WAGE INEQUALITY IN THE WORKPLACE · 7ps 5ps 10ps. Groups of wages in ... 22 Wage Inequality in the Workplace. ... Real-estates & finance and transportation & communication sector

GLOBAL WAGE REPORT 2016/17WAGE INEQUALITY IN THE WORKPLACE

Daniel Kostzer

Senior Regional Wages Specialist,

ILO

[email protected]

1 Global Wage Report 2016/17

Part I: Major Trends in Wages

• Global trends

• Wages, productivity and labour shares

Part II: Wage Inequality in the Workplace

• The extent of wage inequality

• Within & between enterprises

• Gender pay gaps

Part III: Summary & Conclusion

Outline

There is growing recognition that wage trends have

been problematic in many countries …

Global Wage Report 2016/172

2.5 2.5

1.91.7

0

1

2

3

4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global

1.6 1.6

1.3

0.9

0

1

2

3

4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global (without China)

Global wage growth has decelerated since 2012

Major Trends in Wages3

Annual average global real wage growth (2006-15)Weighted average; data from ILO global wage database,

%

6.66.0

3.9

2.5

0

2

4

6

8

10

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Emerging

Wage growth has increased in developed countries;

but declined in emerging economies


Annual average real wage growth in the G20 (2006-15)Weighted average; data from ILO global wage database,

%

2.72.6

1.92.0

0

1

2

3

4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

G20

0.20.4 0.5

1.7

-1

0

1

2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Developed

Comparing Asia and the Pacific with the rest of the

world, the differences are important


3.4

1.5 1.6

2.5

1.7

2.5 2.5

1.9 1.7

5.1

2.8

4.4

5.0

3.8

4.5 4.6

3.1

4.0

-

1.0

2.0

3.0

4.0

5.0

6.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

Global Asia

However the performance of the regions in Asia was

uneven


-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015

East Asia South-Eastern Asia and the Pacific Southern Asia

Wage employment continues a growing trend.

Trends in wage employment as share of total


15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Asia and the Pacific Eastern Asia

South-Eastern Asia and the Pacific Southern Asia

The differences in growth of wages becomes dramatic

in the long run…


Wage growth base year 2000=100

138.0

184.3

206.1

138.3

161.0

100

120

140

160

180

200

220

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global

Asia

East Asia

South-Eastern Asia and the Pacific

Southern Asia

In the last 10 years, real wage gaps have

opened up between developed countries


… and also between emerging economies


There is a strong inverse relationship between the

Labour income share (LIS) and the income distribution


-0.05

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

0.03

0.04

0.05

Latin America Africa Europe North America Arab States Asia

Change in LIS Change in Gini

In most regions, but Latin America,

LIS declines and the Gini coefficient

increases

In developed countries, real wages growth has

lagged behind the growth of labour productivity


7ps

5ps

10ps

Groups of wages in the region


• Australia Korea, Republic of

• Japan New Zealand

• Singapore

High of wages in US$ dollars (above US$ 2000)

• Hong Kong (China) Macau (China)

• Taiwan (China)

Medium high wages in US$ (Between US$ 1000 and US$ 2000)

• China (urban unites) China (Private enterprises)

• Malaysia

Medium wages in US$ (Between US$ 500 and US$ 1000)

•Mongolia Philippines

•Thailand Viet Nam

Medium Low wages in US$ (Between US$ 200 and US$ 500)

•Cambodia Indonesia

•Myanmar Pakistan

Low wages in US$ (Under US$ 200)

Coordination of wage policies should take

into account the relationship between wages

& productivity, and labour income shares.

In conclusion …

14 Major Trends in Wages

Emerging

economies Some emerging economies have performed

well in terms of average wage growth, but

the pace of convergence is slowing down

Developed

economiesWage growth has been slow in many

developed economies, lagging overall

behind productivity growth

Coordination



• Global trends





• Gender pay gaps


Outline

Motivation and Data Sources

16 Wage Inequality in the Workplace

Motivation for Part II

Debate has mostly focused on the

characteristics of workers, and the

effects of technology and

globalization. A new literature

looks at the role of the workplace.

Excessive inequality is bad for

economic growth; It reduces

social mobility and creates

divisions within society.

For Europe, we use EMPLOYER-

EMPLOYEE matched data (Structure

of Earnings Survey, Eurostat).

