Policy measures to address inequalities and increase the labour income share

In recent decades, the global economy has witnessed significant shifts in labour income shares, wage dynamics and inequalities, posing complex challenges for sustainable and inclusive economic growth. The global labour income share – the share of total income distributed to workers – fell by 1.6 percentage points between 2004 and 2024, under the influence of several structural shifts, including the adoption of capital-augmenting technology, automation, globalization and the decline in the bargaining power of workers. Almost 40 per cent of this decline occurred during the COVID-19 pandemic, highlighting the pandemic’s role in exacerbating economic inequality.

The paper highlights the need for comprehensive policy interventions, including strengthened wagesetting nstitutions, the promotion and strengthening of collective bargaining and strategic efforts to
transition from informal to formal employment.