World Economy

Wage growth stuck below precrisis levels: ILO

Why is productivity rising but wages flat?
Why is productivity rising but wages flat?

Stagnant wage growth in developed countries has pulled average global earnings lower and is in danger of dragging economic performance down, according to the International Labour Organization (ILO).

In its latest report published Friday, the ILO said that global wage growth in 2013 slowed to 2 percent, from 2.2 percent the year before. As such, pay growth has a significant way to go before it reaches its precrisis level of around 3 percent.

The average rate was pulled down by stagnant pay in developed countries, the organization said. Annual wage growth in these economies had been around 1 percent since 2006, but fell to just 0.1 percent in 2012, and 0.2 percent in 2013.

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Wage growth in developed countries was hit hard by the recent economic crisis, which saw employers become reluctant to increase workers' pay. Over the past few years, as nascent recoveries took hold in major economies including the U.S. and U.K., pay increases have lagged broader economic growth.

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It's an issue that will be in focus on Friday, when the U.S.'s non-farm payrolls numbers are released. The unemployment rate is expected to be unchanged at 5.8 percent, according to Reuters, but analysts are hoping for a slight increase in wages – a key measure for the Federal Reserve in considering when to raise interest rates.

"Wage growth has slowed to almost zero for the developed economies as a group in the last two years, with actual declines in wages in some," Sandra Polaski, the ILO's deputy director-genera for policy, said in a release.

"This has weighed on overall economic performance, leading to sluggish household demand in most of these economies and the increasing risk of deflation in the euro zone."

By contrast, pay growth in emerging countries has stormed ahead over the last two years, according to the ILO, coming in at 6.7 percent and 5.9 percent in 2012 and 2013 respectively.

EM storms ahead

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This can be seen in the "vast difference" between regions, according to the report, with wages in Asia, for example, increasing by 6 percent in 2013.

The report did stress, however, that pay in developed countries remained on average around three times higher than in emerging and developing economies.

Gender pay gap

US jobs report to focus on wages?
US jobs report to focus on wages?

The organization also warned of a "substantial gender wage divide", after recording a pay gap between men and women in nearly all 38 countries it analysed.

The gap was the worst in the U.S. – where it came in over 35 percent – and the U.K. and Ireland were not far behind, at just under 30 percent. Sweden, Lithuania and Slovenia recorded the best gender pay gaps - all under 10 percent.

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Some of this pay gap can be explained, the organization said, by factors such as a worker's education – but there remained an "unexplained" part of the data that "therefore suggests discrimination in the labour market."

The ILO also stressed that the wage divide widened in absolute terms for high-earning women. It gave the example of Europe, where women in the bottom 10 percent earned about 100 euros ($123.75) per month less than their male counterparts. This difference widens when it comes to the top 10 percent of workers, however, where women earned almost 700 euros per month less than the men.

- By CNBC's Katrina Bishop