A wage increase for the poor means prosperity for all


Today in America a chief executive earns 273 times more than the average worker.

Everyone from the 99 per cent to President Barack Obama now sees that growing inequality stymies economic growth and diminishes every society.

Yet the richest country on earth is only the most extreme example of a disturbing global trend.

Inequality is growing in almost all nations, and wages are amongst the lowest on record as a share of wealth.

Meanwhile, unemployment everywhere is at a record high and more than 50 per cent of workers are in vulnerable or precarious work.

At the same time 40 per cent of workers are trapped in the desperation of the informal sector, with no minimum wages and no rights.

Health, public education, transport and quality public services are increasingly denied to those who cannot pay. Tax evasion by large multinational corporations is rampant.

More than half of all respondents (59 per cent) in the 2013 ITUC Global Poll are no longer able to save any money.

So what are we going to do about it?

In his State of the Union address President Obama announced a raise in the minimum wage for federal employees to US$10.10 an hour and urged Congress to do the same for the rest of the workforce.

The International Trade Union Confederation (ITUC) applauds this vital step towards reducing inequality.

Nearly 100 years ago in the aftermath of the First World War global leaders recognised that a minimum living wage was essential for social justice and lasting peace.

The preamble to the International Labour Organization’s constitution of 1919 argued that an adequate living wage was one way to tackle injustice and hardship, preventing “unrest so great that the peace and harmony of the world are imperiled”.

Today, about 90 per cent of ILO member states have some form of minimum wage, however not every worker in these countries is covered.

In many countries unions work to ensure compliance through under-resourced and sometimes corrupt inspectorates and labour courts.

In the overwhelming majority of countries the minimum wage is inadequate to ensure workers and their families can afford basics such as nutritious food, housing, clothing, health care, education, and transport with minimal provision for emergencies.


Minimum wage

Setting a minimum living wage must rely on evidence of what is required to lift workers out of poverty and enable them to live with dignity.

As the cost of living goes up, so too must the minimum wage.

The ITUC’s latest Frontlines Report, released this February, sets out evidence on the relationship between minimum wage and income inequality.

The dramatic growth in precarious work (even in wealthy countries, like Germany) and the desperation of the informal sector means establishing and enforcing a universal minimum living wage is more important than ever.

Those opposed to raising the minimum wage – corporations, conservative governments and neo-liberal economists – argue without substantive evidence that doing so costs jobs.

Too many governments have been wrongly swayed by this view.

The evidence is that every penny paid to low-paid workers is returned to the economy through local enterprises in key sectors, such as retail, housing, food and energy.

A wage increase for the poor is an injection of economic energy that results in increased jobs and greater prosperity for all.

The global slump in workers’ wages relative to gross domestic product has contributed to the massive growth in inequality and must be reversed.

This stands in contrast to the soaring profits for major corporations, the pursuit of shareholder value at any cost and the massive increase in the wealth of the one per cent who derive most of their income from investments in equities, property and commodities.

Reversing income inequality will require reforms in many areas, including; macroeconomic policies, tax and welfare justice, the regulation of financial markets and labour market policies.

Universal access to a minimum living wage is a key element in the fight for equality.

As we draw closer to the centenary of the ILO it is time to deliver on the promise of its constitution 95 years ago for an ‘adequate living wage’ in all countries.