|Relevant SDG Targets
10.1, 10.3, 10.4, 8.8
|Relevant Policy Outcomes
1, 3, 7, 8
|On this page: DWA-SDG Relationship | Cross-cutting policy drivers | Partnerships | ILO Capacity | Resources
There is growing evidence in the world today of a shift towards returns on capital and away from labour, together with increasing income inequality. The labour share in national income is declining while that of profits is rising in many countries. The current patterns of growth tend to favour the better-off more than the poor. Wage inequality has been increasing. In some countries, there has been a sharp rise in earnings of the highest paid, with important gender dimensions; in other countries, skilled workers in high demand in the labour market have received growing wage premiums. On the other hand, labour market reforms designed to promote flexibility and lower labour costs, causing cuts to welfare benefits, less progressive tax policies, weaker collective bargaining and an absence of tripartite social dialogue, as well as low minimum wages, have all contributed to weakening the position of the lower 50 per cent of income earners in many countries.
Inequality weakens the link between economic growth and employment creation in general and between economic growth and both the reduction of poverty and working poverty, as well as other dimensions of decent work deficits. Inequality has not only material, but also many non-material dimensions, such as unequal power and voice, unequal access to rights, social protection, social capital etc. These different dimensions of inequality are often linked and tend to reinforce each other (19). The focus of this section is primarily on the income aspect of inequality; other dimensions of inequality are discussed in the section on gender equality and non-discrimination, though they are very relevant to income inequality; in particular, there is a clear link between unequal pay between women and men and income inequality (31).
The Gini coefficient23 is commonly used to measure income inequality. Considering income distribution of all human beings, the worldwide income inequality has been constantly increasing since the early 19th century. There was a steady increase in global income inequality according to the Gini score from 1820 to 2002, with a significant increase between 1980 (a Gini coefficient of 0.43) and 2002 (0.71). This trend appears to have peaked and begun a reversal with rapid economic growth in emerging economies, particularly in the large populations of the BRIC countries. Latin America and the Caribbean region had the highest net income Gini index in the world at 0.48, on unweighted average basis in 2008. The remaining regional averages were: sub-Saharan Africa (0.44), Asia (0.40), Middle East and North Africa (0.39), Eastern Europe and Central Asia (0.35), and High-income Countries (0.31). South Africa had the highest income Gini index score of 0.68 (32).
In many countries, inequality starts in the labour market. Changes in the distribution of wages and paid employment have been key factors behind recent inequality trends. In developed economies where inequality increased most, this was frequently due to a combination of more wage inequality and job losses. A number of emerging and developing economies have experienced declines in inequality. In these countries, a more equitable distribution of wages and paid employment was a predominant factor (33).
Growing inequality is partly caused by a declining share of wages in national economies, because income from capital is more highly concentrated than income from wages. Between 1999 and 2013, labour productivity growth in developed economies outstripped real wage growth, and labour’s share of national income fell in the largest economies. The adjusted labour share in the EU plus 11 OECD countries fell from 64 per cent in 1991 to 58 per cent in 2013 (34).
To combat inequality the ILO proposes the following policy responses (33):
- Promoting job creation : Job creation is a priority in all countries, and access to, or loss of, paid employment is a key determinant of income inequality. In developed economies, job losses that disproportionally affect low-income workers contribute to increasing inequality. In emerging and developing economies, the creation of paid employment for those at the bottom of the wage structure, who are disproportionately women, contributes to reducing inequality.
- Fiscal redistribution through taxes and social protection systems : Fiscal policies can compensate to some extent for inequality in the labour market, through both progressive taxation systems and transfers that tend to reduce inequality in household incomes. Emerging and developing economies should increase tax revenues through a variety of measures, including by broadening the tax base through the transition of workers and enterprises from the informal to the formal economy as well as by improving tax collection; this would allow for the extension of social protection systems to unprotected segments of the population.
- Minimum wages and collective bargaining : Recent research suggests that governments have considerable space for using minimum wages as a policy tool. On the one hand, research shows that there is either no trade-off between increased minimum wages and employment levels or that such increases have very limited effects on employment, which can be either positive or negative. On the other, it shows that minimum wages do contribute effectively to reducing wage inequality and reducing the gender pay gap.
- Special attention to disadvantaged groups of workers : Extending minimum wages and collective bargaining to low-paid workers will generally be helpful in reducing inequality among women, migrants and vulnerable groups, who are over-represented among these workers. However, these policy tools alone will not eliminate all forms of discrimination or wage gaps, which constitute a significant source of inequality. A wider range of policies is required to overcome wage gaps across groups that are not explained by human capital and labour market characteristics. For example, achieving equal pay between men and women requires policies aimed at combating discriminatory practices and gender-based stereotypes about the value of women’s work, effective policies on maternity, paternity and parental leave, as well as advocacy for better sharing of family responsibilities.
The struggle for greater equality is fundamental to the Decent Work Agenda. The promotion of social justice as the principal strategy to achieve greater equality is highlighted in the very first sentence of the ILO Constitution: “Whereas universal and lasting peace can be established only if it is based upon social justice…”; it was reaffirmed by the Declaration of Philadelphia (1944), which states that “all human beings, irrespective of race, creed or sex, have the right to pursue their material wellbeing and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity". The Social Justice Declaration (2008), also underlined that the “four strategic objectives are inseparable, interrelated and mutually supportive”, and that gender equality and non-discrimination cut across all the strategic objectives; this was more recently related by the 2016 Resolution on Advancing Social Justice through Decent Work. In fact, the simultaneous promotion of the four pillars of decent work agenda has the potential to significantly reduce inequality. Moreover, the implementation of the recommendation adopted in 2004 by the World Commission on the Social Dimension of Globalization under the title “A Fair Globalization” would contribute greatly to reducing inequality among countries (SDG 10) (35).
Memoranda of Understanding with all major UN agencies, funds and programmes, with many regional organizations and development banks, and with numerous development partners, civil society organizations, as well as the private sector. These all refer to the Decent Work Agenda as the principal instrument to promote greater social justice and, thereby, contribute to greater equality. The centrality of the quest for social justice for the UN system was reaffirmed in 2007, when the UN General Assembly declared the 20th of February to become the World Day of Social Justice.
ILO Country Diagnostic Tool (pages 24 to 27) provides guidance on how to locate data and indicators on inequality and poverty at the national level. Resources related to ILO’s work on equality can be found under the sections on
- active labour market policies
- working conditions
- social protection
- informal economy
19. ILO. Decent Work Country Diagnostics - Technical Guideloines to draft the Diagnostics Report. Geneva : ILO, 2015.
31. IMF. Catalyst for Change: Empowering Women and Tackling Income Inequality. Washington : IMF, 2015.
23 - The GINI coefficient rages from 0 (all people own equal wealth, perfect equality) to 1 (one person owns all, the others nothing: total inequality).
32. Ortiz, Isabel and Cummins, Matthew. Global inequality: Beyond the Bottom Billion. New York : UNICEF, 2011.
33. ILO. Global Wage Report 2014-15. Geneva : ILO, 2015.
34. OECD, ILO. The Labour Share in G 20 Economies. Antalya : OECD and ILO, 2015.
35. WCSDG. A fair globalization - Creating opportunities for all. Geneva : ILO, 2004.