News

In its Global Wages Report 2012-13 the ILO revisits the "usual suspects" for the lower share of profits going to wages and produces new evidence:

"In fact, while much evidence has focused on the role of globalization and especially technology, many studies have overlooked the potential effects of financial markets and of the downsizing of labour and social institutions".



According to the report, both for developed economies and for economies in the developing world, financialization stands as the single most adverse factor in terms of explaining the decline of labour income shares. " Even in China, a country where wages roughly tripled over the last decade, GDP increased at a faster rate than the total wage bill – and hence the labour share went down"



"Financialization has created incentives for diverting corporations’ internal means of finance from real investment into risky speculative financial investments aimed at generating maximum short-run profits. Unregulated financial markets have not only exacerbated inequality but also tended to produce suboptimal and unstable economic outcomes. Therefore, “rebalancing” requires better regulation of the financial sector and restoring their role in channelling resources into productive and sustainable investments."



In order to re-balance wealth, i.e. reconnect wages with productivity, the ILO report concludes that policies will have to stretch beyond labour market policies such as strengthening unions and creating a favourable environment for collective bargaining, into financial regulation, taxation and social security.



For more, see the attached full ILO Global Wage Report 2012-13, especially Chapter 5 and Part III.