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International Labour Office

Global Wage Report 2012/13

 Wages and equitable growth

Preface - Contents - Acknowledgements

Executive summary

Between 1999 and 2011 average labour productivity in developed economies increased more than twice as much as average wages. In the United States, real hourly labour productivity in the non-farm business sector increased by about 85 per cent since 1980, while real hourly compensation increased by only around 35 per cent. In Germany, labour productivity surged by almost a quarter over the past two decades while real monthly wages remained flat.
The global trend has resulted in a change in the distribution of national income, with the workers’ share decreasing while capital income shares increase in a majority of countries. Even in China, a country where wages roughly tripled over the last decade, GDP increased at a faster rate than the total wage bill – and hence the labour share went down.
The drop in the labour share is due to technological progress, trade globalization, the expansion of financial markets, and decreasing union density, which have eroded the bargaining power of labour. Financial globalization, in particular, may have played a bigger role than previously thought.


Part I Major trends in wages
1 The global economic context: Crisis, recession and employment
1.1 Economic growth rates vary widely by region
1.2 Global unemployment rates remain high
2 Real average wages
2.1 Slowing growth across a varied landscape
2.2 The gender pay gap
3 Regional estimates
3.1 Overall growth masks a complex picture
3.2 Developed economies
3.3 Eastern Europe and Central Asia
3.4 Asia and the Pacific
3.5 Latin America and the Caribbean
3.6 The Middle East
3.7 Africa
4 Minimum wages and the working poor
4.1 Developed economies
4.2 Developing and emerging economies

Part II Falling labour shares and equitable growth
5 The fall in the labour income share
5.1 Trends in labour shares
5.2 The gap between wages and productivity
5.3 The role of financial markets and other factors
6 The effects of labour income shares on economic growth
6.1 Falling labour shares and aggregate demand: Ambiguous effects
6.2 In pursuit of the optimal labour share
6.3 The “Great Recession” and the opportunity for more balanced growth
7 Internal and external imbalances
7.1 Functional and personal income distribution
7.2 Wage-based consumption is down, affecting the recovery

Part III Implications for equitable growth
8 Reconnecting wages and productivity
8.1 Coordinated policy action
8.2 Strengthening existing institutions
8.3 Beyond labour markets
8.4 Specificities of developing countries

Appendices

Appendix I: Global wage trends: Methodological issues
Appendix II: How a divergence between labour productivity and wages influences unit labour costs and the labour income share
Appendix III: Determinants of labour shares
Appendix IV: The effect of labour share on aggregate demand
Notes
Bibliography

Tables

1. Cumulative real wage growth by region since 2000 (index: 2000 = 100)
2. Direction of effects of a 1% decrease in labour income share on private consumption of domestic goods and services, investment and net exports in 16 economies

Figures

1. Annual average economic growth, 1995–2012 (GDP in constant prices)
2. Total unemployment rates in the world and in developed economies, 2005–11
3. Annual average global real wage growth, 2006–11
4. The gender pay gap (GPG), 1999–2007 and 2008–11
5. The gender pay gap in Estonia, 1993–2009
6. The gender pay gap in Norway by employment status, 2008–11
7. Annual average real wage growth by region, 2006–11
8. International comparison of hourly direct pay for time worked in manufacturing, 2010 (US$)
9. Trends in nominal wage growth and inflation in advanced economies, 2006–11 (%)
10. Growth in output and employment in developed economies, 1999–2007 and 2008–11 (%)
11. Growth in real wages and labour productivity in developed economies, 1999–2007 and 2008–11 (%)
12. Growth in output and employment in Eastern Europe and Central Asia, 1999–2007 and 2008–11 (%)
13. Growth in wages and labour productivity in Eastern Europe and Central Asia, 1999–2007 and 2008–11 (%)
14. Index of real wages in the Russian Federation since 1990 (1990 = 100)
15. Annual average real wage growth in Asia, 2006–11
16. Growth in output and employment in Asia, 1997–2007 and 2008–11 (%)
17. Growth in output and in numbers of paid employees in Asia, 1997–2007 and 2008–11 (%)
18. Growth in wages and labour productivity in Asia, 1997–2007 and 2008–11 (%)
19. Growth in output and employment in Latin America and the Caribbean, 1997–2007 and 2008–11 (%)
20. Economic growth and unemployment in Latin America and the Caribbean, 2004–11 (%)
21. Annual average real wage growth in Brazil, 2006–11
22. Growth in wages and labour productivity in selected Latin American and Caribbean countries, 2004–11 (%)
23. Growth in output and employment in the Middle East, 1999–2007 and 2008–11 (%)
24. Growth in wages and labour productivity in the Middle East, 1999–2011 (%)
25. Growth in output and employment in Africa, 1999–2007 and 2008–11 (%)
26. Growth in output and numbers of paid employees in Africa, 1999–2007 and 2008–11 (%)
27. Growth in wages and labour productivity in selected African countries, 1999–2011 (%)
28. Minimum wage levels in selected developed economies, in PPP$ and as a share of median full-time wage, 2010
29. Minimum wage growth in developed economies, 2006–11
30. Employed working poor (earning below US$1.25 and US$2 a day), as % of total employees
31. Adjusted labour income shares in developed economies, Germany, the USA and Japan, 1970–2010
32. Adjusted labour income shares in developing and emerging economies, 1970–2007
33. Unadjusted labour income share in China, 1992–2008
34. Hourly productivity and compensation in the United States, Q1 1947–Q1 2012
35. Trends in labour productivity and wages in Germany, 1991–2011

The ILO Global Wage Database is available at: www.ilo.org/wage12.

36. Trends in growth in average wages and labour productivity in
developed economies (index: 1999 = 100)
37. Factors influencing the labour income share
38. Decomposing changes in the average adjusted labour income share between 1990/94 and 2000/04
39. The macroeconomic effects of functional income shares
40. Unit labour costs in selected eurozone countries, 2000–10 (index: 2000 = 100)
41. Changes in current account balance and household debt in selected countries, 2003–10

Box

1. Poverty among waged and salaried workers

Appendix figure

A1. Effect of a 1% decrease in labour income share on private consumption of domestic goods and services, investment and net exports: (a) private consumption of goods and services; (b) investment; (c) net exports

Appendix boxes

A1. Data selection and estimation procedure: An econometric methodology
A2. Data, estimation and simulations

Appendix tables

A1. Regional groups
A2. Coverage of the Global Wage Database, 2010 (%)
A3. Coverage of the Global Wage Database, 2006–11 (%)
A4. The factors influencing the adjusted labour income shares
A5. The impact of external factors on adjusted labour income shares
A6. Description of countries included in the estimation of tables A4 and A5 and box A1 84.
Editor: Róbinson Rojas Sandford
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