GLOBAL WAGE REPORT 2016/17 WAGE INEQUALITY IN THE WORKPLACE Daniel - - PowerPoint PPT Presentation

GLOBAL WAGE REPORT 2016/17

WAGE INEQUALITY IN THE WORKPLACE

Daniel Kostzer Senior Regional Wages Specialist, ILO kostzer@ilo.org

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 2016/17 2

2.5 2.5 1.9 1.7

1 2 3 4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global

1.6 1.6 1.3 0.9

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 Wages 3

Annual average global real wage growth (2006-15)

Weighted average; data from ILO global wage database, %

6.6 6.0 3.9 2.5 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

Major Trends in Wages 4

Annual average real wage growth in the G20 (2006-15)

Weighted average; data from ILO global wage database, %

2.7 2.6 1.9 2.0 1 2 3 4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

G20

0.2 0.4 0.5 1.7

• 1

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

Global Wage Report 2016/17 5

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

Global Wage Report 2016/17 6

• 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

Global Wage Report 2016/17 7

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…

Global Wage Report 2016/17 8

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

• pened up between developed countries

Major Trends in Wages 9

… and also between emerging economies

Major Trends in Wages 10

There is a strong inverse relationship between the Labour income share (LIS) and the income distribution

Major Trends in Wages 11

• 0.05
• 0.04
• 0.03
• 0.02
• 0.01

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

Major Trends in Wages 12

7ps 5ps 10ps

Groups of wages in the region

Major Trends in Wages 13

• 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 economies Wage growth has been slow in many developed economies, lagging overall behind productivity growth Coordination

15 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

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

• f 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 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 Workplace 17

Gross monthly wage of employee (2010)

Weighted average by centile; data from 22 European economies, Euro (thousand) 7.4x

16 71 20 40 60 80 100

Finland

9 56 20 40 60 80 100

Spain

20 40 60 80 100

United Kingdom

14 91 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 6.2x 13.3x

1 2 3 4 5 6 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

Wage Inequality in the Workplace 19

Real gross monthly wage share of employee (2010)

Weighted average; data from 22 European economies, %

D90

Bottom 50% takes 29.1% Top 10% takes 25.5% 3.6%

Education is correlated with wage levels

Wage Inequality in the Workplace 20

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 1 1 1 1 2 3 5 5 1-10th centile 11th to 20th 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to 99th 100th centile Primary Lower secondary Upper secondary Post secondary University Postgraduate Having college degree does not help you move to top 1%

• 4
• 3
• 2
• 1

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?

Wage Inequality in the Workplace 21 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

Wage Inequality in the Workplace 22

About 80% of employees earn less than the average wage in their enterprises

Wage Inequality in the Workplace 23

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 10 20 30 40 50 60 70 80 90 100

Individuals Establishments where they are employed

20 40 60 80 100 120 140 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

Wage Inequality in the Workplace 24

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

Wage Inequality in the Workplace 25

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

10 20 30 40 50 60 70 80 90 100

10 20 30 40 50 60 70 80 90 100

Wages

844

Real-estates & finance and transportation & communication sector provide high wage jobs

Wage Inequality in the Workplace 26

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 1-10th centile 11th to 20th 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to 99th 100th centile Mining and quarrying Manufacturing Construction and utilities Trade Hotel and restaurants Transports and communications Real Estate and finance Social services and public administration Other 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”

Wage Inequality in the Workplace 27

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

Sweden NorwayBelgium Finland France Greece Italy Spain Slovakia Czech Republic Europe Estonia Netherlands Luxembourg Cyprus United Kingdom Poland Hungary Lithuania Bulgaria Latvia Portugal Romania

.05 .1 .15 .2 .1 .2 .3 BETWEEN

Countries with more “between” inequality also have more “within” inequality

Wage Inequality in the Workplace 28

Decomposition of variance (2010)

Average hourly wage; data from 22 European economies s2 (ln)

Fewer women in top deciles; more woman in low-pay

Wage Inequality in the Workplace 29

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 1-10th centile 11th to 20th 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to 99th 100th centile

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

Wage Inequality in the Workplace 30

45 20

Among top 1% earners Wage earning population

Gender pay gap among the highest-paid occupational categories

By 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.

31 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

Proposing country-specific measures to reduce excessive wage inequality

Summary & Conclusion 32

1

Productivity growth Minimum wages & collective bargaining Top salaries: regulation or self- regulation? Gender &

• ther pay

gaps

Sustainable Wage Policies

Govern ment Trade Union Employ er

Proposing country-specific measures to reduce excessive wage inequality

Summary & Conclusion 33

1

Productivity growth Minimum wages & collective bargaining Top salaries: regulation or self- regulation? Gender &

• ther pay

gaps

Sustainable Wage Policies

Govern ment Trade Union Employ er

Proposing country-specific measures to reduce excessive wage inequality

Summary & Conclusion 34

1

Productivity growth Minimum wages & collective bargaining Top salaries: regulation or self- regulation? Gender &

• ther pay

gaps

Sustainable Wage Policies

Govern ment Trade Union Employ er

Proposing country-specific measures to reduce excessive wage inequality

Summary & Conclusion 35

1

Productivity growth Minimum wages & collective bargaining Top salaries: regulation or self- regulation? Gender &

• ther pay

gaps

Sustainable Wage Policies

Govern ment Trade Union Employ er

36 Global Wage Report 2016/17

THANK YOU FOR YOUR ATTENTION!

For further information on Global Wage Report

• r research conducted by the ILO wage group,

please refer to: Global Wage Report 2016/17 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