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Gap between wages and profits increases

12 December, 2012The new ILO Global Wages Report confirms the trend of a greater share of GDP going to capital income while the proportion going to workers in the form of wages has fallen dramatically.

The new report on global wages from the International Labour Organization (ILO), released on 7 December, paints a startling picture of the extent to which workers are missing out on their fair share of the wealth that they are helping to generate. With some regional exceptions, during the period of the economic crisis real average wage growth globally has remained below pre-crisis levels.

Between 1999 and 2011 average labour productivity in developed economies increased more than twice as much as average wages. The ILO points to various factors that are contributing to this declining labour share including technological progress, trade globalization, financial globalization and the expansion of financial markets. Attacks on unionization resulting in declining union density and bargaining power have had a significant impact.

The result is growing income inequality and a decrease in aggregate demand that is necessary for recovery and growth.

The report calls for ‘rebalancing’ that reconnects labour productivity with wage increases and warns against ‘competitive wage cuts’ leading to a race to the bottom. This must include strengthening minimum wages and support for collective bargaining. 

A copy of the report can be found on the ILO website here: