In Haiti, the minimum wage has been, until this year, 200 gourdes a day (or $4.92), and 300 gourdes for piecework ($7.48). (The basic rate rose to 225 gourdes, or $5.61, this year.) In contrast, the Solidarity Center estimates a living wage in Port-au-Prince is about $28 a day.
Rarely do governments admit failing their citizens. However, on Friday the 193-member states of the United Nations did just that when they voted to rectify their failure to uphold the rights of workers and to ensure decent working conditions for more than half of the world’s working women and men.
By voting for an International Labor Organization (ILO) recommendation, The Transition from the Informal to the Formal Economy, the large majority of the world’s governments has done more than just pledge to provide the basics for the world most vulnerable workers—those struggling to make ends meet in the informal economy—they have begun the essential process of strengthening society by promoting worker rights.
Street vendors, home-based workers, domestic workers and day-laborers usually work “off the grid” and outside a country’s regulations and labor laws. They join subcontracted, temporary and part-time workers who subsist on the fringes of the formal economy. These jobs typically pay low wages, perpetuate worker and human rights violations, provide limited or no social benefits, and offer little access to union representation. For most of these workers, survival trumps active engagement in society’s daily undertakings.
An estimated 1.5 billion, or approximately 60 percent of the world’s workers, toil in the informal economy, according to the ILO. In some developing countries, informal jobs comprise up to 90 percent of available work, and most workers take these unstable jobs out of necessity, not by choice.
Women, migrant workers and the young are disproportionately represented in the informal economy, and often the most exploited. Their situation is exacerbated because they may be barred from joining unions, which could offer support through collective bargaining on wages and working conditions, or because unions have not been able to reach them due to the isolated and changeable nature of their job.
Informalization of work fuels global income inequality, poverty and abuse. For example, at age 22, N. Naga Durga Bhavani left her small village in India for Bahrain, where she hoped a job as a domestic worker would help pay for her young daughter’s heart surgery. But when she arrived, after paying labor recruiters the equivalent of nearly two months’ wages, she says her passport and papers were confiscated, and she was forced to work long hours, trapped in an abusive environment where she was beaten, her fingers broken. After she escaped, the Indian Embassy could not help her leave the country because she had no identification.
And the drag on society does not end with the desperate plight of workers like Bhavani. Businesses employing workers in standard employer-employee relationships find themselves at a distinct disadvantage when they compete against those chasing short-term profits by not hiring full-time workers, paying taxes and benefits, or complying with regulations and labor law. Companies that provide financial and business services miss huge swaths of potential clients whose income leaves them too poor to enter the shop door and unable to access credit.
The effects on government are even more profound. The loss of tax revenue on huge percentages of GDP in many countries is only one edge of the sword. Because workers in the informal economy usually hang from the bottom rung of the economic ladder, they are more likely to need social safety nets—the very nets their jobs do not support through tax revenue.
Friday’s vote is significant because governments, worker representatives and employer representatives, who usually operate with very different agendas, publicly acknowledged the imperative of providing all workers with rights at work, social benefits and the ability to join a union. Their acknowledgement that the current system does not work—not for working people, not for governments and not for the businesses that serve them—is an important step toward bringing millions of workers into decent jobs that comply with labor codes and allow workers to be stronger members of their society. All of us should applaud the 193 nations for not choosing failure.
Inequality around the world has its roots in the labor market, according to this year’s International Labor Organization’s (ILO) “Global Wage Report.” ILO research shows that increased worker productivity–particularly in developed economies, where inequality saw its widest increase—has had little effect on boosting wages. However, some emerging and developing economies, especially those focused on poverty reduction, did see inequality decline through a greater focus on more equitable wage distribution and increased paid (as opposed to self-) employment.
The ILO found that minimum wages contribute effectively to reducing wage inequality—and collective bargaining is “a key instrument for addressing inequality in general and wage inequality in particular.”
Some of the blame for flat wage growth can be laid on the 2008 financial crash, which pushed workers out of jobs and lowered growth rates in many economies. The long-term forces of globalization, technology and the decline of unions also have contributed to the problem.
“Average monthly real wages grew globally by 2 percent in 2013, down from 2.2 percent in 2012,” according to the report. Developing and emerging economies drove this growth: Asia saw a 6 percent increase, Eastern Europe and Central Asia nearly 6 percent and the Middle East saw real wages rise by almost 4 percent. Wages in Latin America and the Caribbean rose by less than 1 percent. Average wages in developed countries grew just 0.4 percent since 2009, despite a 5.3 percent increase in worker productivity.
Inequality fell most in Argentina and Brazil. Workers’ real wages in industrialized countries like Japan, Spain and the United Kingdom are less than they were in 2007.
In almost all countries surveyed, wage gaps remain between women and men, between national and migrant workers and between workers in the formal and informal economy.
According to the ILO, the gender “wage penalty” occurs despite education, experience and productivity, and often as a result of discrimination. Indeed, women’s average wages are between 4 percent and 36 percent less than men’s, and the gap widens for higher-earning women. Closing that gap will require policies to combat discrimination and gender-based stereotypes, and improve maternal, paternal and parental leave, says the report.
The ILO was created in 1919, as part of the Treaty of Versailles that ended World War I, to reflect the belief that universal and lasting peace can be accomplished only if it is based on social justice.
Read a summary of the full Global Wage Report.
Check out the Global Wage Report in Short (video).