22 Countries, 2002 to 2010, 22 million

wage employees from about 1.1

million enterprises

For Emerging & Low income

Economies, such data is not available.

Instead, we used labour & household

surveys & enterprise level surveys

Data sources for Part II

0.5 0.8

1.0 1.3 1.5 1.7 1.9 2.2

2.5 3.1

4.7

12.5

0

2

4

6

8

10

12

14

1st 2nd-10th 2nd 3rd 4th 5th 6th 7th 8th 9th 91st -99th

100th

Wage inequality increases sharply at the top

Wage Inequality in the Workplace17

Gross monthly wage of employee (2010)Weighted average by centile; data from 22 European economies,

Euro (thousand)

7.4x

16

71

0

20

40

60

80

100

Finland

9

56

0

20

40

60

80

100

Spain

0

20

40

60

80

100

United Kingdom

14

91

0

20

40

60

80

100

France

There are differences across countries; some

have much lower wages inequality

18

Gross hourly wage of employee (2010)Weighted average by centile; data from 22 European economies,

Euro

Wage Inequality in the Workplace

4.4x

6.2x13.3x

0

1

2

3

4

5

6

0 10 20 30 40 50 60 70 80 90 100

Top decile of highest-paid employees earns

as much as the bottom 50% of the population


Real gross monthly wage share of employee (2010)Weighted average; data from 22 European economies,

%

D90Bottom 50% takes 29.1% Top 10% takes 25.5%

3.6%

Education is correlated with wage levels


Education of wage employee (2010)Weighted average by centile; data from 22 European economies,

%

11 10 9 8 6 5 4 3 2 1 1

26 22 21

19 18

15 11

9 6

4 4

51 53

53 52

50

48

44

38

32

23 18

5 6

7 8

10

11

12

13

12

11

11

7 8 10 13 16

20 27

36

45

57 62

0 0 0 1 1 1 1 2 3 5 5

1-10thcentile

11th to20th

21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to99th

100thcentile

Primary Lower secondary Upper secondary

Post secondary University Postgraduate

Having college degree

does not help you

move to top 1%

-4

-3

-2

-1

0

1

2

3

4

5

6

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Can such wage distributions be justified by

differences in worker characteristics?


Maximum distance

Minimum distance

Average distance

Methodologies & Findings

Predicted & actual wages using a classic human

capital model (age, education, tenure) (2010)Individual ranked by average hourly wage; 22 EU economies data,

Euro (ln)

• We run a model which tries to explain the

wages of individuals to the observed skills-

related characteristics of workers, including

age, education and tenure.

• The result shows that these factors are

important, but that there are enormous

differences between individuals’ actual wages

and those predicted by the model.

• This is particularly striking at the top (where

people’s actual wages exceed predictions)

and at the bottom (where wages are below

predictions).

1

2

3

Between enterprises

According to recent research, increases in

inequality in the U.S. are due to mainly to

growing difference in productivity and

average wages between enterprises

Within enterprises

But what about inequality within enterprises?

Let us also distinguish changes over time,

and the part of total inequality due to

between and within inequality at one point in

time

Next, we therefore bring enterprises into

the analysis


About 80% of employees earn less than the

average wage in their enterprises


Average hourly wages of individuals & enterprises (2010)By centile ranking of individual wages; data from 22 European economies,

Euro (ln)

1

2

3

4

5

0 10 20 30 40 50 60 70 80 90 100

Individuals

Establishments where

they are employed

0

20

40

60

80

100

120

140

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Avg min of individuals

Avg max of individuals

Avg wage at enterprise level

Wage inequality is much higher among

enterprises that pay high average wages


Average minimum & maximum wages of individuals (2010)By centile of establishments ranked by average hourly wage; data from 22 European

economies,

Euro

A few workers in a few enterprises earn

extremely high wages


Mountain of wage inequality in Europe (2010)Hourly wage; enterprises and individuals ranked by their average

wages in centiles; data from 22 European economies,

Euro

0

10

20

3040

5060

7080

90100

0 10 20 30 40 50 60 70 80 90100

Wages 844

Real-estates & finance and transportation &

communication sector provide high wage jobs


Economic sector of wage employee (2010)Weighted average by centile; data from 22 European economies,

