The imperialist countries are consciously cutting wages, while China is leading on wage growth

By Martin Brennan

The latest report of the International Labour Organisation (ILO) is required reading for anyone interested in the current global struggle to defend or improve living standards. 

In the Global Wage Report 2022-23 the ILO reaches this very stark conclusion, “The report estimates that global monthly wages fell in real terms to –0.9 per cent in the first half of 2022 – the first negative global wage growth recorded since the first edition of the Global Wage Report in 2008. If China, where wage growth is higher than in most other countries, is excluded from the computations, the fall in real wages during the same period is estimated at –1.4 per cent.”

The contrast with the trend in wages in the imperialist countries is equally stark.  “Among the G20 countries, which account for some 60 per cent of the world’s wage employees, real wages in the first half of 2022 are estimated to have declined to –2.2 per cent in advanced economies, while wage growth in emerging economies slowed but remained positive at 0.8 per cent”, the report argues.

It is clear that socialist China has a policy of raising living standards. This is partly through wage growth and also partly from the host of poverty alleviation measures that have led to the elimination of absolute poverty.

By contrast, the global fall in real wages is led by the main imperialist centres, as highlighted by the ILO in the comments above. Again, this is a conscious policy which is aided by global inflationary wave initiated by US fiscal and monetary policy, but is not an inevitable consequence of it.

Digging deeper into the data

One of the widely accepted economic problems concentrated in the imperialist countries is low productivity growth. This is primarily a function of the low level of fixed capital investment in those countries, although there is a concerted effort to obscure the capitalists’ responsibility for this aspect of the crisis.

Low productivity growth makes sustained rises in real wages very difficult. This is because it would entail all or the bulk the proceeds of productivity growth being allocated to wages rather than profits. Of course, the capitalists fight hard against any such outcome.

But this is not the complete picture. Although very slow by historical standards, productivity has been growing in the imperialist centres. But over a prolonged period (the chart data goes back to 1998) wage growth has failed to keep pace with the growth in labour productivity.

This means that workers have been producing more per hour, but a greater share of the value created by them has been taken by the capitalists. In reality, this is the product of a major capitalist offensive that began at the start of the 1980s, under Reagan and Thatcher.

Wage Growth and Productivity Growth in High Income Countries

Source: ILO

This latest ILO data show that a renewed capitalist offensive on this front has begun. Inflation is being used as a battering ram against real wages. But this is not a naturally occurring phenomenon, as the contrast with other regions of the world underlines.

Here the most startling contrast is with China, and is shown in the chart below. Over both a prolonged period and especially in the current crisis, China’s wage growth consistently outstrips growth in the rest of the world. In the current crisis, the rest of the world excluding China is experiencing substantial falls in real wages (taking inflation into account).

Source: ILO

There is a global working class, as famously expressed in the closing words of the Communist Manifesto. In practical terms this means that the successes of the working class of any country, in this case China are a shared victory for all workers, which reclaims the value extracted by the global capitalists. But by the same token, every setback for workers unevenly affects them all.

China has led the way in terms of raising the living standards of the population and raising wages in real terms. Western mainstream economists continue to insist that the neoliberal economic model is superior to socialism. On a series of measures this is transparently false.

One claim is that the key to prosperity is to increase the role of Consumption in the economy. This is false. The aim of economic policy is to increase both public and private Consumption as a measure of broad prosperity.  But the means to achieve that is to increase Investment.  Over decades, the weight of Investment in the Chinese economy at an average over 40% of GDP has been more than double the proportion of GDP directed towards Investment in the G7 economies. The results for the well-being of the population are there for all to see in these data. The Chinese economic model works.

China has also focused on reducing inequality, which the ILO highlights has been deepened in the rest of the world as a result of the current ruling class offensive in the capitalist countries.  Only a government and state which is engaged in the early stages of constructing socialism would attempt this. Only China has been able to achieve it in a way which affects the outcome for the global working class.

There is now a huge fight in main capitalist centres over wages. The ruling class offensive is consciously aimed at driving down wages to increase profits. Everyone involved in this struggle, or the related struggle against inequality should study what has happened in China and attempt to draw the appropriate lessons from it.