Wages Expected to Decline Globally in 2009

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Researched by Industrial Info Resources (Sugar Land, Texas)--Real wages are expected to decline for millions of workers in 2009. According to a report published by the Communication and Public Information Unit of the International Labour Organization (ILO), wage cuts represent one more measurable consequence of the global economic downturn. As a specialized agency within the United Nations, the ILO is tasked with researching related global employment and policy.

ILO Director General Juan Somavia attributes the erosion of wage cuts to "slow or negative economic growth, combined with highly volatile food and energy prices" affecting not only the lower wage households but the middle class, as well. Real wages increased 1.7% in 2008 globally but are only expected to increase 1.1% in 2009 despite rising inflation. The predictions follow a decade in which wages failed to keep pace with economic growth; wages increased 0.75% for each 1% increase in annual GDP per capita between 1995 and 2007. Furthermore, while wage growth failed to increase in lockstep during economic upswings, during economic downturns worker compensation decreased more rapidly. For each 1% drop in the GDP per capital, average wages fell by 1.55 percentage points. These figures indicate an overall erosion in the labor share of the GDP.

Since 1995, the wage gap between high and low wage earners increased in two-thirds of countries included in the report. Germany, Poland and the United States all join the list of developed countries in which the wage gap widened sharply. Historically, worker response to such conditions has included labor organization and demands for policy reform. Tensions could intensify over the predicted wage cuts.

Currently under consideration in the U.S. is the Employee Free Choice Act (EFCA) related to labor organization. Should the EFCA become law, unions would have the right to recognition as the exclusive bargaining organization for workers if a majority of employees sign authorization cards. Businesses would have 10 days after a union is certified to begin construction of a collective bargaining agreement. The global and national economic state, specifically real wages for workers, will play a role in this and future union legislative considerations.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.