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PPPs for policy making: a visual guide to using data from the ICP - Chapter 4: Labor costs, wages, and social safety nets

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Sustainable Development Goal (SDG) 8 calls for sustained, inclusive, and sustainable economic growth and full and productive employment and decent work for all, and highlights the importance of achieving equality of pay and protecting labor rights. 

SDG 10 seeks to reduce inequality within and among countries, and urges the adoption of policies, especially fiscal, wage, and social protection policies, to progressively achieve greater equality. PPP-based data on labor income and wages are key tools enabling policy makers to monitor progress towards these goals.

The International Labour Organization (ILO) provides monthly and hourly earnings in PPP terms (figure 4.2), while the Organisation for Economic Co-operation and Development (OECD) publishes PPP-based average wages for each of its member states. 

PPP-based data on the earnings of both women and men provide policy makers with a tool to review pay differentials and progress towards gender parity (figure 4.3).

Furthermore, SDG target 5.4 recognizes the value of unpaid care and domestic work, and the ILO also reports PPP-based data in this regard to assist policy makers in addressing persistent gender inequalities in paid and unpaid work, as a necessary foundation for inclusive growth and development.

The ILO publishes PPP-based data on statutory minimum wages for countries where these exist, and policy makers can use these data to review whether implementing minimum wage frameworks adequately supports low-wage earners and promotes inclusive growth (figure 4.4).

SDG target 2.3 looks to double, by 2030, the agricultural productivity and incomes of small-scale food producers, who are often poor and are frequently found to be close to subsistence conditions but play an important role in the global production of food.

SDG indicator 2.3.2 published by the Food and Agricultural Organization (FAO) measures the incomes of small-scale food producers in PPP terms (figure 4.5).

A sound understanding of the structure and affordability of public sector compensation practices is essential to ensure that public sector wages are high enough to attract and motivate qualified individuals into the public service, but competitive enough to not crowd-out candidates from the private sector, while not exerting undue pressures on precious fiscal resources. The World Bank’s Worldwide Bureaucracy Indicators (WWBI), a project of the World Bank Bureaucracy Lab, can help researchers, development practitioners, and policy makers gain a better understanding of the personnel dimensions of state capability and of the investment a country makes in its public sector employees. WWBI provides a view of the incentives and the competitiveness of public sector wages compared to the private sector, and of the wage differentials across occupations. Data collected by the ICP on the compensation of public sector occupations in its participating economies are used to calculate pay compression ratios for occupations benchmarked to the average wage of clerical occupations and figure 4.6 shows the variation in these ratios for each income group of countries. Cross-country public sector pay comparison ratios by occupation are also available.