A recent International Labour Organization (ILO) report revealed that wage inequality had decreased in most countries since 2000, but it remained a significant challenge.

The report, published on Thursday, examined global and regional wage trends, real wage growth, and income differences within and between countries, offering insights into the key challenges faced by workers worldwide.

Titled The Global Wage Report 2024-25: Is Wage Inequality Decreasing Globally?, the report showed that, on average, wage inequality had decreased in many countries since the early 2000s, with annual reductions ranging from 0.5 per cent to 1.7 per cent, depending on the measure used. The most notable decreases occurred in low-income countries, where wage inequality fell by an average annual rate of 3.2 per cent to 9.6 per cent over the past two decades.

According to the report, the D9/D1 ratio—a measure of income disparity between the top 10 per cent (D9) and the bottom 10 per cent (D1)—stood at 4.9 in Bangladesh, underscoring persistent inequities in the country. Similarly, income remained disproportionately concentrated among the wealthiest 10 per cent compared to the poorest 40 per cent.

The D9/D1 ratio compared the wages of the highest-paid workers at the 90th percentile (D9) with the lowest-paid workers at the 10th percentile (D1). A higher ratio indicated greater disparity, while a lower ratio suggested more equitable wage distribution.

In global rankings, Tanzania topped the list with a staggering D9/D1 ratio of 22.4, indicating extreme wage inequality where the highest earners made over 22 times what the lowest earners took home. Conversely, Vietnam had one of the lowest ratios at 2.7, reflecting relatively equitable wage distribution.

Bangladesh’s ratio was lower than that of other South Asian countries, such as India (6.8) and Sri Lanka (10.8), but higher than Myanmar (4.2) and Vietnam (2.7), which demonstrated lower wage disparities.

Despite the relatively low ratio, the 4.9 D9/D1 ratio revealed that income inequality remained a challenge for Bangladesh. While there was some level of wage compression, the gap between the top earners—often in manufacturing, finance, and trade—and the lowest earners, primarily in agriculture and informal labour, was still substantial.

ILO Bangladesh Country Director Tuomo Poutiainen stated that in a rapidly transforming world of work, characterised by globalised supply chains and new forms of labour relations, effective wages and wage-setting mechanisms were more critical than ever to ensure decent work and social justice.

However, declining real wages in Bangladesh exacerbated socioeconomic challenges such as working poverty, social exclusion, and multidimensional poverty, he added.

Data showed that real wage growth in Bangladesh had remained stable between 0.5 per cent and 1 per cent from 2018 until it dropped sharply to -1.8 per cent in 2023, falling further to -1.9 per cent in the first two quarters of 2024.

The persistent challenges of wage inequality, including the gender pay gap, highlighted the urgent need for a comprehensive, evidence-based, and gender-responsive National Wage Policy, Poutiainen said. Such a policy, coupled with effective wage-setting mechanisms, could have ensured fair compensation that reflected both workers’ needs and the country’s economic realities.

The ILO expressed its commitment to supporting this process through strengthened social dialogue and fostering collaboration among the government, employers, and workers.

‘By implementing an inclusive and transparent wage-setting framework, we could reduce disparities, promote equitable opportunities, and enhance living standards for all workers and their families, ultimately contributing to a more sustainable and just society in Bangladesh,’ Poutiainen added.

The report also highlighted that women and wage workers in the informal economy were more likely to be among the lowest paid, reinforcing the need for targeted actions to close wage and employment gaps and to ensure fair wages for all workers.

The ILO report’s key recommendations included setting wages through social dialogue. Wage-setting mechanisms were advised to balance the needs of workers and their families with economic realities. Wage policies were also encouraged to promote gender equality, equity, and non-discrimination.

The report emphasised the importance of basing decisions on reliable data and statistics. It further suggested that national policies should reflect each country’s specific context and address the root causes of low pay, such as informality, low productivity, and the undervaluation of roles in sectors like the care economy.