American Income Gap Worst In Developed World

From Right Democrat:

James Parks reports in the AFL-CIO's NOW Blog:

The global economic crisis will lead to deep cuts in the wages of millions of workers worldwide in the coming year, according to a report published today by the International Labor Organization (ILO). Meanwhile, wage inequality in the United States between the top 10 percent and bottom 10 percent income brackets is the highest of any developed economy.

The report, Global Wage Report 2008/09, warns that wages are likely to fall worldwide and exacerbate an already unacceptable level of inequality. Based on the latest growth figures from the International Monetary Fund, the ILO forecasts the global growth in real wages will at best reach 1.1 per cent in 2009, compared to 1.7 per cent in 2008.

Says ILO Director-General Juan Somavia:

For the world’s 1.5 billion wage earners, difficult times lie ahead. Slow or negative economic growth, combined with highly volatile food and energy prices, will erode the real wages of many workers, particularly the low-wage and poorer households. The middle classes will also be seriously affected.

The wage crisis is not confined to poor or developing countries, the ILO says. Wages in industrialized economies are expected to actually fall, from an increase of 0.8 percent in 2008 to a decline of -0.5 percent in 2009. In the U.S., average wages are expected to decrease by about 1 per cent in 2008 and fall even further in 2009.

In the United States, workers at the top earn 4.75 times more than those at the bottom, compared to a ratio of 2.10 in Norway, 3.0 in France and 3.15 in Germany.

The ILO report shows this bleak outlook follows a decade in which wages failed to advance as much as economic growth. According to the report, while the global economy grew at a 4 percent annual rate between 2001 and 2007, growth in wages lagged behind, increasing by less than 2 percent per year in half of the world’s countries.

The report also points out that growing wage inequality is creating a dangerous situation. Since 1995, inequality between the highest and lowest wages has increased in more than two-thirds of the countries surveyed, often reaching socially unsustainable levels. Among developed countries, Germany, Poland and the United States are among the countries where the gap between top and bottom wages has increased most rapidly. In other regions, inequality also has increased sharply, particularly in Argentina, China and Thailand.

The wage gaps are so wide, Somavia says, that they threaten the future of free societies.

The legitimacy of globalization and of open economies and societies hinges critically on greater fairness in outcomes. Central to this fairness is the ability of working women and men to obtain a fair share of the wealth they create.

To prevent the decline in wages from deepening the global recession and delaying its recovery, the ILO suggests that governments provide stimuli for consumers and increase the purchasing power of workers:

Firstly, social partners should be encouraged to negotiate ways to prevent a further deterioration in the share of wages relative to the share of profits in GDP. Secondly, minimum wages should effectively protect the most vulnerable workers. Thirdly, minimum wages and wage bargaining should be complemented by public intervention through, for instance, income support measures.

The report shows that collective bargaining is an efficient way to counter declining wages and fight wage inequality. However, the ILO notes that in the United States, less than 15 percent of workers are covered by union collective bargaining, compared with more than 70 percent in a number of European countries, including Denmark, Finland, France, Netherlands and Spain.

http://blog.aflcio.org/2008/11/25/global-wages-decline-us-income-gap-worst-of-developed-countries/

Economic populists flocked to Obama. He united the black, white and (to an extent) Hispanic working class in his support. He owes them. They know it. They should let him know that they know it.