ILO warns over flatlining wages, below 2007-level in Greece

Wages in developed countries are flatlining and even falling in some places, holding down economic growth after the financial crisis and increasing the risk of deflation, the International Labour Organization said Friday.

The UN agency said that tax and welfare interventions were not enough to address the resulting inequality, and urged governments to introduce or boost national minimum wages and strengthen collective bargaining.

In its latest biennial update on world trends, the ILO said wage growth in developed economies was just 0.2 percent last year and 0.1 percent in 2012, down from around 1.0 percent before the global financial crisis.

By contrast, strong wage growth in Asia helped push up the global average to 2.0 percent in 2013 and 2.2 percent in 2012, down from 3.0 percent before the financial crisis.

In Greece, Ireland, Italy, Japan, Spain and Britain, real wages actually fell below 2007 levels 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."

Cutting wages has been a key element in the international bailouts of eurozone members, and European Central Bank chief Mario Draghi called last week for wage cuts to strengthen the viability of the single currency.

However, there are concerns that exceptionally low price rises in the 18-countries sharing the euro could augur a long period of slow growth and falling prosperity.

Asia growth

The modest global growth in wages...