Global Recession Turns Top-Tier Economies Upside Down

This year, the big list of who's naughty and nice won't come from Santa. The International Labour Organization has published its Global Wage Report 2010/11. It's another reminder that workers should expect no glad tidings in the coming year as the recession continues to snowball around the globe.

It wasn't all bad news. Wages are generally on an upward trendline. But in its analysis of national wage data sampled from 115 countries and territories, the ILO reports:

growth in average monthly wages slowed from 2.8 per cent in 2007, on the eve of the crisis, to 1.5 per cent in 2008 and 1.6 per cent in 2009. Excluding China from the aggregate, the global average wage growth drops to 0.8 in 2008 and 0.7 in 2009....

In particular... since the mid-1990s the proportion of people on low pay - defined as less than two-thirds of median wage - has increased in more than two-thirds of countries with available data.

The range of countries that have seen a growth in low-paid workers span the spectrum of "development," including "Argentina, China, Germany, Indonesia, Ireland, the Republic of Korea, Poland and Spain." Paradoxically this growth in the low-wage labor force will be met with Europe's onslaught of harsh austerity measures, which economists predict will not only shred the safety net but also deepen the overall economic contraction (meaning more misery for ordinary people).

Some countries, however, might be getting smarter about rejiggering their economies with a combination of organized labor power and aggressive fiscal policy. For example, the ILO says, departing from policies tried by governments in response to earlier economic crises, half of the surveyed countries this time around "have adjusted their minimum wages either as part of the regular minimum wage review process or with the aim of protecting the purchasing power of the most vulnerable workers." Building on the baseline of economic security provided by government, the ILO finds, "Wages are better aligned with productivity in countries where collective bargaining covers more than 30 per cent of employees."

The United States saw a significant drop in real average weekly earnings from 2007 to 2008, followed by an uptick going into 2009, which the ILO attributes largely to falling consumer prices (increasing relative purchasing power). The U.S. sits near the top of the ILO's list of industrialized countries in terms of the portion of its workforce comprised of low-paid full-time workers (about a quarter of the U.S. labor force compared to six percent in Sweden, for instance).

On both sides of the Atlantic, the oft-maligned public sector again appears to be better shielded from recessionary woes. In most of the surveyed European nations, "nominal earnings in the public sector have risen faster - or fallen less - than earnings in the private sector." Earnings rose faster in the U.S. for state and municipal employees than for private sector employees from March 2008 to 2010.

But the budget axe looms over civil servants. The ILO says "this trend may be reversed in some of the countries that have implemented austerity measures to contain public debt and/or which have signed recent agreements with the IMF."

In this recession, the bigger they come, the harder they fall. The "advanced" countries that helped drive markets over a cliff have spiraled downward while meeker economies have stayed afloat, according to the wage report. Though global average wages grew substantially over the past decade, the increase was unevenly concentrated:

while wage growth slowed but remained consistently positive in Asia and Latin America, other regions such as Eastern Europe and Central Asia experienced a dramatic fall. Advanced economies experienced a drop in the level of real wages which fell in 12 of 28 countries in 2008 and in seven in 2009.

For the "emerging economies," the psychological ramifications of feeling as though your nation is moving up as opposed to toppling over, are reflected in a new Gallup poll showing economic optimism clustered in less wealthy countries.

Yet the U.K. Guardian's analysis suggested that the global downturn could be a great leveler of sorts. On one hand, writes Vittorio Longhi, the recession will inevitably have an acute impact on the most impoverished, least educated, least politically empowered workers. Relegated to the "3D's" ("dirty, dangerous and demanding" jobs), these are often women, youth, ethnic minorities and members of otherwise marginalized communities.

Still, there's nothing like a crashing economy to concentrate officials' minds on designing a better safety net. Countering the EU's "austerity" mantra, the ILO identifies key areas where lawmakers can coordinate social and labor policies to boost recovery and reduce inequity.

The researchers recommend that on top of a government-mandated wage floor, "there must be a system of wage policies which benefits all workers, irrespective of wage levels, union membership or employment status." For workers higher on the economic ladder, that means stronger collective bargaining and organizing rights at work, especially in "non-standard" sectors like domestic workers. Wage supplements like tax credits need to work in tandem with minimum-wage guarantees to prevent employers from ruthlessly driving down wages.

The ILO report also notes that labor policies cannot be designed in a vacuum. While certain principles of decent work hold true universally, like the benefits of unionization, local patterns of racial, gender and ethnic discrimination must also be addressed to ensure a just recovery.

On that front, the U.S. remains a case study in the shameful entanglement of economic, racial and gender inequalities. Meanwhile a disillusioned underclass has spiraled into virulent jingoism and wingnutty theatrics amid increasing confusion over the root causes of the crisis. Once-privileged citizens of the U.S. and European economies will understandably feel dispirited during this holiday season. But the global wage report suggests it's possible to envision other ways overcoming the economic storm, as long as workers don't get mired in the politics of self-defeat.