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Amid sluggish growth, ILO calls for minimum wage policies

December 5, 2014

Imposing a minimum wage could lead to price increases and staff cutbacks, studies have suggested. But the International Labour Organization thinks it could help bolster consumer demand.

young man pushing cart in soda factory
Image: picture alliance/JOKER

In its latest report on global wage trends, the International Labour Organization called on governments to introduce or support minimum wage policies, saying tax and welfare measures were not enough to address inequality.

In its latest update on world trends, released Friday, the United Nations agency also said wage growth in developed countries has slowed almost to zero in the past two years. In some places it even declined, further raising the risk for deflation in the eurozone.

The global average for wage growth in 2013 was 2 percent, down from 2.2 percent in 2012, driven mostly by wage increases in Asia. The region saw the highest wage growth in 2013 at 6 percent.

But wages and incomes in much of Asia and the Pacific remain much lower than in industrialized countries, the report added.

Praise for Germany

The agency praised Germany for promising to introduce a minimum wage at the beginning of next year, stating while such policies do not necessarily create jobs, they do help stimulate consumer demand.

But not all German industry workers have been happy with the change of plan, as DW's Loveday Wright reported earlier this week. A recent study funded by German employers' organizations found hundreds of thousands of jobs could be cut after the minimum wage goes into effect next month.

Wage cuts have played a key role in the international bailouts of eurozone members. Last week, European Central Bank head Mario Draghi urged for an "adjustment of wages" to strengthen the euro, addressing concerns that low inflation could point to sluggish growth and falling prosperity.

el/cjc (AFP, dpa)