December begins with two very bad news – first, the warning by the Global Wage Report 2022-23 by International Labour Organisation (ILO)of rising inflation that has caused a striking decline in real monthly wages highlighting the urgent need for policies to prevent further poverty, inequality and social unrest, and secondly the November data by the Centre for Monitoring Indian Economy (CMIE) data which shows rise in unemployment in India for the third consecutive month since September 2022 that reached 8 per cent.
CMIE data of December 2, 2022 shows even a higher unemployment rate of 8.1 per cent in the county. Urban unemployment rate was 9 per cent while rural unemployment rate was 7.7 per cent, showing comparatively more hardship for the urban unemployed compared to the rural areas.
In September, all India unemployment rate was 6.43 per cent, that rose to 7.77 per cent in October in spite of the Great India festival season. Last month in November it rose even higher to 8 per cent shattering all hope of the unemployed.
The trend in urban unemployment was worse than the rural unemployment which rose from 7.7 per cent in September, 7.21 per cent in October 2022, and 8.96 in November, as against the rural unemployment for 5.84 per cent, 8.04 per cent and 7.55 per cent respectively during this period. The sharp rise in unemployment in rural areas in October, was however eased a little in November, though it remained intolerably high.
The ILO global report on wages across the world has said that the global monthly wages fell in real terms to -0.9 per cent in the first half of the year marking the first instance of negative growth this century. As a result, purchasing power of middle-class families has been reduced, while low-income households have been hit particularly hard.
“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 Gilbert F. Houngbo, the ILO Director-General, warning of the potential consequences.
“Income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained,” he said. “In addition, a much-needed post-pandemic recovery could be put at risk. This could fuel further social unrest across the world and undermine the goal of achieving prosperity and peace for all.”
The report has revealed how the severe inflationary crisis, combined with a slowdown in economic growth – driven in part by the war in Ukraine and the global energy crisis – have affected pay packets worldwide, including in the G20 leading industrial nations.
It is estimated that in the first half of the year, real wages declined to -2.2 per cent in advanced G20 countries and grew by 0.8 per cent in emerging G20 countries. This is 2.6 per cent less than in 2019, the year prior to the COVID-19 pandemic.
Inflation has eroded the real wages of the workers. Real wage that grew to 3.5 per cent last year in Asia and the Pacific region in 2021, has slowed to 1.3 per cent during the first six months of this year.
Rising inflation has had greater impact on poorer families, as most of their disposable income is spent on essential goods and services which generally experience greater price increases compared to non-essential items. And in many countries, which included India, inflation is also eroding the real value of minimum wages.
It is in this context ILO has underscored the urgent need for well-designed policy measure to help wage workers and their families maintain their purchasing power and living standards.
They are critical to prevent the deepening of existing levels of poverty, inequality and social unrest. “We must place particular attention on workers at the middle and lower end of the pay scale,” said Rosalia Vazquez-Alvarez, one of the report’s authors.“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic. This can be an effective way to lessen the probability or depth of recessions in all countries and regions.”
One effective tool could be adequate adjustment of minimum wage rates, said the ILO, given that 90 per cent of its 187 Member States have minimum wage policies in place. This recommendation is important for India since it has very low minimum wages that is not enough to feed the workers what to talk about meeting other essential expenditure such as on healthy diet, medical needs, and education of their children.
Collective bargaining and “strong tripartite social dialogue” – that is, between government, employers and workers representatives – also can help to achieve adequate wage adjustments during a crisis. It is also a recommendation that should be taken note of by Modi government since it has been ignoring all tripartite consultations even in the framework of Indian Labour Conference (ILC). Modi government even got the four controversial labour codes passed in the Parliament of India without any consultation and social dialogue, and now bent upon implementing them while the joint front of 10 Central Trade Unions (CTUs), and associations and unions across all the sectors are saying the codes anti-workers and even went for all India strike actions.
Other recommendations include measures that target specific groups, such as providing vouchers to low-income households so they can purchase essential goods, or cutting taxes on these items which will reduce the burden inflation places on households while also helping to bring down inflation generally.
Falling real wages and rising unemployment is a deadly combination, which Modi government needs to address urgently. (IPA Service)