ILO seeks policies to tackle inflation

The International Labour Organisation (ILO) is seeking measures to prevent rising inflation
In a report, it stated that a severe inflationary crisis combined with a global slowdown in growth, driven in part by the war in Ukraine and the global energy crisis, are causing a striking fall in real monthly wages in many countries.

It said the crisis was reducing the purchasing power of the middle classes and hitting low-income households, particularly hard.

The report with the topic: “The Global Wage Report 2022-2023: The Impact of inflation and COVID-19 on wages and purchasing power”, estimates that global monthly wages fell in real terms to minus 0.9 per cent in the first half of the year – the first time this century that real global wage growth has been negative.

ILO Director-General, Gilbert F. Houngbo, said: “The multiple global crises we are facing have led to a decline in real wages. It has placed 10s of millions of workers in a dire situation as they face increasing uncertainties.

“Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained. In addition, a much-needed post pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”

The report said the cost-of-living crisis comes on top of significant wage losses for workers and their families during the COVID-19 crisis, which in many countries had the greatest impact on low-income groups.

It shows that rising inflation has a greater cost-of-living impact on lower-income earners. This is because they spend most of their disposable income on essential goods and services, which experience greater price increases than non-essential items.

Inflation is also biting into the purchasing power of minimum wages, the report says. Estimates show that despite nominal adjustments taking place, accelerating price inflation is quickly eroding the real value of minimum wages in many countries for which data is available.


The analysis shows there was the need to apply measures to maintain the purchasing power and living standards of wage workers and their families.

“Adequate adjustment of minimum wage rates could be an effective tool, given that 90 per cent of ILO Member States have minimum wage systems in place. Strong tripartite social dialogue and collective bargaining can also help to achieve adequate wage adjustments during a crisis.

“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic,” the report stated.

Other policies that can ease the impact of the cost-of-living crisis on households include measures targeting specific groups, such as giving vouchers to low-income households to help them buy essential goods, or cutting Value Added Tax (VAT) on these goods to reduce the burden inflation places on households while also helping to bring down inflation.

“We must place particular attention to workers at the middle and lower end of the pay scale. Fighting against the deterioration of real wages can help maintain economic growth, which, in turn, can help to recover the employment levels observed before the pandemic. This can be an effective way to lessen the probability or depth of recessions in all countries and regions,” Houngbo added.