The Coronavirus Pandemic and Global Wages

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Starting in 2020, the Coronavirus pandemic has already changed the landscape of global wages. By early June 2021, Corvid-19 was by no means finished and is still ravaging through many countries having killed “officially” about 3.6 million people globally. Unsurprisingly, most of the worst Covid-19 effected countries were all – and some still are – run by right-wing populists:

  • the USA was run by “the-virus-will-go-way” Donald Trump with 610.000 deaths; 
  • right-wing populist Bolsonaro’s Brazil with 470.000 deaths; 
  • religious fanatic Modi’s India with 330.000 deaths; and 
  • let-the-bodies-pile-up-high” BoJo’s UK with 130.000 deaths). 

Apart from these countries, many responded with lock-downs, putting extraordinary pressure on wages. Yet in the four years before the Coronavirus pandemic (2016-2018) wage-growth was already sluggish, fluctuating down to the lower levels of between 0.9% and 1.6%. Overall, the Coronavirus pandemic has put a heavy damper on the pay-packets all over the world.

As expected, women who are often employed in those sectors of the economy that are more exposed to the Coronavirus pandemic, like office cleaners, hospitality workers and retail clerks, but also nurses and  kindergarten teachers, suffer more than men. This imbalance is exacerbated by the fact that females tend to be employed at the lower end of the job market more than males, and no more so than during the Coronavirus pandemic.

Without government wage subsidies, workers in Europe, for example, would have lost about 17.3% of their income. If the neoliberal free market would have been let loose, all workers would have suffered far more. To protect wage-earners from the ravages of the neoliberal market that hits workers hardest at the lower end of the scale, many (but hardly all) advanced countries have legislated minimum wage legislation and unemployment insurance scvhemes. There are roughly two classes of countries: 

  • those that regularly adjust their minimum wage (60 countries) and 
  • those that that adjust the minimum wage irregularly (87 countries). 

Overall, 90% of the 187 International Labour Organization (ILO) countries have legal provisions for a minimum wage. Yet despite such legislation, globally roughly 327 million workers are paid at or below the minimum wage, representing roughly 20% of the global workforce. While the raison d’être for a legal minimum wage is to protect workers at the lower end, it is also a highly valued instrument to fight inequality. Those who are paid below the minimum wage are mostly found in two industries: agricultural labourer and domestic work. These are also the very sectors with a high rate of informal contract arrangements.

Nonetheless, the level of pay for minimum wage workers differs significantly around the world. Commonly, minimum wages are set, on average at about 55% of what is paid in developed countries and at 67% in developing and emerging economies. Real minimum wage growth for example, is annually at 1.1% in Africa, 1.8% in the Americas, 2.5% in Asia and 3.5% in Europe and Central Asia.

One might set the 10th of January 2020 as the “semi-official” starting date of the Coronavirus pandemic (the date it was reported by the WHO). Nine months later by November 2020, the ILO estimated that there was a 10.7% decline in global wages, which translates into drop of $3.5 trillion. 

Around that time, too, the IMF projected that the global economy – having grown 2.8% in 2019 – would decline by roughly 4.4% in 2020. The sectors hardest hit are unsurprisingly wholesale, retail trade, accommodation and food services – all areas of the economy in which women are disproportionally employed.

Among workers who continue working during the lockdowns are those who are able to switch to teleworking arrangements using home-offices (e.g. the kitchen table), which translates more often than not, into the kitchen table. By mid-Aril 2020, sixty countries had instituted home-office work arrangements mostly for non-essential workers in the public sector but also in private industry. 

On the downside, the ILO estimates that in the first month alone of the Coronavirus pandemic, the overall earning power of informal workers globally may have declined by up to 60%. As a consequence, relative poverty among workers in the informal economy worldwide has increased from 26% to 60% over just in the first month of lockdowns. This pushed between 71 million and 100 million people into extreme poverty in 2020, many if not most of them women. A big welcome to the wonderful world of global capitalism! 

In the rich world of the G20, countries spent more than $7,600 billion – about 11.2% of their GDP – on fiscal measure to counteract the social, economic, and financial impact of the Coronavirus pandemic. Meanwhile in the not-so-rich world, workers in Asia and the Pacific who had enjoyed the highest real pre-Covid-19 wage growth among all region over the period 2006-19, with China, India, the Republic of Korea, Thailand and Viet Nam leading the way, the advent of the Plague Year changed everything.

Overall the ILO has noticed the inexorably rising gap between slow-wage growth and strong productivity growth during the last twenty years. In 2018, even the rather neoliberal OECD was forced to take note of the rising gap between wages and productivity. The OECD calls it the “decoupling” of wage from productivity. The OECD’s study further shows that wage and productivity growth had been aligned in 1995. 

Between 1995 and 2013 productivity rose by 30% while workers’ wages rose only by 15% half as fast as the pay to managers and share-holders. In other words, the wage gap is growing. Workers work more and harder but get less and less for their labour. The overall trend that can be projected into the future seems clear: the gap between productivity and wage will continue to grow, Pandemic or no Pandemic.

The OECD calls this in their report a “Winner-Takes-Most Dynamics,” and who exactly the winner in this trend was been made very clear by Warren Buffett when he said, 

There’s class warfare going on, all right,

but it’s my class, the rich class,

that’s making war and, boy, are we winning!

The $110bn dollar man Mr. Buffett is correct. Workers keep receiving less and less for their hard work, big money is hoovered upwards to the rich, and the entire project is purveyed as trickle down economics. 

