Global wage growth in 2017 was not only lower than in 2016, but fell to its lowest growth rate since 2008, remaining far below the levels obtaining before the global nancial crisis. Global wage growth in real terms (that is, adjusted for price in a- tion) has declined from 2.4 per cent in 2016 to just 1.8 per cent in 2017. If China, whose large population and rapid wage growth signi cantly in uence the global average, is excluded, global wage growth in real terms fell from 1.8 per cent in 2016 to 1.1 per cent in 2017.
Real wage growth is calculated using gross monthly wages, rather than hourly wage rates, which are less frequently available, and uctuations therefore re ect both hourly wages and the average number of hours worked.
Slow wage growth in high-income countries despite economic recovery and falling unemployment
In the advanced G20 countries, real wage growth declined from 1.7 per cent in 2015 to 0.9 per cent in 2016 and 0.4 per cent in 2017. In Europe (excluding Eastern Europe), real wage growth declined from 1.6 per cent in 2015 to 1.3 per cent in 2016 and further declined to about zero in 2017, owing to lower wage growth in coun- tries including France and Germany, and declining real wages in Italy and Spain; in Eastern Europe, by contrast, real wage growth recovered from its 4.9 per cent decline in 2015 and continued to increase thereafter, from 2.8 per cent in 2016 to 5.0 per cent in 2017. Real wage growth in the United States declined from 2.2 per cent in 2015 to 0.7 per cent in both 2016 and 2017.
Given the recovery in GDP growth and the gradual reduction in un- employment rates in various countries, slow wage growth in high-income coun- tries in 2017 represented somewhat of a puzzle and has been the subject of intense debate. Possible explanations for subdued wage growth include slow productivity growth, the intensi cation of global competition, the decline in the bargaining power of workers and the inability of unemployment statistics to adequately cap- ture slack in the labour market, as well as an uncertain economic outlook which may have discouraged rms from raising wages.
In view of this low wage growth, it is perhaps not too surprising that the acceleration of economic growth in high-income countries in 2017 was led mainly by higher investment spending, rather than by private consumption.
More robust wage growth in low- and middle-income countries, with much diversity across countries and regions
In emerging and developing countries of the G20, real wage growth has uctuated in recent years, rising from 2.9 per cent in 2015 to 4.9 per cent in 2016, and then falling back to 4.3 per cent in 2017.
Workers in Asia and the Paci c have enjoyed the highest real wage growth among all regions over the period 2006–17. However, even here wage growth in 2017 was lower than in 2016, falling from 4.8 per cent in 2016 to 3.5 per cent in 2017. Wage growth also declined in Central and Western Asia, from 3.0 per cent in 2016 to 0.5 per cent in 2017. In Latin America and the Caribbean, real wage growth in 2017 increased slightly compared to 2016 but remains relatively low, below the 1 per cent mark. In Africa, where wage data have been collected for the rst time for a signi cant number of countries, real wages appear to have declined overall in 2017 by 3.0 per cent. This is mainly attributable to negative wage trends in Egypt and Nigeria, two large countries which exert a strong in uence on our weighted regional average. If these two countries are taken out of the sample, real wages in Africa are estimated to have increased by a moderate 1.3 per cent in 2017.
Taking a longer perspective, real wages between 1999 and 2017 have almost tripled in the emerging and developing countries of the G20, while in advanced G20 countries they have increased by a much lower total of 9 per cent. Yet in many low- and middle-income countries average wages remain low and insu cient to adequately cover the needs of workers and their families.
Wage growth lagging behind productivity growth in high-income countries
Looking at trends in average wages and labour productivity over the period 1999–2017 in 52 high-income countries, the report nds that, on average, labour productivity has increased more rapidly (by a total of 17 per cent) than real wages (13 per cent), although the gap between the two trends narrowed between 2015 and 2017. Overall, the decoupling between wages and labour productivity explains why labour income shares (the share of labour compensation in GDP) in many coun- tries remain substantially below those of the early 1990s.
Wage inequality highest in low-income countries
Using survey data on wages from 64 countries which, together, re ect the wage distribution of about 75 per cent of the world’s wage employees, the report nds that the countries with the lowest levels of wage inequality are found among the high-income group, whereas countries with the highest levels of wage inequality are found in the low- and middle-income groups. Among high-income countries, wage inequality is lowest in Sweden and highest in Chile. Among low-income and middle-income countries, South Africa and Namibia have the highest inequality, Armenia and Mongolia the lowest.
Chosen excerpts by Job Market Monitor. Read the whole story at Flagship report: Global Wage Report 2018/19: What lies behind gender pay gaps