Global Wage Inequality Decreases, But Persistent Gaps Remain, Says ILO Report

“The return to positive real wage growth is a welcome development,” said ILO Director-General Gilbert F. Houngbo.

The International Labour Organization (ILO) has released its Global Wage Report 2024-25, revealing a promising reduction in global wage inequality over the past two decades. However, it highlights that significant wage disparities persist, particularly in low-income countries, and calls for continued efforts to address these gaps.

According to the report, wage inequality has decreased in about two-thirds of countries since 2000. The report indicates that on average, wage inequality — the difference between the wages of high and low earners — decreased annually by 0.5 to 1.7 percent in many countries. In particular, low-income countries have seen the most significant decreases, with reductions averaging 3.2 to 9.6 percent per year over the past 20 years.

While this is encouraging, the pace of wage inequality reduction has been slower in wealthier nations. In upper-middle-income countries, the decrease ranged between 0.3 and 1.3 percent annually, while high-income countries experienced a narrower reduction, between 0.3 to 0.7 percent per year.

Rising Real Wages and Regional Disparities

Global real wages have risen, outpacing inflation in recent years. In 2023, real wages grew by 1.8 percent globally, and projections for 2024 suggest a growth of 2.7 percent, marking the highest increase in over 15 years. This growth is a significant recovery compared to 2022, when global wages saw a decline of 0.9 percent, mainly due to high inflation rates.

However, the report also underscores that wage growth has been uneven across regions. While emerging G20 economies saw positive real wage growth (1.8 percent in 2022 and 6.0 percent in 2023), advanced G20 economies struggled with consecutive declines in real wages, with a drop of 2.8 percent in 2022 and 0.5 percent in 2023. The Asia-Pacific region, Central and Western Asia, and Eastern Europe saw the fastest real wage growth.

“The return to positive real wage growth is a welcome development,” said ILO Director-General Gilbert F. Houngbo. “However, millions of workers continue to feel the impact of the cost-of-living crisis, and wage disparities between and within countries remain unacceptably high.”

Persistent Wage Inequality Across the Globe

Despite overall improvements, wage inequality remains a significant global challenge. The report reveals that the lowest-paid 10 percent of workers earn only 0.5 percent of the global wage bill, while the highest-paid 10 percent earn nearly 38 percent. The highest levels of wage inequality are observed in low-income countries, where nearly 22 percent of wage workers are considered low-paid.

Women and informal sector workers are disproportionately affected by wage inequality, with many of the lowest-paid workers coming from these groups. The report emphasizes the need for targeted policies to close the wage gap, improve employment conditions, and ensure fair wages for all workers.

Additionally, the report points out that a significant portion of workers in low- and middle-income countries are self-employed, often working in the informal economy, which leads to a higher measure of income inequality when both wage and non-wage earners are considered.

Addressing Wage Inequality: Recommendations for Policy

To tackle persistent wage inequality, the ILO calls for stronger wage policies and national strategies focused on inclusive economic growth. Key recommendations for addressing wage inequality include:

Social Dialogue: Wages should be set through collective bargaining or minimum wage systems, ensuring that workers, employers, and governments collaborate on wage-setting decisions.

Data-Driven Decisions: Wage-setting policies should be informed by reliable data, considering both the needs of workers and economic factors.

Promoting Equality: Wage policies should support gender equality, equity, and non-discrimination, ensuring fair treatment and outcomes for all workers.

Addressing Low Pay: National policies should target the root causes of low pay, such as informality, low productivity, and the undervaluing of certain sectors, including the care economy.

Giulia De Lazzari, ILO economist and co-author of the report, stated, “National strategies to reduce inequalities require strengthening wage policies and institutions, but equally important is promoting productivity, decent work, and the formalization of the informal economy.”

Looking Ahead: A Path Toward Inclusive Economic Growth

The ILO’s report emphasizes that while progress has been made in reducing global wage inequality, substantial work remains to be done. By implementing inclusive wage policies and addressing the structural challenges faced by workers, countries can make meaningful strides toward more equitable economic growth. The ILO stresses that closing wage gaps is essential for ensuring sustainable, fair economic development that benefits workers worldwide.

Through concerted efforts, the ILO believes that nations can continue to improve wage fairness, supporting workers at all income levels, particularly those in low-income and informal sector jobs, to build a more equitable global labour market.