Global Wage Report 2012/13

Economic crisis leads to huge changes in working practices

Large numbers of employees are getting lower wages because they are working fewer hours and doing less overtime. Many are also ‘work sharing’ - in order to avoid being laid off.

News | 10 December 2012
GENEVA (ILO News) – The ILO’s Global Wage Report 2012/13 says many companies have adopted new working practices in response to the global economic crisis as a way of staying afloat.

According to the report, employees have seen changes in their hourly wage rates, as well as in the number of hours they work.

“In many countries, the global economic crisis has led to shorter hours of work due to reductions in the amount of overtime or an increase in involuntary part-time work, as well as increases in the proportion of part-time relative to full-time employees. This has negatively affected wages,” says Patrick Belser, co-author of the report.
Reductions in working hours due to work sharing policies should be seen as a positive development."

Companies in several countries have reduced employees’ working time as part of work sharing programmes. Often, three or four-day weeks have replaced the traditional five-day week, daily hours have been reduced or plants have been shut down for periods of several weeks or even months.

Work sharing saves jobs

But rather than being a universally negative aspect of the economic crisis, reductions in working hours due to work sharing policies should be seen as a positive development, says Jon Messenger, ILO Senior Research Officer.

“Work sharing is a reduction in working time to avoid lay-offs. The company temporarily gets a reduction in its wage bill and the employees don’t lose their jobs. It is a measure that helps to stabilize the economy,” Messenger explains.

Although work sharing means a proportional reduction in wages, these are often supplemented by partial unemployment payments funded by governments. In addition, workers may be offered training which helps them in the long term.

It’s a safety net that operates long enough for the economy to rebound."
“If you look at the pure effect on wages, you would assume that wages would go down proportionately. But in the majority of cases there are income support payments, unemployment insurance or unemployment compensation, which fund a proportion of the reduced wage. Workers in many cases receive at least half, if not more of the wages that they have lost,” Messenger adds.

Work sharing programmes have been implemented in two dozen countries in the Americas, Europe - including Turkey - as well as South Africa.

Messenger stresses that work sharing is a temporary measure, to be used in times of crisis, which gives companies breathing space until a recovery begins. On average, it last between six to 24 months.

“It’s a safety net that operates long enough for the economy to rebound. It is not a silver bullet but an important tool that you need to have available, and you need to have it in place before the downturn comes.”

Further information on work sharing will be available in a forthcoming volume (Messenger, J. and Ghosheh, N. (eds.), Work Sharing during the Great Recession: New developments and beyond (Edward Elgar and ILO).