Financial crisis 2020

Sean Fleming, Senior Writer, Formative Content

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Sean Fleming, Senior Writer, Formative Content


More than 10 years since the global financial crisis, many people are still dealing with its aftermath.

Global wage growth in 2017 fell to its lowest rate since 2008. Adjusted for inflation, real-terms pay increases were just 1.8% in 2017, down from 2.4% in 2016.

In its Global Wage Report 2018/19, the International Labour Organization (ILO) found that advanced G20 economies saw wage growth drop from 0.9% in 2016 to 0.4% in 2017. Meanwhile, emerging economies in the G20 experienced growth between 4.9% in 2016 and 4.3% in 2017.

G20 emerging nations’ wage growth
Image: International Labour Organization

The poor performance of some of the G20’s developed countries is hard to miss. Both Italy and the UK lost around 5% in real wage growth over the period 2008–17. Italy experienced a return to positive wage growth in 2014 but this reversed in 2017.

G20 developed markets’ wage growth
Image: International Labour Organization

There was also a brief recovery in the UK between 2014 and 2016, but since then pay increases have remained constantly depressed. In Japan, the picture has been even more bleak; overall wage growth has remained close to zero between 2008 and 2017.

A clear gap is opening up between advanced and emerging G20 nations
Image: International Labour Organization

The ILO also found that the global gender pay gap is still very present, with women earning an average of 20% less than men. The reasons behind this are less clear. Educational attainment differences seem not to be a factor, as female employees tend to have just as good – if not better – educational achievements than men.

Gender pay gaps across the wage distribution for selected countries
Image: International Labour Organization

The segregation and polarization of work along gender lines is a more clear-cut factor. In traditionally male-dominated occupations, where women are still under-represented they tend to be paid less than their male counterparts. The report also finds that a predominantly female workforce may suffer a 14.7% wage penalty, compared with similar organizations employing a more mixed workforce.

There is a puzzle at the heart of the low wage growth statistics. Although GDP recovery is beginning to slow, and forecasts indicate it will remain slow, in recent years it has been growing. At the same time, across many major economies like the UK and the US, unemployment has been falling. Traditionally, that would force wages up, as employers compete with each other for a reduced number of available employees. But that simply hasn’t happened; or not uniformly, at least.

One reason may be the slow growth of productivity.

Productivity measures the output of economic resources – such as land, equipment or employees. It is calculated by dividing the average output in a given period, by the costs incurred and/or resources consumed in that same period to arrive at a figure for GDP per worker, for example.

Trends in average real wages and labour productivity in high-income countries, 1999–2017
Image: International Labour Organization

If the value of their output is not growing or is even falling, employees aren’t generating additional wealth that can be converted into wage increases.

But there may also be emotional and psychological factors involved, too. The 2008 downturn didn’t just hit businesses hard. Many people were left without work, even for a short while. For many in the developed world, the downturn left them exposed with high levels of personal debt and little in the way of savings. Some have even been left with homes worth less than they were 10 years ago.

All of which can undermine confidence in the employment landscape; if you have a job, maybe it’s better to be grateful than to worry about asking for a pay rise, never mind risking whatever job security you have on a new start somewhere else. The crisis of 2008 has cast a lingering shadow.