Is wage inequality decreasing globally?

BRUSSELS (ILO News) – During a hearing on the cost of living crisis, the ILO briefed the European Economic and Social Committee (EESC) on the findings of the Global Wage Report 2024-25. In 2023, global real wages grew by 1.8 per cent, and in the first two months of last year, global real wage growth reached 2.7 per cent, the largest gain in more than 15 years.

Despite these positive outcomes, in most economies, real wages have yet to close the gap created by the cost-of-living crisis

said Giulia De Lazzari, ILO Economist and one of the main authors of the report.

In high-income countries, wage inequality has a significant impact on shaping household income inequality, as wage employees account for 70 to 95 per cent of all workers. Wage inequality within countries declined in about two thirds of countries, with low-income and lower-middle income countries displaying larger decreases. Women and workers in the informal economy are overrepresented among low-paid workers, and despite the decline, wage inequality within countries remains unacceptably high.

Wage inequality between countries also remain a pressing issue, especially in the bottom half of the distribution, where wage inequality has increased in recent years.

Latest trends in minimum wages

Minimum wage earners concentrate in low-income households. Low-income households spend a greater share of their incomes on items whose prices increase faster than the headline inflation related to the consumer price index (CPI). As a result, they face higher levels of inflation than those indicated by the general CPI.

Whereas in 2022 and 2023, more countries than usual adjusted the level of their minimum wage, in many cases, the adjustment was insufficient to fully compensate for the increase in the CPI.

"National strategies to reduce inequalities require setting and adjusting wages through collective bargaining, and regularly adjusting minimum wages to protect the purchasing power of low-wage earners, while also taking into account economic factors”, said De Lazzari. "But equally important is to address the root causes of low pay and design policies that promote productivity and the formalization of the informal economy."