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A crisis for Labour as real wages drop and working poverty climbs

Graham Watson

17th January 2023

Some interesting articles have appeared in recent days about the squeeze on real wages and the growing incidence of working poverty.

Phillip Inman's piece in the Observer highlights the growing inequality of income distribution between firms and workers, arguing that the current crisis has continued to see returns to capital rising and returns to labour (i.e. wages) being squeezed, with many workers, especially in the public sector, seeing real incomes falling.

The International Labour Organization expects to see growth in informal sector employment, with a lack of global growth forcing more of them to opt for less secure jobs, at lower rates of pay and for fewer hours than they'd like. And, overall, that's just not good for development.

What is working poverty?

Working poverty refers to individuals or families who are employed but still struggle to make ends meet and are unable to afford basic necessities such as food, housing, and healthcare. These individuals may be working full-time or multiple jobs, but their wages are not sufficient to lift them above the poverty line.

Working poverty can be caused by a variety of factors, including low wages, lack of benefits, and high living expenses. It is often seen in low-paying sectors such as retail, hospitality, and agriculture, as well as in jobs that are considered "gig economy" positions, such as ride-sharing or food delivery.

Working poverty can have a number of negative consequences for individuals, families, and communities, including poor health, limited educational opportunities, and increased stress and financial strain. It can also contribute to a cycle of poverty that is difficult to break.

What is informal employment?

Informal employment refers to work that is not regulated by labour laws and social security systems. It is often characterized by a lack of job security, benefits, and legal protections, and is typically found in the informal economy, which includes activities such as street vending, domestic work, and small-scale agriculture.

Informal workers are often not covered by minimum wage laws, social security programmes, or other labour protections and benefits that are typically provided to formal sector employees. This can make it difficult for informal workers to access healthcare, education, and other basic services, and can leave them vulnerable to exploitation and abuse.

Informal employment is a global phenomenon and can be found in both developed and developing countries. According to the International Labour Organization (ILO), an estimated two billion people, or 61% of the world's workforce, were in informal employment in 2019.

Informal employment is often seen as a symptom of broader economic and social problems, such as poverty, inequality, and lack of opportunities in the formal sector.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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