GENEVA (Reuters) - Stagnant wage growth in rich countries is a result of corporate penny-pinching and not competition from cheap Chinese labour, the International Labor Organization said on Friday.
Average wages in developed countries have grown only 0.4 percent since 2009 despite a 5.3 percent increase in workers’ productivity, the ILO said in its latest Global Wage Report.
Globally, wages are slowly converging as poor countries close the gap with rich countries. Wage growth in developed economies was a 0.1 percent in 2012 and 0.2 percent in 2013, while developing economies saw increases of 6.7 percent and 5.9 percent respectively.
But it is not cheap labour competition that is causing wages to stagnate in more advanced economies, said Sandra Polaski, the ILO’s deputy director for policy.
“If productivity levels are increasing you can accommodate the competition because the productivity of your firm will allow you to continue to pay good wages and still be able to compete.”
Profits have recovered since the global financial crisis but that income was not being reinvested at the rate that was seen previously, Polaski said.
“It’s sitting on this retained profitability that’s not producing good results for the global economy.
“Those lower incomes in these advanced economies are reducing household demand which is decreasing overall aggregate demand.”
Reporting by Tom Miles; Editing by Robin Pomeroy