Average wage growth in the developed economies has been stuck in a low-growth scenario since 2006, further exacerbating inequality, according to a report from the International Labour Organization.

Among the G20 countries, Canada is actually ahead of the pack in wage growth, with pay packets growing five per cent from 2007 to 2013.

If five per cent real growth over six years seems like very little, that's because it is. But it's well ahead of the rest of the world's developed countries, says the ILO, a UN-sponsored labour organization. 

Only Australia, with an 8.9 per cent improvement since 2007, outstripped Canada in the developed world.

The strength of commodities over the period help push up incomes in Canada and Australia in that period, the ILO said, as resource economies have more well-paid jobs and there was less overall unemployment.

Plus Canadian minimum wages did not remain locked at 2007 levels, as they did in some countries.

Real wages falling

By contrast, other countries were hit harder by the financial crisis. The U.S. saw wages rise 1.4 per cent over the six years, in Germany, they were up 2.6 per cent and in Japan, Italy and the U.K., real wages fell.

Countries such as Spain and Greece saw sharp falls in income, as civil servant wages and minimum wage were reduced in an effort to get the deficit in hand over the last five years.

'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' - ILO's Sandra Polaski

In 2013, wage growth around the world slowed to 2.0 per cent from 2.2 per cent in 2012, according to the ILO’s Global Wage Report.

Most of the wage increases went to emerging economies, with pay growing by six per cent in Asia and 5.8 per cent in Eastern Europe and Central Asia.

By contrast, in developed economies pay packets rose by just 0.1 per cent in 2012 and 0.2 per cent in 2013.

“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,” said Sandra Polaski, the ILO’s deputy director-general for policy.

“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 Eurozone,” she  said in a news release.

Productivity improved, wages didn't

There is a growing gap between productivity growth and wage growth in the developed world, the ILO says in its report, pointing out that investors are reaping the gains of improved productivity, while workers get very little.

Productivity growth has continued strong in the past five years as wages stagnated.

“Wage stagnation must be addressed as a matter of fairness and of economic growth,” said Polaski. “And because overall inequality is driven significantly by wage inequality, labour market policies are needed to address it.” 

The ILO recommends co-ordination of strategy at an international level to address inequality, because it is hampering economic growth.

Among its recommendations:

  • Progressive taxation systems.
  • Enhanced minimum wage policies.
  • Strengthened collective bargaining.
  • Elimination of discrimination against vulnerable groups.
  • Adequate social protection systems.”