Wage Inequality Grows in America

The International Labour Organization (ILO) has released its Global Wage Report 2014/2015. Most of its conclusions were grim, particularly in terms of advances in the United States. And much of the trouble in America is driven by wage inequality.

Worldwide, the report states:

Wage growth around the world slowed in 2013 to 2.0 per cent, compared to 2.2 per cent in 2012, and has yet to catch up to the pre-crisis rates of about 3.0 per cent.


Even this modest growth in global wages was driven almost entirely by emerging G20 economies, where wages increased by 6.7 per cent in 2012 and 5.9 per cent in 2013.

By contrast, average wage growth in developed economies had fluctuated around 1 per cent per year since 2006 and then slowed further in 2012 and 2013 to only 0.1 per cent and 0.2 per cent respectively.


Between 1999 and 2013, labour productivity growth exceeded wage growth in Germany, Japan, and the United States. This discoupling of wages and productivity growth is reflected in the decline of labour income share (the share of GDP going to labour compensation) over the same period in these countries. In other countries, such as France and the United Kingdom, the labour income share remained stable or increased. Among emerging economies, the labour income share increased in recent years in the Russian Federation, and declined in China, Mexico and Turkey. It is important to note, however, that when real wage growth is rapid, the welfare implications of a declining labour income share in emerging and developing economies may be different from those in developed economies.

So, the United States wears the black hat.

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The solutions proposed by the ILO are mostly ones unlikely to happen in the United States, or at least not soon. Among them are minimum wages (which have made some progress in America), collective bargaining (which once was a method of improvement in wages but has mostly disappeared), reduced inequality for women (which has stagnated, if it ever was a trend) and financial redistribution though taxes (which will never happen as the U.S. economy and society are constituted for now).

Changes in income inequality may come to much of the rest of the world, but not to America.

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