Global productivity outshines wage growth

Businesses are focusing on improving their productivity rather than offering higher wages to workers, a report from the International Labour Organisation (ILO) has discovered. The Global Wage Report 2014-15 points to an increase in output at a time when wages are remaining largely flat across many developed nations.

Labour productivity is defined as the value of goods and services produced by each person in employment for the purposes of the study. In the majority of developed economies, the ILO reveals this has outshone wage growth – a situation that has particularly emerged over the past few years.

If the situation is allowed to continue, the group warns that workers and households will find themselves with a smaller share of economic growth. This will happen as owners of capital increasingly benefit from better profits.

The ILO has recognised a growing gap between wages and productivity, therefore leading to a fall in labour's share of GDP. In light of this, companies may find themselves investing not only in productivity solutions, but also measures to ensure workers receive additional pay for their efforts.

The report also pointed to a slight rise in wages across the world, although emerging G20 economies appear to be leading the charge. Wage growth increased 2 per cent in 2013, which marks a slight slowdown from the 2.2 per cent recorded the previous year.

However, there is still some way to go before wage growth recovers to the level seen before the global financial crisis, where it reached 3 per cent. Emerging economies, on the other hand, witnessed an increase of 5.9 per cent in 2013.

Latest wage growth figures from the Australian Bureau of Statistics (ABS) show that between the June and September quarters, wages in the private sector increased 0.6 per cent on a seasonally adjusted basis. Public sector wage growth during the same period increased 0.5 per cent.