ISLAMABAD: A new report of the International Labour Organisation (ILO) on Thursday revealed that wage inequality has decreased in about two-thirds of all countries since 2000, but despite this positive trend, significant wage differentials persist across the world.

The report titled, “Global Wage Report 2024-25: Is wage inequality decreasing globally”, finds that since the early 2000s, wage inequality, which compares the wages of high and low wage earners, has decreased in many countries at an average rate from 0.5 to 1.7 per cent annually, depending on the measure used.

The most significant decrease occurred among low-income countries where the average annual decrease ranged from 3.2 to 9.6pc in the past two decades.

After falling to -0.9pc in 2022, the global real wage growth recovered in 2023, marking an increase of 1.8pc. Preliminary data for the first two quarters of the year indicate that global real wage growth recorded a 2.7pc increase in 2024, the largest gain in more than 15 years.

Report says despite positive trend, significant wage differentials persist across the world

When looking at regional level data, real wage growth continues to be heterogeneous, with average wa­ges increasing faster in Asia and the Pacific, Central and Western Asia, and Eastern Europe compared to the rest of the world, the report says.

The report finds that, on average, labour productivity in high-income countries increased more rapidly than real wages over the period 1999–2024. Estimating the gender wage gap at different deciles of the wage distribution reveals that men earn more than women in all country income groups and across the entire wage scale.

Wage inequality is declining at a slower pace in wealthier countries, shrinking annually between 0.3pc and 1.3pc in upper-middle-income-countries, and between 0.3pc and 0.7pc in high-income countries. Moreover, even though wage inequality narrowed overall, the decrease was more significant among wage workers at the upper end of the pay scale, the report says.

The report also finds that global wages have been growing faster than inflation in recent times. In 2023, global real wages grew by 1.8pc with projections reaching 2.7pc growth for 2024, the highest increase in more than 15 years. Such positive outcomes mark a notable recovery when compared to the negative global wage growth, of -0.9 per cent, observed in 2022, a period when high inflation rates outpaced the nominal wage growth.

However, wage growth has been uneven across regions, with emerging economies experiencing stronger growth than advanced economies, the report finds. While advanced G20 economies registered a decline in real wages for two consecutive years (-2.8 per cent in 2022 and -0.5 per cent in 2023), real wage growth remained positive for both years in emerging G20 economies (1.8pc in 2022 and 6.0pc in 2023).

Regional wage growth patterns varied considerably. Wage workers in Asia and the Pacific, Central and Western Asia, and Eastern Europe experienced their real wage increases at a faster rate than those in other parts of the world, according to the report.

Despite recent progress high levels of wage inequality remain a pressing issue. The report shows that globally, the lowest-paid 10pc of workers earn just 0.5pc of the global wage bill, while the highest-paid 10pc earn nearly 38pc of this wage bill. The wage inequality is the highest in low-income countries, with close to 22pc of wage workers there classified as low-paid.

Women and wage workers in the informal economy are more likely to be among the lowest paid.

Wage inequality is relevant in all countries and regions. Globally, however, one in every three workers is a non-wage worker.

Published in Dawn, November 29th, 2024