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The COVID-19 pandemic was identified as a key driver of this decline — nearly 40% of the reduction in the labour income share occurred during the years of 2020-2022.
Following the findings of its most recent employment report, the International Labour Organization (ILO) is finding upward pressure on inequality — according to the World Employment and Social Outlook: September 2024 Update, labour income share has stagnated and a large share of youth remains out of employment, education or training.
As the 2030 deadline approaches, progress on key Sustainable Development Goals (SDGs) has been slow, particularly for two indicators — the share of youth not in employment, education, or training (NEET), and the labour income share.
The report clarifies that the labour income share measures the proportion of total income in an economy that employed people earn by working.
Having been on a downward trend for a long time, the global labour income share has fallen by 0.6 percentage points (p.p) from 2019 to 2022 and has since remained flat – compounding a long-running downward trend. The COVID-19 pandemic was identified as a key driver of this decline, with nearly 40% of the reduction in the labour income share occurring during the pandemic years of 2020-2022.
In 2019, the labour income share was recorded at 52.9%. Following a brief growth in 2020, the share in 2021 had already returned to pre-pandemic levels as the global economy recovered. However, in 2022, it declined to 52.3%.
The latest macroeconomic data estimates that the labour income share remains at that level for 2023 and 2024, at roughly 0.6p.p below the pre-pandemic situation.
Technological advances, including automation, have also played a part in this decline.
While technological advancements have been long celebrated as a key driver of economic growth in the long run, more evidence has emerged over the last two decades indicating that technological improvements can actually produce transitory disruptions. As the report points out for instance, under certain circumstances, technological improvements can reduce employment and hours worked in the short run.
With the emergence of generative artificial intelligence tools and other technological advances that have the potential to transform the world of work, the ILO emphasises the importance of ensuring that the workforce is equipped with the necessary education, training, and skills. While such advancements have boosted productivity and output, evidence suggests that workers are not reaping a fair share from the resulting gains; without comprehensive policies to ensure that the benefits of technological progress are broadly shared, these recent developments, particularly in the field of AI, could deepen inequality.
"Ensuring that youth participate in education and are effectively integrated into the labour market can bring substantial long-run social and economic benefits."
The latest ILO estimates for the 2024 NEET rate (20.4%) point to only a modest improvement, and the number is projected to remain flat in 2025 and 2026. Despite the growth in youth population between 2015 and 2024, the absolute number of young people not in employment, education, or training has remained at a similar level. This can be attributed to modest progress in lowering the global NEET rate.
That being said, the number of youth NEET is projected to increase in the next two years.
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Not just that, the NEET estimates also reveal large gender inequalities in young people’s access to education and employment. Globally in 2024, the female youth NEET incidence is estimated at 28.2%, double the incidence among young men at 13.1%.
Commenting on the findings, Celeste Drake, ILO Deputy Director-General, highlighted that countries must take action to counter the risk of declining labour income share.
"We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labour administration, to achieve inclusive growth, and build a path to sustainable development for all", she urged.
Lead image / World Employment and Social Outlook: September 2024 Update
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