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Covid-19 Drives Wages Down, New ILO Report Finds

A new report by the International Labor Organization (ILO) found that monthly wages either fell or grew at a slower rate in the first six months of 2020 as a result of the Covid-19 pandemic and that the crisis was likely to inflict massive downward pressure on wages in the near term.

The report also concluded that the wages of women and low-paid workers have been disproportionately affected by the crisis. While average wages in one-third of the two-thirds of countries globally that provided data appeared to increase, this was largely due to substantial numbers of lower-paid workers losing their jobs and skewing the average, since they were no longer included in the data for wage-earners, ILO noted.

In countries where strong measures were taken to preserve employment, the effects of the crisis were felt primarily as decreases in wages rather than massive job losses.

The “Global Wage Report 2020/21” shows that not all workers have been equally affected by the crisis. The impact on women has been worse than on men. Estimates based on a sample of 28 European countries found that without wage subsidies, women would have lost 8.1 percent of their wages in the second quarter of 2020, compared with 5.4 percent for men.

The crisis has also affected lower-paid workers severely. Those in lower-skilled occupations lost more working hours than higher-paying managerial and professional jobs, according to the report. Using data from the group of 28 European countries, the report shows that without temporary subsidies, the lowest paid 50 percent of workers would have lost an estimated 17.3 percent of their wages.

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Without subsidies, the average amount of wages lost across all groups would have been 6.5 percent. However, wage subsidies compensated for 40 percent of this amount.

Looking at minimum wages for some of the top apparel exporting countries, Chinese workers were paid 1,500 yuan ($228.55) per month; Cambodia’s textile, garment and shoe-sewing workers made $182 a month; Vietnam’s were paid $126.25 per month; Bangladesh’s earned 1,500 taka ($17.80) monthly, and Mexican workers made $5.11 per day.

“The growth in inequality created by the A new ILO report found that monthly wages fell or grew more slowly in the first six months of 2020 as a result of the Covid-19 pandemic.-19 crisis threatens a legacy of poverty and social and economic instability that would be devastating,” ILO director-general Guy Ryder said. “Our recovery strategy must be human-centered. We need adequate wage policies that take into account the sustainability of jobs and enterprises, and also address inequalities and the need to sustain demand. If we are going to build a better future we must also deal with some uncomfortable questions about why jobs with high social value, like care[givers] and teachers, are very often linked to low pay.”

The report includes an analysis of minimum wage systems, which ILO said could play an important role in building a recovery that is sustainable and equitable. Minimum wages are currently in place in some form in 90 percent of ILO member states. But even before the onset of the Covid-19 pandemic, the report found that globally, 266 million people–15 percent of all wage earners worldwide–were earning less than the hourly minimum wage, either due to non-compliance or because they were legally excluded from such schemes. Women are overrepresented among workers earning the minimum wage or less.

“Adequate minimum wages can protect workers against low pay and reduce inequality,” Rosalia Vazquez-Alvarez, one of the authors of the report, said. “But ensuring that minimum wage policies are effective requires a comprehensive and inclusive package of measures. It means better compliance, extending coverage to more workers, and setting minimum wages at an adequate, up-to-date level that allows people to build a better life for themselves and their families. In developing and emerging countries, better compliance will require moving people away from informal work and into the formal sector.”