"Race to the middle"

Wages have flatlined in the developed world as workers fail to benefit from the uneven global economic recovery.  Since the 1980s, wages have been rising less quickly than productivity, which means workers are receiving a shrinking share of economic growth. This trend was interrupted by the crisis, but has resumed in most states.

Average real pay in developed economies rose just 0.1 per cent in 2012 and 0.2 per cent last year, according the International Labour’s Organisation’s biennial report on global wages. Workers in several rich economies, including Italy, Japan and the UK, were earning less than in 2007.

The ILO said wage stagnation was not just the result of the 2008 financial crash, which has pushed up unemployment and lowered economic growth rates in many economies. It was also the consequence of the long-term forces of globalisation, technology and the decline of unions.

Meanwhile, wages have continued to rise in developing countries, though they are still a long way from catching up with rich countries. Average monthly pay is about $1,000 in developing economies, a third of the average in the rich world. There were stark differences in the rate of pay growth between regions. Wages rose an average 6 per cent in Asia, eastern Europe and Central Asia but less than 1 per cent in Africa and Latin America. Labour’s share of economic growth has shrunk in China, Mexico and Turkey, but increased in Russia.

The ILO said there was a global “race to the middle” as wages rose in poorer countries but stagnated in richer states. It found income inequality had increased in about half of developed and developing countries between 2006 and 2010, and decreased or remained stable in the other half.