Wage growth recovering, deflation risk remains – ILO

* Global real wage growth in 2009 only 1.6 pct

* Signs of higher growth in 2010

GENEVA, Dec 15 (BestGrowthStock) – Wage growth is recovering but has
not regained pre-crisis levels, meaning many countries still
face the threat of deflation from inadequate demand, the
International Labour Organization said on Wednesday.

A report by the United Nations body that monitors
work-related issues found wages had fallen in the last few years
in rich economies, Eastern Europe and the former Soviet Union,
but continued to grow at slower rates in Asia and Latin America.

“The recession has not only been dramatic for the millions
who lost their jobs but has also affected those who remained in
employment by severely reducing their purchasing power and their
general well-being,” ILO Director-General Juan Somavia said in a
statement on the report.

A study of trends in 115 economies covering 94 percent of
the world’s 1.4 billion wage earners showed wages grew in real
terms by 1.6 percent in 2009 — the last year for which full
data are available — after 1.5 percent in 2008 when it halved
from 2.8 percent in 2007.

The figures are skewed by imperfect Chinese official data,
which only cover workers in state-run urban enterprises, who
according to Chinese surveys have enjoyed wage growth at twice
the level of those in the private sector.

Excluding China — the world’s biggest number of wage
earners — real wages grew by 0.7 percent in 2009 after 0.8
percent in 2008 and 2.2 percent in 2007.

ILO officials said that initial indications from G20
economies suggest wages continued to recover in 2010, rising 2.0
percent this year in a group of these countries after median
growth of 1.3 percent in 2008 and 2009, said Patrick Belser, one
of the authors of the report.

“We’re not yet back to the levels before the crisis but the
trend is probably upwards,” he told a news conference.

Besides pointing to a sharp slowdown in wage growth after
the crisis, the report shows that wage growth in many countries
before the crisis was only moderate, and far outstripped by
productivity gains, while large numbers of people in employment
were nevertheless living in poverty.

These suppressed wage levels eroded consumption and
aggregate demand, said Manuela Tomei, the report’s lead author.

“These trends that have preceded the outbreak of the
crisis… have been among the factors that triggered the
financial crisis,” she said.

Continuing moderate wage growth in advanced economies
exposes them to a risk of deflation, while fuel and food price
inflation in developing countries is also eroding purchasing
power there despite stronger wage growth, she said.

The fact that productivity gains have exceeded wage growth
reflects two main trends. In some countries such as Germany and
China, companies coped with inadequate demand by switching
production into exports, while in others such as the United
States a rise in household debt compensated for low purchasing
power, ILO officials said.
(For full report go to http://link.reuters.com/hyv99q )
(Reporting by Jonathan Lynn; editing by Ralph Boulton)

Wage growth recovering, deflation risk remains – ILO