Constrained recovery
Over the past couple of years, the world has witnessed a series of global shocks having socio-economic repercussions at national and regional levels. While the well-off sections have managed to restore and retain their prestige to a certain extent, it is people on the margins who are still struggling to recoup their strength for meeting basic necessities. More importantly, the youth population appears to be finding it difficult to secure a comfortable place in what could still be said to be a recovering global economy. Shades of this disturbing reality are visible in the latest World Employment and Social Outlook report by the International Labour Organisation (ILO)—indicating both global stagnation in terms of income and rising inequality. Unemployment and inequality are undoubtedly the biggest economic challenges the world has been facing for quite some time.
The ILO report highlights key issues that cast a shadow on the achievement of crucial Sustainable Development Goals (SDGs) as the 2030 deadline approaches. It also highlights the need for comprehensive policy interventions to reverse the current trends. One of the most significant findings from the report is the stagnation of the global labour income share. This metric represents the portion of total global income earned by workers, and according to the ILO, it has been on a long-term downward trend. Between 2019 and 2022, the labour income share fell by 0.6 percentage points, and it has since remained flat. To put this decline into perspective, had the share remained at the same level as it was in 2004, global labour income in 2024 would be larger by an estimated USD 2.4 trillion. The implications of this trend seem dangerous. While worker productivity has increased over the past two decades, income has not kept pace. This growing gap is indicative of the fact that workers are contributing more to economic output without seeing a proportional rise in their income, exacerbating existing inequalities. The ILO’s Deputy Director-General Celeste Drake aptly summarized the issue: “Workers contribute to a growing global economy, yet they are taking home a smaller share of that growth.”
Dissecting the causal factors behind the present scenario, the ILO has attributed nearly 40 per cent of the decline in the labour income share to the COVID-19 pandemic. During the pandemic period, while the global economy struggled, capital income became increasingly concentrated in the hands of the wealthiest. This trend is a threat to the progress of SDG 10, which aims to reduce inequality within and among countries. The pandemic, it is evident, not only disrupted economies but also exposed the fragility of income distribution systems. In addition to the pandemic, technological advances—particularly automation and artificial intelligence (AI)—have contributed to the stagnation of labour income. Although these innovations are known to have boosted productivity, workers have not seen equitable benefits. This raises concerns that future technological developments, including generative AI, could further depress labour income unless robust policies are implemented. Massive technological breakthroughs are, by default, disruptive in nature. Interventions at an authoritative level, thus, become an uncompromisable requisite for seamless transition.
Another worrying finding from the ILO report is the persistently high rate of youth not in employment, education, or training (NEET). Despite modest improvements since 2015, the global NEET rate remains high at 20.4 per cent in 2024, with little prospect for significant improvement in the next two years. The situation is particularly dire for young women, with a NEET rate of 28.2 per cent, more than double that of young men. The World Employment and Social Outlook report is a timely documentation of socio-economic ills plaguing societies. The findings need to be taken seriously for a better future.
