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

Outline 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 1 Global Wage Report 2016/17

There is growing recognition that wage trends have been problematic in many countries … 2 Global Wage Report 2016/17

Global wage growth has decelerated since 2012 Annual average global real wage growth (2006-15) Weighted average; data from ILO global wage database, % Global (without China) Global 4 4 3 3 2.5 2.5 1.9 2 2 1.7 1.6 1.6 1.3 0.9 1 1 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 3 Major Trends in Wages

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, % Developed G20 2 1.7 4 1 0.5 0.4 0.2 0 3 2.7 2.6 -1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2.0 1.9 2 Emerging 10 8 6.6 6.0 6 1 3.9 4 2.5 2 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 4 Major Trends in Wages

Comparing Asia and the Pacific with the rest of the world, the differences are important 6.0 5.1 5.0 5.0 4.6 4.5 4.4 4.0 4.0 3.8 3.4 3.1 2.8 3.0 2.5 2.5 2.5 1.9 2.0 1.7 1.7 1.6 1.5 1.0 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 Global Asia 5 Global Wage Report 2016/17

However the performance of the regions in Asia was uneven 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 -1.0% -2.0% East Asia South-Eastern Asia and the Pacific Southern Asia -3.0% -4.0% 6 Global Wage Report 2016/17

Wage employment continues a growing trend. Trends in wage employment as share of total 60% Asia and the Pacific Eastern Asia 55% South-Eastern Asia and the Pacific Southern Asia 50% 45% 40% 35% 30% 25% 20% 15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 7 Global Wage Report 2016/17

The differences in growth of wages becomes dramatic in the long run… Wage growth base year 2000=100 220 Global 206.1 200 Asia East Asia 184.3 South-Eastern Asia and the Pacific 180 Southern Asia 161.0 160 138.3 140 138.0 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 8 Global Wage Report 2016/17

In the last 10 years, real wage gaps have opened up between developed countries 9 Major Trends in Wages

… and also between emerging economies 10 Major Trends in Wages

There is a strong inverse relationship between the Labour income share (LIS) and the income distribution 0.05 0.04 In most regions, but Latin America, LIS declines and the Gini coefficient 0.03 increases 0.02 0.01 0 Latin America Africa Europe North America Arab States Asia -0.01 -0.02 -0.03 -0.04 -0.05 Change in LIS Change in Gini 11 Major Trends in Wages

In developed countries, real wages growth has lagged behind the growth of labour productivity 10ps 5ps 7ps 12 Major Trends in Wages

Groups of wages in the region High of wages in US$ dollars (above US$ 2000) • Australia Korea, Republic of • Japan New Zealand • Singapor e Medium high wages in US$ (Between US$ 1000 and US$ 2000) • Hong Kong (China) Macau (China) • Taiwan (China) Medium wages in US$ (Between US$ 500 and US$ 1000) • China (urban unites) China (Private enterprises) • Malaysia Medium Low wages in US$ (Between US$ 200 and US$ 500) • Mongolia Philippines • Thailand Viet Nam Low wages in US$ (Under US$ 200) • Cambodia Indonesia • Myanmar Pakistan 13 Major Trends in Wages

In conclusion … Emerging Some emerging economies have performed economies well in terms of average wage growth, but the pace of convergence is slowing down Developed Wage growth has been slow in many economies developed economies, lagging overall behind productivity growth Coordination Coordination of wage policies should take into account the relationship between wages & productivity, and labour income shares. 14 Major Trends in Wages

Outline 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 15 Global Wage Report 2016/17

Motivation and Data Sources Motivation for Part II Data sources for Part II Excessive inequality is bad for For Europe, we use EMPLOYER- economic growth; It reduces EMPLOYEE matched data (Structure social mobility and creates of Earnings Survey, Eurostat). divisions within society. 22 Countries, 2002 to 2010, 22 million wage employees from about 1.1 million enterprises Debate has mostly focused on the characteristics of workers, and the For Emerging & Low income effects of technology and globalization. A new literature Economies, such data is not available. looks at the role of the workplace. Instead, we used labour & household surveys & enterprise level surveys 16 Wage Inequality in the Workplace

Wage inequality increases sharply at the top Gross monthly wage of employee (2010) Weighted average by centile; data from 22 European economies, Euro (thousand) 14 12.5 12 10 8 7.4x 6 4.7 4 3.1 2.5 2.2 1.9 1.7 2 1.5 1.3 1.0 0.8 0.5 0 1st 2nd-10th 2nd 3rd 4th 5th 6th 7th 8th 9th 91st - 100th 99th 17 Wage Inequality in the Workplace

There are differences across countries; some have much lower wages inequality Gross hourly wage of employee (2010) Weighted average by centile; data from 22 European economies, Euro France Finland 100 100 91 71 80 80 60 60 4.4x 40 40 16 14 20 20 0 0 Spain United Kingdom 100 100 80 80 56 60 60 13.3x 6.2x 40 40 20 20 9 0 0 18 Wage Inequality in the Workplace

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, % 6 5 4 3 2 1 3.6% 0 0 10 20 30 40 50 60 70 80 90 100 Top 10% takes 25.5% Bottom 50% takes 29.1% D90 19 Wage Inequality in the Workplace

Education is correlated with wage levels Education of wage employee (2010) Weighted average by centile; data from 22 European economies, % Primary Lower secondary Upper secondary Post secondary University Postgraduate 0 0 0 1 1 1 1 2 3 5 5 7 8 10 13 16 5 20 6 7 27 8 36 10 45 11 Having college degree 57 12 does not help you 62 51 move to top 1% 53 53 13 52 50 12 48 44 11 38 11 26 32 22 21 19 23 18 18 15 11 9 11 10 6 9 8 6 5 4 4 4 3 2 1 1 1-10th 11th to 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91st to 100th centile 20th 99th centile 20 Wage Inequality in the Workplace

Can such wage distributions be justified by differences in worker characteristics? Predicted & actual wages using a classic human capital model (age, education, tenure) (2010) Individual ranked by average hourly wage; 22 EU economies data, Methodologies & Findings Euro (ln) 6 • We run a model which tries to explain the 1 5 wages of individuals to the observed skills- Maximum distance 4 related characteristics of workers, including age, education and tenure. 3 2 • The result shows that these factors are 2 important, but that there are enormous 1 Average distance differences between individuals’ actual wages 0 and those predicted by the model. -1 Minimum distance • This is particularly striking at the top (where 3 -2 people’s actual wages exceed predictions) and at the bottom (where wages are below -3 predictions). -4 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 21 Wage Inequality in the Workplace

Next, we therefore bring enterprises into the analysis Between According to recent research, increases in enterprises inequality in the U.S. are due to mainly to growing difference in productivity and average wages between enterprises Within But what about inequality within enterprises? 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 22 Wage Inequality in the Workplace

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) 5 Individuals 4 3 Establishments where they are employed 2 1 0 10 20 30 40 50 60 70 80 90 100 23 Wage Inequality in the Workplace