Tech progress, automation, AI, cut workers’ share of wealth: ILO

This article is published in association with United Nations.

The global trend for shrinking pay packets in heavily industrialized economies could be driven – at least temporarily – by tech innovations in the workplace such as automation and AI, the UN International Labour Organization, ILO, said on Wednesday.

“Global labour income share, which is the proportion of total global income that goes to workers, is shrinking,” said Celeste Drake, Deputy Director-General. “This means that even as workers contribute to a growing global economy, they’re taking home a smaller share of that growth. This needs to be changed, because it’s increasing inequality, which will have a disproportionate effect on working people”.

Trillion-dollar question

In a scheduled update on world employment, the ILO cited data from 36 countries indicating that total income declined globally by 0.6 percentage points between 2019 and 2022 “and has since remained flat”.

This apparently modest decline in income represents an annual shortfall in income of some $2.4 trillion, which is in line with the longer-term decline of 1.6 per cent between 2004 and 2024.

Nearly 40 per cent of this decline happened during the three years of the COVID-19 pandemic from 2020 to 2022, the ILO said, before pointing to further data which showed that while production output has increased over the last two decades, income has not kept up.

Production increases welcomed

From 2004 to 2024, workers’ output per hour increased globally by 58 per cent, said Steven Kapsos, Head of the Data Production and Analysis Unit at the UN agency.

“That’s a very positive trend, that’s a big output,” he said, but over the same period, income increased by only 53 per cent. “So, there’s a wedge of five percentage points between how much productivity grew over that period and how much labour income grew over that period – and that’s leading to this decline in the labour income share.”

In light of these findings, the ILO’s latest World Employment and Social Outlook report maintained that without policy intervention by governments, breakthroughs in generative AI “could exert further downward pressure” on pay packets.

It is crucial that countries strive to reduce such inequalities in line with the internationally agreed Sustainable Development Goals (SDGs), the ILO’s Mr. Kapsos insisted, pointing to the sluggish global economic outlook.

“Over the last two years when we’ve seen inflation rates come down, the labour income has stagnated, so we haven’t seen a recovery… an increase in the share as inflation has come down,” he told journalists in Geneva.

Recommendations from ILO to governments to overcome this trend for rising inequality by 2030 in line with the SDGs include offering universal social

protection to workers and a decent minimum wage. In addition, countries should seek to promote policies in support of freedom of association and recognition of collective bargaining, “so that workers and employers can negotiate how to share those productivity gains”, insisted ILO Deputy Director-General Ms. Drake.

Youth unemployment snapshot

Other key elements in ILO report included the finding that the level of youth not employed around the world has declined only modestly from 21.3 per cent globally in 2015 to 20.4 per cent this year.

Arab States have the highest percentage of young workers unable to find a job – one in three – followed by Africa (almost one in four – a figure that has not changed in two decades), Asia and the Pacific (one in five), Latin America and the Caribbean (nearly one in five), Europe and Central Asia (more than one in six) and Northern America (over one in 10).

Female youth unemployment (nearly one in three) remains more than double men’s (almost one in eight).