Global Wages Expected to Rise by 1.7% in 2024, Excluding China and Turkey

According to a report published by the United Nations, real wages are rising again with the decrease in inflationary pressures; however, despite increases in China and Russia, they remain below pre-pandemic levels in many parts of the affluent world. The International Labour Organization (ILO), affiliated with the UN, noted in its annual report on wage developments that wage inequality among countries has declined since the beginning of this century, with the most significant decrease evident in poorer countries.

In many countries worldwide, wages in 2022 did not keep pace with rising prices of energy, food, and other goods and services, leading to a sharp decline in real wages. In some countries, this decline continued into 2023, but signs of a significant recovery have been observed in 2024. The ILO stated that, in the first half of 2024, global wages were 2.7% higher compared to the same period in the previous year, marking a 1.3% increase in 2023 after a 1.5% drop the previous year. This represented the fastest growth in the last 15 years.

Excluding China, global real wage growth is projected to be 2.3% in 2024. The ILO also indicated that the last two years in the series were significantly influenced by Turkey, which experienced hyperinflation and reported very rapid real wage increases. When excluding both China and Turkey, global real wage growth in 2024 is measured at 1.7%, which remains the largest increase recorded since 2010.

However, while Asia leads the wage recovery, Europe and North America are lagging. Real wages continue to remain below pre-Covid-19 levels in most wealthy members of the Group of Twenty (G20) and many poor countries. ILO Director-General Gilbert F. Houngbo remarked, “It is encouraging to see a return to positive growth in real wages. However, we must not forget that millions of workers and their families continue to suffer from a cost-of-living crisis that erodes their standards of living.”

In the first half of this year, real wages remained lower compared to 2019 in Germany, France, Italy, and the UK, as well as in Japan and South Korea. The decline in earnings contributed to a wave of losses for ruling parties in recent elections. In the U.S., real wages rose by only 1.4%, while Canada experienced a larger increase.

In contrast, real wages in China increased by 27% compared to 2019, and significant increases were also recorded in Brazil. In Russia, real wages displayed a sharp rise since the beginning of 2023, as potential workers have been engaged in the war in Ukraine, and arms manufacturers have been forced to ramp up production.

The ILO noted that real wages in some countries, such as the UK, Japan, and Italy, remain below the levels recorded in 2008 when the financial crisis plunged many wealthy economies into a deep recession. The recovery in real wages is expected to support global economic growth through increased household spending, although this has not yet occurred in certain regions of the world. In Europe, consumer spending has remained weak as many households prefer to increase their savings amid the expectation of new economic shocks, including the possibility of a transatlantic trade conflict following Donald Trump's election as U.S. president.

In China, consumer spending is also stagnant as the collapse of the housing market has led households to save more to compensate for their losses. The ILO expects the global economy to slow down this year, with production growth decreasing from 3.3% in 2023 to 3.2%.

The ILO's analysis of inequality trends in this century is limited by the availability of comparable data only until 2021, so it lags behind inflationary increases. By then, two-thirds of sampled countries, which account for 73% of all wage earners, had seen a decline in wage inequality since 2000.

“It has been predominant across all country income groups, but the decreases in wage inequality have been more pronounced among low-income and lower-middle-income countries,” it stated. Nevertheless, the earnings gap between the highest and lowest-paid workers continues to widen. The ILO estimated that in 2021, when adjusted for purchasing power, workers in the bottom 10% earned $250 per month, while those in the top 10% earned $4,199 per month for full-time work.

The ILO stated, “This means that the purchasing power of the median wage earner in low-income countries is about 6% of the purchasing power of the median wage earner in high-income countries.” Globally, the lowest-paid 10% of workers earn only 0.5% of total wages, while the highest-paid 10% receive 38% of the global wage bill.