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The Political Roots of Falling Wage Growth

New findings from the International Labor Organization show that workers across many advanced and emerging economies continued to miss out on the gains from growth in 2017. Rather than trotting out the usual suspects – trade and technology – it is time for policymakers to place the blame where it belongs.

NEW DELHI – It’s now official: workers around the world are falling behind. The International Labor Organization’s (ILO) latest Global Wage Report finds that, excluding China, real (inflation-adjusted) wages grew at an annual rate of just 1.1% in 2017, down from 1.8% in 2016. That is the slowest pace since 2008.

In the advanced G20 economies, average real wages grew by a mere 0.4% in 2017, compared to 1.7% growth in 2015. While real wages were up by 0.7% in the United States (versus 2.2% in 2015), they stagnated in Europe, where small increases in some countries were offset by declines in France, Germany, Italy, and Spain. The slowdown in “success stories” like Germany and the US is particularly surprising, given the former’s expanding current-account surpluses and the latter’s falling unemployment and tight labor markets.

In emerging markets, average wage growth in 2017, at 4.3%, was faster than in the advanced G20 economies, but still slower than the previous year (4.9%). Asia enjoyed the fastest real wage growth, owing largely to China and a few smaller countries such as Cambodia, Sri Lanka, and Myanmar. But, overall, wage growth in Asian economies mostly decelerated in 2017. And in Latin America and Africa, several countries experienced real-wage declines.

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