ILO warns 1.5 billion workers face wage cuts next year

About 1.5 billion wage earners in the Philippines and other countries worldwide face wage cuts next year due to the economic crisis, the International Labor Organization (ILO) said yesterday.

In a report titled “Global Wage Report 2008/09,” the ILO said the global economic crisis is expected to lead to “painful” cuts in wages of low-income workers worldwide in 2009.

“For the world’s 1.5 billion wage earners, difficult times lie ahead,” ILO director general Juan Somavia said while noting that negative economic growth, combined with highly volatile food and energy prices, will erode the real wages of many workers, particularly low-wage ones and poorer households.

Based on the ILO report, the global growth in real wages will at best reach 1.1 percent in 2009, compared to 1.7 percent in 2008, but wages are expected to decline in a large number of countries, including major economies.

Overall, ILO said wage growth in industrialized countries is expected to fall, from 0.8 percent in 2008 to -0.5 percent in 2009.

According to the report, between 1995 and 2007, each additional one percent in the annual growth of gross domestic product (GDP) per capita led to an average of only 0.75 percent increase in annual growth of wages.

As a result, in almost three quarters of countries worldwide, the labor share in GDP has declined.    

While inflation was low and the global economy grew at 4 percent annual rate between 2001 and 2007, growth in wages lagged behind, increasing by less than 2 percent per year in half of the world’s countries, the report said.

In the Philippines, wage share fell by 2 percent between 1995-2000 and 2001-2007 based on the United Nations National Accounts Statistics.

Three possible factors caused these trends in most countries — the weakening trade unions, technical progress due to changes in skills and productivity favoring skilled workers only, and globalization in particular the presence of low-wage exporters.

ILO noted that since 1995, inequality between the highest and lowest wages has increased in more than two-thirds of the countries surveyed, often reaching socially unsustainable levels.

Jobs and sectors where women predominate are often excluded from the protection of minimum wage laws shown by consistently lower minimum wages for domestic workers. 

In the Philippines, minimum wage rates for domestic workers are among the lowest, ILO reported.

According to the report, between 1995 and 2007, for each one percent decline in GDP per capita, average wages fell even further by 1.55 percentage point – a result that points to the possible effects on wages of the current crisis.

“If this pattern were to be followed in the rapidly spreading global downturn it would deepen the recession and delay the recovery,” Somavia pointed out.