The largest wage cut in recent history?
As soaring inflation squeezes wages, we dig into employment data.
This week in-equality
Last week saw millions of people worldwide strike and protest because of wages and working conditions. In the UK, half a million public sector workers were on strike, in France, over a million people protested against pension reform. Tens of thousands of teachers in Portugal took to the streets to demand higher wages. In South Africa, thousands of retail workers are striking over wages.
Economic crises have even driven a new style of citizen action. In Lebanon, using dubious capital control laws, private banks decided to limit cash withdrawals amid unprecedented economic decline. This has led to ordinary people organizing and resorting to very public “robbing” the banks to request the return of their deposits, often joined by a large group of supporters. It is worth noting that the “robbers” would often be released without a charge. This Vice documentary, featuring a surreal piece to camera inside a bank being robbed, is a must-watch.
Around the world, soaring inflation is squeezing real wages, despite many corporations making record profits, driving the inequality explosion. In this week’s edition of Equals Bulletin, we look at the data behind what, in terms of the numbers of workers impacted, is likely to be one of the largest wage cuts in recent history and what this means for the people bearing the brunt of the soaring cost of living.
Wage cuts in numbers
The official picture. Government wage data for 2022 is available in 39 countries. On average, when taking into account the changes in the cost of living, wages have fallen in real terms by 1.5%. The majority of countries in this sample are high-income countries and don’t give a global view.
Our analysis seeks to get more global. To get a more complete picture, which includes low- and middle-income countries, we scoured databases, combining the best available forecasts with official government data.
The result: a dataset of 101 countries covering 84% of the world. Wages on average have declined by 2.5% in real terms between 2021-2022. Low- and lower-middle-income countries have seen the greatest decline at 5.2% and 2.7%, respectively. Africa was the region to see the largest decline in wages at 3.9%. 78% of the countries in our sample saw real wages fall with at least 1.7 billion workers living in countries where inflation is outpacing wage growth.
(click on the map for an interactive version)
Hit to your pocket. The ILO estimates that globally, average real wage growth excluding China fell by 1.4% in 2022. Combining this figure with the available wage data from 81 countries, we found that last year workers had $337bn wiped off their wages in real terms.
Working poor. Analysing ILO data we found that since 2021, the number of people earning between $3.20 and $5.50 PPP has risen by 12 million while the number of people earning above $5.50 PPP has fallen by 25 million. The trend of working poverty decreasing is showing worrying signs of reversing. There are millions more poor workers not captured by these statistics, like nurses in the UK forced to use food banks.
Impact of wage cuts on low earners. Inflation is not felt equally. The poorest are hit hardest by inflation and real-term wage cuts. The poorest spend a higher proportion of their income on food and other essential goods. Take Mexico for example, the cost of living has increased by 8.2% between June 2021-2022, but because increases in food prices have been disproportionality higher (14%), the ILO estimates that the increase in the cost of living has actually been 8.9% for low earners and 6.8% for high earners.
Biden’s billionaire tax. Together with a raft of tax proposals, including quadrupling the tax on stock buybacks, the US president called for a Billionaire Minimum Tax in his State of the Union address saying: “No billionaire should be paying a lower tax rate than a school teacher or firefighter”.
Spain considering a climate tax. Following the Climate Inequality report, Spain is reportedly considering a climate tax for the rich.
Reads and listens
Listen Gautam Adani, until recently one of the world’s richest billionaires, has seen his fortune collapse spectacularly in recent days, losing tens of billions of dollars. Listen to the Ones and Tooze podcast about what the Adani group scandal says about the Indian economy.
Read The fantastic new Climate and Inequality report by Lucas Chancel, Thomas Piketty and the team at the World Inequality Lab.
Watch Greenpeace protestors scale a Shell oil platform as the company reports record profits.
Read the warning that AI will widen wealth inequalities, creating a raft of new tech billionaires. Maybe we’ll see if ChatGPT can write the Equals Bulletin one week.
Be inspired by ten great inequality victories in 2022 in the US.