More Wage Cuts And Work Sharing On The Way

Falling wages and a rise in changing working practices around the world were triggered by the global credit crisis and are set to continue as economic revival stutters.

The International Labour Organisation (ILO) Global Wage Report 2012 found companies are increasingly paying lower wages by cutting working hours and overtime.

There’s also an increase in ‘work sharing’ which helps prevent staff lay-offs as people opt to reduce their hours or share tasks with colleagues.

A spokesman for the ILO said: “Not only has the economic crisis led to reduced hours and overtime but there has also been an increase in involuntary part-time work. The number of part-time employees has also increased.

“This is happening in many countries and it has had a negative effect on wages.”

Shut downs, layoffs and shorter working weeks

Many firms have introduced shorter working weeks – some open for as little as three days a week – and others have closed factories or plants for weeks at a time to help save cash.

Some have also cut the length of their working day and in effect, wages for their staff.

But these changes shouldn’t always be seen as negative, according to the ILO’s senior research officer Jon Messenger.

He explained that reducing working hours because of work sharing policies should be viewed positively.

“By work sharing, employees are reducing the company’s working time to avoid lay-offs which means the company gets a reduction in its wages bill and staff don’t lose their jobs,” said Messanger.

“This measure helps stabilises the economy.”

Work sharing to save money

The ILO points out that when workers chose to work fewer hours, then their drop in wages is often picked up by the government in various welfare benefits. Some may even be offered training schemes to help their long term employment prospects.

“By looking at the effect reducing hours has on wages, it could be assumed that wages would fall proportionately but for the majority off workers they will have access to income support payments, unemployment insurance or unemployment compensation schemes,” said Messanger.

“That means that many workers will continue to receive at least half, if not more, of the wages they have lost.”

The ILO found that work sharing practices have been implemented in more than 24 countries around the world, including Turkey and South Africa.

Though the ILO stresses that such a move is only a temporary measure, usually lasting between six to 24 months, which gives a company room to manoeuvre during a crisis and wait for economic recovery.

Mr Messenger added: “It should be understood that such a move is not a ‘silver bullet’ to solve a company’s problems but more of a safety net that is waiting for the economy to pick up.”