By Erika Mae P. Sinaking, Reporter
GLOBAL ECONOMIC stability hinges on shifting from simple job creation to direct investment in job quality and wages, as the widening gap between productivity and pay threatens consumer demand, according to the International Labour Organization (ILO).
Speaking on the ILO’s Future of Work podcast released on Oct. 16, ILO Chief Economist Sangheon Lee said that despite recent moderation of global inflation, real wages have largely failed to keep pace with productivity gains.
“Inflation has come down, but that doesn’t mean prices have fallen,” Mr. Lee explained, noting that real pay gains remain “very modest, leaving many workers with very limited improvement in their purchasing power.”
He said this disconnect has eroded the share of national income allocated to workers worldwide, compounding living cost pressures.
“Globally speaking, the share of incomes going to labor declined from around 54% in 2004 to 52.6% in 2025,” Mr. Lee said, attributing the decline to market concentration, technological shifts, and weakened collective bargaining power.
Looking ahead, the ILO underscored the urgent need to break what Mr. Lee termed the “low-pay, low-productivity jobs trap,” a vicious cycle currently affecting roughly 1.1 billion informal workers worldwide.
In this situation, weak business revenue restricts investment in training and technology, while meager wages dampen worker incentives.
“Low productivity contributes to low pay, while low pay also can itself become an obstacle to productivity growth,” Mr. Lee said. “So these two problems reinforce each other, creating a bit of a vicious circle. This is why simply creating more jobs is not sufficient.”
He warned that young people entering low-paying positions face severe risks of remaining trapped throughout their careers.
“There is a high risk these young people may stay in that kind of job for the rest of their working lives,” Mr. Lee noted.
When large segments of the workforce face low earnings, household consumption, the primary engine of demand, is severely constrained.
“Low productivity, low wages and weak consumption demand and insufficient investment can keep an economy trapped in a low-growth equilibrium,” Mr. Lee said.
He also pointed out that emerging technologies could exacerbate these structural disparities.
Mr. Lee warned that artificial intelligence (AI) threatens to widen divides between advanced and developing nations, between large firms and micro-, small- and medium-sized enterprises (MSMEs), and between skilled and unskilled workers.
“AI should not become another source of economic division. It should be an opportunity to make productivity growth more inclusive,” Mr. Lee said, calling for targeted financial support and training for MSMEs, particularly across the Asia-Pacific region.
The ILO is advocating a fundamental shift, to reverse these trends, urging global financial institutions to move from funding “investment for jobs” to prioritizing “investment in jobs.”
“Much of the conversation among the international financial institutions now is still sort of about investment for jobs,” Mr. Lee said. “We should go further towards, I must say, investment in jobs — treating the jobs themselves, like their productivity, quality and income they generate, as an investment in economic development.”
He said economic performance must be judged by improvements in human welfare.