The International Labour Organization (ILO) has raised concerns about the widening gap between labor and capital income, highlighting the challenges faced by young people in the job market.
The ILO’s World Employment and Social Outlook: September 2024 Update revealed that the labor income share has stagnated while a large portion of youth remain out of employment, education, or training. This upward pressure on inequality is a major concern as the 2030 deadline for achieving the Sustainable Development Goals (SDGs) approaches.
The study found that the global labor income share, representing the portion of total income earned by workers, declined by 0.6 percentage points from 2019 to 2022 and has remained flat since then. If the share had remained at the same level as in 2004, labor income would be larger by $2.4 trillion in 2024 alone.
The COVID-19 pandemic played a significant role in exacerbating this decline, with nearly 40 percent of the reduction in the labor income share occurring during the pandemic years. The crisis amplified existing inequalities, particularly as capital income continues to concentrate among the wealthiest, undermining progress towards SDG 10, which aims to reduce inequality within and among countries.
Technological advances, including automation, have also contributed to the trend. While these innovations have boosted productivity and output, the evidence suggests that workers are not sharing equitably from the resulting gains.
The ILO warned that without comprehensive policies to ensure that the benefits of technological progress are broadly shared, recent developments in the field of artificial intelligence could deepen inequality and jeopardize the achievement of the SDGs.
The report also highlighted the large share of youth who are not in employment, education, or training (NEET). The global NEET rate has only modestly decreased from 21.3 percent in 2015 to 20.4 percent in 2024 and is projected to remain flat for the next two years. The female NEET rate is significantly higher than that of young men, jeopardizing SDG 8.
The ILO’s Deputy Director-General, Celeste Drake, emphasized the need for countries to take action to counter the risk of declining labor income share. Policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining, and effective labor administration, are essential for achieving inclusive growth and building a sustainable development path for all.
