A new global report by the International Labour Office (ILO) provides the latest evidence that failing to get more money into the hands of working people undermines economic recovery. The report shows that throughout 177 countries where data was collected, the growth in real average monthly wages declined from 2.8 percent before the crisis in 2007, to 1.5 percent and 1.6 percent, respectively, in 2008 and 2009.
From a positive frame of view, the report also suggests the economic crisis could provide an opportunity to improve wages in developing countries. One way to do this is through the power of unions.
ILO's report found that low pay is much less prevalent in countries with higher levels of union membership.
Wages are better aligned with productivity in countries where collective bargaining covers more than 30 per cent of employees, and minimum wages reduce inequality in the bottom half of the wage distribution.
"Unions play a vital role in linking wages to productivity growth, so higher union density would help to reduce the incidence of low pay," explained Erin Weir, a senior economist at the International Trade Union Confederation.