Why in News?

• Labour’s share to national incomes has been declining in both developing and developed countries for around four decades now, highlighted the latest United Nations Conference on Trade and Development (UNCTAD) report.

Key Stats of the Report:

1.Decline in the Labour’s share to national incomes:

• The report stated that Labour’s share to national incomes has reduced to around 54 per cent in 2018 from 61.5 per cent in 1980 in developed countries.
• In developing economies, the labour share dipped to 50 per cent in 2018 from 52.5 per cent in 1990.
• In the same period, more than 10 per cent of GDP was transferred from workers to capitalists.
• The report also showed that labour wages did not grow at the same pace as the cost of living, but the profit share of corporations increased.

Effect of the decline:

• Affecting living conditions can decrease productivity and further cause erosion of social security, growing market concentration and spread of outsourcing through global value chains, highlighted the UNCTAD report.
• In developing countries, labour market liberalisation weakened the prospects of full-time and regulated employment. This made workers lose bargaining power and borrow money for household expenditure. All this finally slowed down demand and led to a recession-like situation.

2.Decline in Public spending:

• Public spending has been on a declining trend in both developed and developing countries since the 1970s. But public spending is more important for social protection system and long-term asset creation.
• The spending, which included stimulus packages and corporate and banking bailouts, increased inequalities, according to the UNCTAD report.

3.Weak Investment Growth

• Globally, both developed and developing economies tried to increase profit share and cut down corporate taxes to promote productive investment but it didn’t work out.
• Credit has been expanding since 1980s without productive investment. The global financial system is going in the wrong direction, which neither encourages productive investment nor creates an environment of productive investment.

4.Growing stock of Carbon Dioxide

• The current financial mechanism is also at odds with the growing stock of atmospheric carbon dioxide that increases temperature. The prevailing economic pattern where big corporations have a say over carbon-free technology is making it costlier to adopt a solution.The report added that in the last one decade, production of carbon dioxide from developing economies has accelerated, but per capita production of CO2 is less. Developing countries produce around 80 per cent less CO2 when compared with per capita production, read the report.
• The report also established a link between rising inequality and rising temperatures. The threat of rising temperatures from high levels of atmospheric carbon is in large part due to emissions from the richest 10 per cent of people in the world.

Conclusion of the Report:

• Impact on SDGs: Reducing labour share, erosion of public spending, weakening of productive investment and rise in stock of carbon dioxide are factors that stand in the way of countries achieving Sustainable Development Goals (SDGs), according to the UNCTAD findings.
• Misplaced Structural Reforms: The report highlighted the fact that there are underlying structural challenges that stand in the way of revival of global economy.
• The global market, instead of pondering over challenges, brought some misplaced structural reform that further targets liberalisation in labour, products and financial markets, found the UNCTAD.

About UNCTAD:

• United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body.
• UNCTAD is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues.
• The organization’s goals are to: maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis.
• Permanent secretariat — Geneva.
• Other Reports: World Investment Report, Trade and Development Report, Technology and Innovation Report, Commodities and Development Report