2.2% decline in real wages in advanced economies in 2022

Emerging economies posted decreased but positive wage growth of 0.8%


In the year 2022, average real wages dipped. That means, daily wagers and salaried workers were unable to increase their incomes to keep pace with inflation. As a result, the middle class lost its purchasing power and low-income groups were most adversely impacted, in addition to dwindling incomes due to the pandemic. The advanced economies experienced the worst fall in real wages in 2022, at 2.2 per cent. On the other hand, emerging economies, reported decreased but positive wage growth of 0.8 per cent.

As per The World Employment and Social Outlook Trends 2023 report by the International Labour Organisation (ILO), when real incomes fall, the poorer households stand the risk of falling into poverty and experiencing food insecurity. When the share of food and transportation in the budget of poorer families is higher, it is an indication that the increase in cost-of-living may be between 1 and 4 percentage points higher than what is experienced by high-income households.

According to estimates by the World Bank, in a worst case scenario, wherein the effect of high food prices is maximum on the lowest 40 per cent of the income distribution, 20 million more people, worldwide, were in extreme poverty in 2022 compared to the baseline scenario of equal impact across the income distribution.

Currently, the effect of inflation on extreme working poverty is heterogeneous, because about 65 per cent of the extremely poor population is engaged in agriculture (Castañeda et al. 2018). Therefore, this section may also benefit from rising incomes when food prices go up. This may also bring them out of poverty.

However, millions of people who are living and working in rural areas with inadequate agricultural productivity, rely on food bought from outside. Therefore, they experienced a rise in food insecurity in 2022.

The year 2022 was witness to about 214 million workers living in extreme poverty, that is, about 6.4 per cent of the world’s employed population. This was about 14 million lower than 2020, because restrictions were lifted and workplaces were opened up post the pandemic.

What was a matter of concern, however, was that in 2022, low-income countries are estimated to have posted the same rate of extreme working poverty as in 2019. This kind of stagnancy is not a good sign when it comes to the fulfilment of the sustainable development goal (SDG) of poverty eradication in all its forms. The number of working poor is going up in low-income nations, because of more jobs in subsistence agriculture and other informal activities where the pay is very low.

Job quality is a worrying issue, because many people cannot afford to remain jobless. Not only are they extremely poor but they have no social security or protection either. Therefore, they will take up any work that comes their way, even if it pays very little and involves long hours.

The lack of better job opportunities amidst a projected slowdown will force workers and job seekers to take up low-quality jobs. With prices shooting way faster than the incomes of workers, it will become difficult for workers to maintain their real income. That means, labour market conditions will deteriorate and not only in terms of employment alone, says the ILO report.

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