​Income inequality: On the ILO’s World Employment and Social Outlook study

The ILO’s World Employment and Social Outlook study (September) has definitively linked declining trends in labour’s income share of total income within nations to technological advances — mainly automation and artificial intelligence. In an analysis of the past two decades, it mentions a 1.6% drop in the global labour income share between 2004-24. More ominously, almost 40% of this decline was in the pandemic years of 2019-22 — a drop that has not been recouped in the past couple of years. Labour income share is a measure widely used to assess income inequalities within economies. The 1.6% drop might seem insignificant, but it amounts to $2.4 trillion in lost wages at constant purchasing power parity, in relation to what workers would have earned had the labour income share been stable since 2004. $2.4 trillion lost globally is more than half of India’s nominal GDP forecast for FY2023-24. The study also highlights the gendered aspect of this inequality. In 2024, almost a third of the world’s young women (28.2%) are not in employment, education or training, it estimates, which is double that of young men (13.1%). This is alarming for developing nations with growing working age populations, as it highlights challenges in job creation. In fact, another ILO report on the status of employment in India estimates that 83% of its unemployed are youth. This coupled with the government’s recent prescriptions to the private sector to invest in labour intensive employment points to a crisis in jobs growth and rising inequality, even as output and labour productivity rise.

Several countries have been mooting the idea of a universal basic income (UBI), or a floor to stand on, as economists have called it. A referendum in Switzerland on UBI was defeated in 2016, while Democratic candidate and American tech investor Andrew Yang, in his aborted 2020 bid to the White House, mainstreamed a ‘Freedom Dividend’ of $1,000 a month for every American adult. Congress leader Rahul Gandhi too made a proposal of ₹12,000 a month for every family, during his 2019 election campaign, calling it a “final assault on poverty”. Several industry reports point to high-paying job creation due to automation and AI, to counter the jobless growth theory. But again, this only highlights an acceleration in income-inequality trends. Indeed, with the apparent advantages of automation and AI being irreversible, perhaps a global goal towards a universal basic income could address Sustainable Development Goal 10, or reduced inequality within and among countries. It is perhaps time that developing nations such as India consider the reintroduction of an inheritance tax as a measure to redress wealth inequality.