The growing gap between productivity and wage, the rising wage inequality, the fact that the rich are getting richer, and some people suggest that Warren Buffett’s class war from above just might have something to do with capitalism’s and in particular neoliberalism’s relentless fight against trade unions.

Without trade union protection, management has a free hand, leading in some cases to macho-management or what Alex J. Wood calls flexible despotism. Yet during the Coronavirus pandemic 35% of low-wage workers in the USA, 30% in the UK and 20% in Germany reported even lower earnings during the initial months of the Coronavirus pandemic – January and February 2020. Meanwhile, in India workers reported a 3.6% wage cut while informal workers reported a 22.6% wage cut. 

Management has used the Coronavirus pandemic to put downward pressure on workers’ wages. Post-Brexit UK provides one of the starkest examples of this. Management’s attack on wages kicked in almost immediately once the Coronavirus pandemic was announced. As soon as it was established, the post-Brexit trend towards wage cuts accelerated during March and April, says the ILO. At the same time, the union monitoring group noted that in two EU- countries – Denmark and Romania – there were no identifiable effects of the Coronavirus pandemic on wages. In Denmark protection comes from, as the ILO says, “solid labour relations”. As for Romania, the formerly Communist labour unions still have some clout.

Inside Europe, the overall wage losses during the first and second quarter of 2020 occurred most severely in Portugal, Spain, Ireland, France, Greece and the UK (above 10%) and mildest in Switzerland, Denmark, Luxembourg, Sweden, Croatia and the Netherlands (around 3%). Of course, management reduction of income was unequally distributed between those workers at the top-end of the income scale in the top-10% and low-income workers at bottom-10% of the income scale. This, of course, led to further wage inequalities. The Coronavirus pandemic only enhanced this existing trend.

The most unequal wages exist in Spain, Bulgaria, the UK, Austria and Ireland, while the highest equality is found in Denmark, Croatia, Serbia, Slovakia and Romania. With the exception of Denmark, all these are former Soviet satellite countries. Simultaneously, most westernized European countries have either introduced or expanded existing wage subsidies to cover their employees. In some cases, however, only those workers who were unable to work because of lockdown measures were covered.

In many European and non-European countries a minimum level of protection comes from legally set minimum wages existing in 147 countries. The aforementioned split between countries that adjust minimum wages regularly vs. those countries that do it irregularly made a serious difference. 

In those countries with an irregular adjustment, governments tended to delay adjustments of the minimum wage. It came during a time when these were most needed and their lack was felt acutely. Meanwhile, in countries which regularly adjust their minimum wage, these payments were made as scheduled and workers have been better able to weather the storm.

Strong adjustments to the minimum wage were made in Malawi (40%), Mongolia (31%), Iran (21%) and Mexico (20%),  while only microscopically small adjustments were made in Malta (2%), Germany (1,7%), Ecuador (1.5%), France (1.2%), Panama (0.9%) and Kazakhstan (0%). Despite the disparity in the overall GDP of these countries, this failure to ease the burden on working people will lead to increased poverty and inequality. The ILO notes that minimum wage adjustments after the global financial crisis of 2009 have shown that raising the minimum wage can reduce the worst effects of poverty.

There are significant regional differences in minimum wage regulations. For example, Arab States are in a region where minimum wage adjustments are barely evident. By contrast, in all European and Central Asian countries, and in most countries in the Americas, Africa, and Asia and the Pacific, legislative watchdogs or trade unions exist to keep the hungry, howling wolves from the door. 

In Europe and Central Asia, nine countries – notably Austria, Denmark, Finland, Iceland, Italy, Norway, San Marino, Sweden and Switzerland – rely exclusively or primarily on collectively agreed minimum wages negotiated between employers and trade unions. On the other hand, in the Americas, 94% of all countries have statutory minimum wages. 

Overall, it can be said that even in low-income countries, the vast majority of states have adopted a minimum wage system. Finally, in recent years there has at least been a positive trend in the development of minimum wage regulation. 

No doubt about it, the Coronavirus pandemic has hit workers hard and it has hit some workers harder than others. Those in the top-income group were able to escape greedy management’s push to reduce all wages. And they were able to this largely through moving into home-office work. Those unable to work from home were hit hardest, particularly in the hospitality and retail sectors, again where women outnumber men.

Workers at the lower end of the income scale were largely protected through minimum wage legislation, regulation and negotiated systems of minimum wage. Yet wherever employers could get away with it, they used the Coronavirus pandemic to justify wage cuts. Those cuts were most severe in the informal sector where workers are forced to labour without state or trade unions protection. It was the old fashioned dog-eat-dog situation, and the top dogs always win.

If one places the impact of the Coronavirus pandemic on workers’ wage into the context of what is call coordinated-market economies vs. liberal-market economies, with the latter being countries that staunchly follow Herr von Hayek’s crypto-religion-catechism of Neoliberalism one finds, as expected, that workers in coordinated-market economies do better than workers in liberal-market economies. Where non-unionized workers are exposed to the pathology of the neoliberal market turbo-charged by the Coronavirus pandemic, they simply don’t have a chance. 

They soon go under—unable to purchase food for their families, to pay the rent or mortgage on their homes or to move elsewhere where there might a job. They also may be listed on what used to be called “the plaguey bill” or what is now known as the statistics of those who succumb to Corvid-19. Bring out your dead!

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