Wage drag

The International Labour Organisation’s Global Wage Report has put into sharp relief one of the biggest drags on global economic momentum: slowing wage growth. Global wage growth, adjusted for inflation, slowed to 1.8% in 2017, from 2.4% in 2016, it shows. Worryingly, this is the lowest rate since 2008. Excluding China (given its high population and rapid wage growth it tends to skew the mean), the average was even lower (1.1% in 2017 against 1.8% in 2016). Across a majority of geographies and economic groupings, wage expansions were noticeably tepid last year. In the advanced G20 countries the pace eased to 0.4%, with the U.S. posting an unchanged 0.7% growth and Europe (excluding Eastern Europe) stalling at about zero. The emerging and developing economies in the G20 were not spared a deceleration, with the growth in wages slowing to 4.3%, from 4.9% in 2016. In the Asia and Pacific nations, where workers had enjoyed the biggest real wage growth worldwide between 2006 and 2017, it slid to 3.5% from the previous year’s 4.8%. The obvious impact of this low pace has been on global economic growth with consumption demand hurt by restrained spending by wage-earners. Slow wage growth prompted U.S. Federal Reserve Chairman Jerome Powell to observe in June that “in a world where we’re hearing lots and lots about labour shortages — everywhere we go now, we hear about labour shortages — but where is the wage reaction? So it’s a bit of a puzzle.”

Source : https://www.thehindu.com/todays-paper/tp-opinion/wage-drag/article25638764.ece

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