirable wage-inflation spiral,” it said. The report said that there is a need to strengthen labour market institutions and wage policies. The ILO states that the creation of decent formal wage employment is a prerequisite for a more equitable distribution of wages and income, and is a key contributor to equitable and sustainable wage growth. It wants governments to focus on gender pay gap as when women leave the labour market, they are less likely to return than men. Most importantly, the report says that a multilateral approach is the key to solving the crises around us. There is an urgent need to address the negative effects of climate change; increasing inequalities; the poverty, discrimination, violence and exclusion endured by millions of people, including the discrimination that women and girls continue to suffer in many parts of the world; the lack of vaccines and access to adequate sanitation and essential healthcare for all; and the growing digital divide between poor and wealthier countries.