ILO warns of world unrest if inflation and Covid crises go unchecked
The International Labour Organization (ILO) has warned of global social unrest if governments fail to implement policies to respond to the crises spawned by runaway inflation and the Covid-19 pandemic.
In its Global Wage Report of 2022/2023 released on Wednesday, the ILO said that the severe inflationary crisis, together with the global economic slowdown — driven in part by the Ukraine war and the global energy crisis — are causing a “striking fall in real monthly wages in many countries”.
The crisis was reducing the purchasing power of the middle classes and “hitting low-income households particularly hard”.
It was estimated that global monthly wages fell in real terms to minus 0.9% in the first half of 2022 —“the first time this century that real global wage growth has been negative”.
The coronavirus pandemic battered the SA economy, which fell 6.4% in 2020 and led to a loss of about 1.4-million jobs.
Stats SA said on Tuesday that the economy added back a total of 1.62-million jobs since the initial Covid-19 restrictions were introduced in early 2020.
SA headline inflation came in on the upside, accelerating to 7.6% in October, above consensus expectations of 7.4%.
The ILO report comes as SA trade unions across various sectors have been strongarming employers into signing above-inflation increases, citing the rising cost of living that has seen fuel, electricity, transport and food prices shooting through the roof.
The report stated that among advanced Group of Twenty (G20) countries, real wages in the first half of 2022 are estimated to have fallen to -2.2%, whereas real wages in emerging G20 countries grew 0.8%, which was 2.6% less than in 2019, the year before Covid-19 struck.
“The multiple global crises we are facing have led to a decline in real wages. It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” said ILO director-general Gilbert F Houngbo. “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,” said Houngbo.
“This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”
In the absence of countervailing policies, Houngbo said that deterioration in workers’ real incomes can be expected to continue and lead to a fall in aggregate demand.
“This would increase the probability of a deeper recession, a risk that is already worsening due to the restrictive monetary policies adopted by central banks in their efforts to bring down inflation.
“This in turn would endanger the economic and employment recovery, further increasing inequalities and fuelling social unrest,” he said.
Houngbo said: “While the erosion of real wages affects all wage earners, it is having a greater impact on low-income households which spend a higher proportion of their disposable incomes on essential goods and services, the prices of which are increasing faster than those for non-essential items in most countries.”
SA’s national minimum wage is R23.19 an hour.