Global Wage Report 2020-21: Wages and minimum wages in the time of COVID-19

The Covid-19 crisis resulted in unprecedented losses in employment across the world. It led to a 12.1 per cent decrease in working hours – equal to 345 million full-time jobs – and a 10.7 per cent decline in global labour income. Many governments implemented a range of policy measures to tackle the crisis, such as wage subsidies and credit facilities. However, studies show that such policies were directed mainly towards those in formal employment in most countries.

The employment, wages and work hours of informal workers are less likely to be regulated by laws, as compared to formal workers. ILO estimates that the pandemic impacted 1.6 billion informal workers – 76 per cent of those in informal employment – worldwide. In India, informal workers’ wages fell by 22.6 per cent.

The Covid-19 crisis disproportionately affected vulnerable social groups, such as women, young workers and migrants. A significant economic impact was noted in sectors where women tend to be over-represented, such as retail trade, accommodation and food services and domestic work. UN Women estimates that 40 per cent of young workers worldwide were employed in sectors hardest hit by the pandemic, and 77 per cent were in informal jobs. Further, the world’s 164 million migrant workers too suffered heavy losses.

India placed fifth among nine emerging G20 economies – including Brazil, China, Indonesia, Mexico, Russian Federation, Saudi Arabia, South Africa and Turkey – in ILO’s real wage index ranking in 2019. The index represents changes in each country’s wage rates over time, starting at a base value of 100 in 2008. In 2019, India had a real wage value of 160. (Real wages are the amount of goods and services that a worker can purchase from their nominal wages, or their wages expressed in monetary terms.)

In 2019, 90 per cent of ILO’s 187 member States had minimum wage policies in place. Yet 19 per cent of the world’s wage earners – 327 million people – are paid at or below their countries’ hourly minimum wage. About 15 per cent of workers – 266 million – are paid below the minimum wage rate.

Minimum wage rates in India vary by state, and for different occupations within each state. The country’s Code on Wages, 2019, aims to reduce the number of minimum wage rates and introduces a universal national ‘floor wage’ to be set by the central government.

India’s median minimum wage for unskilled workers has increased in the last decade. Their median nominal minimum wage was Rs. 180.9 in 2015 and Rs. 270 in 2019. The corresponding real minimum wage was Rs. 104.5 in 2015 and Rs. 135.3 in 2019.

Between 2010 and 2019, minimum wages have grown in ‘real’ terms – taking inflation and workers’ purchasing power into account – in 114 of the 153 countries for which data are available. Real minimum wages have doubled in 13 of these countries, including Bulgaria, Cambodia, Iraq, Nigeria and Sierra Leone.

About 18 per cent of the 187 ILO member States exclude either agricultural workers, domestic workers, or both from minimum wage regulations. Even where such workers receive legal coverage, non-compliance with laws reduces the effectiveness of minimum wages.

Minimum wage rates cannot adequately reduce gender-based wage discrimination where there are high rates of informal employment. Domestic workers worldwide – 80 per cent of whom are women – are typically paid around 40 per cent of average wages. The report states that the low valuation of domestic work arises from pervasive social norms that consider such labour “…a natural part of a woman’s role as an unpaid worker in the home.” 

Among other recommendations, the report suggests that governments enact adequate wage policies – through inclusive social dialogue – to mitigate the ‘downward pressure’ on global wage rates as a result of the Covid-19 pandemic. Governments should support people in rebuilding their livelihoods and prevent further impoverishment. Minimum wage policies should be accompanied by measures that support the formalisation of the informal economy, increase paid employment, and support the growth of productivity among ‘sustainable’ enterprises.

Focus and Factoids by Darren James Gens.

PARI Library's health archive project is part of an initiative supported by the Azim Premji University to develop a free-access repository of health-related reports relevant to rural India.