The global economic landscape is undergoing a significant shift, with workers worldwide experiencing a decline in their share of total income. Recent data from 36 countries reveals a troubling trend: the global labor income share has decreased by 0.6 percentage points between 2019 and 2022. This decline translates to an annual shortfall of approximately $2.4 trillion in workers’ income, highlighting a growing disparity between economic growth and individual prosperity.

The long-term picture is even more concerning. Over the past two decades, from 2004 to 2024, the labor income share has fallen by 1.6%. Alarmingly, nearly 40% of this decline occurred during the three years of the COVID-19 pandemic (2020-2022), underscoring the pandemic’s profound impact on global labor markets and income distribution.

While workers’ productivity has surged, their compensation has not kept pace. From 2004 to 2024, global output per hour increased by an impressive 58%. However, income only grew by 53% during the same period, creating a 5 percentage point gap between productivity growth and labor income growth. This disconnect between productivity and wages is a key factor contributing to rising inequality.

The AI Factor and Economic Outlook

As we look to the future, the potential impact of artificial intelligence on the labor market cannot be ignored. Without appropriate policy interventions, breakthroughs in generative AI could exert further downward pressure on wages, potentially exacerbating the existing income disparity.

The global economic outlook remains sluggish, with labor income stagnating even as inflation rates have decreased in the past two years. This combination of factors paints a challenging picture for workers worldwide, particularly for vulnerable groups such as youth and women.

Youth Unemployment: A Persistent Global Challenge

While global youth unemployment has seen a modest decline from 21.3% in 2015 to 20.4% in 2024, regional disparities remain stark. The Arab States face the highest youth unemployment rate, with one in three young people out of work. Africa’s youth unemployment rate, at almost one in four, has remained stagnant for two decades, highlighting the need for targeted interventions in these regions.

Other regions also face significant challenges:
– Asia and Pacific: one in five youth unemployed
– Latin America and Caribbean: nearly one in five
– Europe and Central Asia: more than one in six
– Northern America: over one in 10

Gender disparities in youth unemployment are particularly alarming, with female youth unemployment (nearly one in three) more than double that of men (almost one in eight).

Addressing the Challenges: Policy Recommendations

To combat these trends and promote more equitable economic growth, the International Labour Organization (ILO) recommends several key policy measures. These include implementing universal social protection systems and establishing decent minimum wages to address rising inequality. Additionally, the ILO advises promoting policies that support freedom of association and collective bargaining, empowering workers to negotiate for fair compensation and better working conditions.

As the global economy continues to evolve, it is crucial for policymakers, businesses, and workers to collaborate in developing strategies that ensure economic growth benefits all segments of society. By addressing the root causes of income inequality and implementing targeted interventions for vulnerable groups, we can work towards a more inclusive and sustainable economic future.