World wages went into the red – Newspaper Kommersant No. 224 (7425) dated 12/02/2022

According to the results of the first half of 2022, real monthly wages on average around the world did not increase for the first time in the last 20 years, but decreased by 0.9%, according to a report by the International Labor Organization (ILO). The reasons for the change in the trend in the dynamics of real wages, ILO experts called the superimposition of a “serious inflationary crisis” on the slowdown in global economic growth, which was partly caused by the conflict in Ukraine and the rise in world energy prices.

For the first half of 2022, the global wage growth rate, on average, failed to outpace accelerated inflation for the first time in the last 20 years and fell by 0.9% year-on-year. Such calculations in the Global Wage Survey are given by the International Labor Organization. It follows that, in general, employment indicators in the global labor market have partially recovered by the beginning of this year after rising unemployment due to the pandemic. However, while high-income countries have returned to the levels of the fourth quarter of 2019 in terms of this indicator, in low- and middle-income countries it is still 2% lower than “pre-pandemic” figures. The intensity of the recovery was also different for groups of workers – the number of unemployed among young people in 2021 in the world was higher than the “pre-pandemic” level by 6 million people.

Further reduction in global unemployment, ILO analysts predict, will slow down due to hostilities in Ukraine. As you know, they have already led to a reduction in forecasts for world GDP growth. According to the latest expectations of the International Monetary Fund, the global economy will grow only by 3.2% this year, while global inflation will reach 8.8% by the end of the year.

ILO analysts note that if we exclude China (where wage growth is usually higher than the world average) from the global indicator of the decline in real wages, the fall in monthly wages will already be 1.4%. The maximum decline among the regions of the world is in Eastern Europe (3.3%), where, obviously, Ukraine made the largest contribution to the reduction of the indicator. By the end of 2022, the labor market of this country may lose about 15.5% of jobs (for more details, see Kommersant of November 3). In second place in terms of wage cuts are the countries of North America (3.2%), the third is South America (1.7%). The maximum positive dynamics was recorded in the countries of Central Asia (plus 2.5%), in the Asia-Pacific region (plus 1.3%).

The indicators of the Russian Federation look worse than the world ones – the growth of wages in the country for nine months, according to Rosstat, was below the inflation rate by 1.5%. At the end of the year, according to the forecast of the Ministry of Economy, the fall will be 2%, however, the department promises that in 2023 it will be replaced by a growth of 2.6%. At the same time, the unemployment rate in the Russian labor market remains record low and in the third quarter of this year amounted to only 3.8%. It should be noted that the relatively high level of inflation in recent years was one of the factors that determined the specific “adjustment” of Russian employment to the economic crises in the country – it traditionally occurred due to a reduction in spending on wage funds, and not the number of jobs. It can be assumed that this model can be used in other countries, especially since a number of national labor markets have already managed to resort to it during the pandemic (for more details, see Kommersant of June 5, 2020).

Anastasia Manuylova