%

12 15 17 19 20 19 18 17 15 13 13

6 6

7 8 9 10 9 8

7 7 6

21 23

21 18 15 13 10

9 8 9 13

12 9 7 5 3

2 2

1 1 1

1

5 6 7 9 9

10 11

11 12 12

13

1 1 2 2 3 4

5 6

8 12

21

15 15 18 20 20 22

23 22

19 16

12

28 25 22 19 20 20 22 26

30 29 20

1-10thcentile

11th to20th

21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to99th

100thcentile

Mining and quarrying ManufacturingConstruction and utilities TradeHotel and restaurants Transports and communicationsReal Estate and finance Social services and public administrationOther service providers

1 in 5 top 1%

wage earner

work in R&F

Decompose total variance in wages as the

sum of the “within” and “between”


Average hourly wages of individuals & enterprises (2010)Wage variance; data from 22 European economies,

% of total

43

57

Variance within establishments Variance between establishments

Within-enterprise inequality is as nearly important as

between- establishments inequality

SwedenNorwayBelgium

FinlandFrance

Greece

Italy

Spain

Slovakia

Czech Republic Europe

Estonia

Netherlands

Luxembourg

Cyprus

United Kingdom

Poland

Hungary

Lithuania

Bulgaria

Latvia

Portugal

Romania

.05

.1.1

5.2

WIT

HIN

0 .1 .2 .3BETWEEN

Countries with more “between” inequality also

have more “within” inequality


Decomposition of variance (2010)Average hourly wage; data from 22 European economies

s2 (ln)

Fewer women in top deciles;

more woman in low-pay


Gender of wage employee (2010)Weighted average by centile; data from 22 European economies,

%

58 58 55 50 47 45 46 45 42

34

21

42 42 45 50 53 55 54 55 58

66

79

1-10thcentile

11th to20th

21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to99th

100thcentile

Female Male

4x

1.4x

Gender of wage employee (2010)Ratio of female to male hourly earnings

among total population; data from 22

European economies,

%

Gender wage gap is even wider among top

1% of wage employees


45

20

Among top 1% earners Wage earning population

Gender pay gap among the

highest-paid occupational

categoriesBy occupational category & within top 1 per cent

The gender pay gap is not just larger

among the highest-paid occupational

categories but actually increases at the

top end of the wage distribution.

• The gender gap among CEOs in the

population is about 40 per cent – twice as

high as the overall gender pay gap.

Within the top 1 per cent, male earn

almost twice as much as their female

counterparts

• The gender pay gap reaches about 45

per cent overall, and among CEO top 1

per cent amounts to more than 50 per

cent.



• Global trends





• Gender pay gaps


Outline

Proposing country-specific measures to

reduce excessive wage inequality

Summary & Conclusion32

1

Productivity growth Minimum wages

& collective

bargaining

Top salaries:

regulation or

self-

regulation?

Gender &

other pay

gaps

Sustainable Wage

Policies

Government

Trade Union

Employer




1


& collective

bargaining

Top salaries:

regulation or

self-

regulation?

Gender &

other pay

gaps

Sustainable Wage

Policies

Government

Trade Union

Employer




1


& collective

bargaining

Top salaries:

regulation or

self-

regulation?

Gender &

other pay

gaps

Sustainable Wage

Policies

Government

Trade Union

Employer




1


& collective

bargaining

Top salaries:

regulation or

self-

regulation?

Gender &

other pay

gaps

Sustainable Wage

Policies

Government

Trade Union

Employer


THANK YOU FOR YOUR ATTENTION!

For further information on Global Wage Report

or research conducted by the ILO wage group,

please refer to:


http://www.ilo.org/global/research/global-

reports/global-wage-

report/2016/WCMS_537846/lang--en/index.htm

Minimum Wage Guide & Other Publications

http://www.ilo.org/global/topics/wages/publicatio

ns/lang--en/index.htm

http://www.ilo.org/global/research/global-reports/global-wage-report/2016/WCMS_537846/lang--en/index.htm

http://www.ilo.org/global/topics/wages/publications/lang--en/index.htm

Documents

WAGE INEQUALITY IN THE WORKPLACE · 7ps 5ps 10ps. Groups of wages in ... 22 Wage Inequality in the Workplace. ... Real-estates & finance and transportation & communication sector