Worrying trends for workers despite soaring corporate profits
Despite record-breaking shareholder payouts and windfall profits, workers are facing worrying prospects.
The COVID-19 pandemic and then the war-fuelled cost-of-living crisis bore a heavy toll on workers. But with headlines of bumper corporate profits and the easing of inflation in some countries, you would think that the outlook for workers might be improving. Right?
Wrong. The world’s largest corporations paid $2.7 trillion to wealthy shareholders last year, while workers have had $1.5 trillion wiped off their wages over the last two years.
In this week’s Bulletin, we go through the International Labour Organisation’s (ILO) latest research on the world of work (it’s looking bleak) and what that means for inequality.
Work in numbers
The economic picture. Inflation has been soaring, with emerging and developing economies suffering the worst of it. Inflation is now easing, but likely to persist over 2024 and 2025, and will continue to significantly affect real wages. Interest rates increased at rates not seen since the 1980s with significant global repercussions to trade and investment. Global GDP growth severely slowed and was projected to grow by just 0.3% points in 2023.
Labour market conditions. Global unemployment was 5.1% in 2023, a 0.2 percentage point decline – a small improvement. In high-income countries, unemployment stayed about the same and declined in middle-income countries. Low-income countries saw a worrying increase.
Women, young people and migrants hit especially hard by the pandemic continue to have lower workforce participation rates and overall, the average number of hours worked is still lower than before the pandemic struck.
Falling real wage growth. According to Oxfam’s calculations, workers across 52 countries have lost a combined $1.5 trillion (£1.2 trillion) over the last two years, equivalent to nearly a month (25 days) of lost wages for each worker. The ILO research concurs, despite lower unemployment finding that real wages declined in the majority of G20 countries in 2023.
Rising unemployment. Employment growth in 2024 and 2025 is forecast to be half that of 2023, with the number of unemployed people set to rise by around 2 million in 2024. A notable gender gap persists —the global employment rates of men will exceed those of women by 25 percentage points in 2025. Informal employment rates have returned close to pre-pandemic levels, but as the working-age population grows, the number of informal workers will rise.
Growing in-work poverty. In 2023, despite working poverty rates declining slightly, the total number of workers living in extreme poverty grew by around 1 million, and the number of workers living in moderate poverty increased by nearly 8.4 million. Around a third of workers in sub-Saharan Africa were living in extreme poverty ($2.15PPP per day) in 2023, as were about 37% of workers in South Asia. Around 8% of workers in Latin America and the Caribbean were living below the moderate poverty line ($3.65 PPP). The ILO predicts that these rates will persist.
Technological acceleration not helping. Despite wave after wave of technological innovation, AI the latest, living standards and productivity growth have not improved according to the ILO. Lack of technology transfers and IP rules are benefitting a few corporations and their billionaire owners - while preventing developing countries from harnessing new technologies. So far this year, 96% of the wealth gains of the 500 richest billionaires have come from 30 billionaires invested in AI.
What this means for inequality. Higher unemployment, lower real wages and increased poverty —combined with increasing income from capital (for example dividends paid to wealthy shareholders) and wage rises for top earners— point towards a clear and worrying trend of widening income inequality. Following a decline since 2013, income inequality increased during the pandemic - according to the World Bank, 2020 witnessed the largest increase in global inequality since 1990. We haven’t yet seen more recent data or forecasts for the years ahead but will be keeping an eye on this worrying trend.
Something to read and listen to
Read this FT piece about how to tax billionaires.
Listen to this Pitchfork economics episode making the case for inheritance tax.