GLOBAL WAGE REPORT 201617 WAGE INEQUALITY IN THE

GLOBAL WAGE REPORT 2016/17 WAGE INEQUALITY IN THE WORKPLACE Mariko Ouchi ILO-Budapest ouchi@ilo. org

Some preliminary remarks The 2008 ILO Declaration on Social Justice for a Fair Globalisation calls for policies “designed to ensure a just share of the fruits of progress to all, and a minimum living wage to all employed and in need of such protection” ey e of income: th rc u so y e k a re Wages a 0% of total 8 o t % 0 7 t n se re often rep h at least one it w s ld o h se u o income for h labour force. member in the omy: fect on the econ ef t an rt po im Wages have an ct impact on They have a dire nsumption , co competitiveness mand. e and aggregate d nds have become a In many countries, wage tre “nature of political issue, changing the political discussion”. 1 Global Wage Report 2016/17

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 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, % 3 Major Trends in Wages

Wage growth has increased in developed countries; but declined in emerging economies Annual average real wage growth in the G 20 (2006 -15) Weighted average; data from ILO global wage database, % Developed G 20 1. 7 2 4 1 0. 2 3 2. 7 0. 4 0. 5 0 2. 6 -1 1. 9 2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2. 0 Emerging 10 8 6. 6 6. 0 6 1 4 3. 9 2. 5 2 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 4 Major Trends in Wages 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real wage growth in Moldova is steady Real wage growth (2010 -14) Nominal monthly average wage (2010 -14) Calculated by ILO, based on nominal wage data from National statistics office & IMF cpi % Data from national statistics office; Moldovan Leu (MDL) RWG 8 5000 6. 4 5. 9 6 4090 4000 3674 2 3386 3000 3. 7 3. 1 4 2972 3042 0. 7 0 2011 2012 2013 4. 6 2012 2013 2014 CPI 2000 10 8 1000 7. 4 7. 7 6 5. 1 4 2 0 2010 5 2011 2012 Wage Inequality in the Workplace 2013 2014 0 2011 2014

In the last 10 years, real wage gaps have opened up between developed countries 6 Major Trends in Wages

… and also between emerging economies Average real wage index (2006 -15) base year=2006; developing G 20 countries 280 230 China 180 Moldova India Russia Turkey South Africa 130 Brazil Indonesia Saudi Arabia Mexico 80 7 2006 2007 Major Trends in Wages 2008 2009 2010 2011 2012 2013 2014 2015

In developed countries, real wages growth has lagged behind the growth of labour productivity Labour productivity 10 ps 2 x 5 ps 7 ps 8 Major Trends in Wages Wage

… and there has been a global decline in labour income shares Adjusted labour income share, % Note: China data is unadjusted 9 Major Trends in Wages

But in Moldova, growth trends of wage and productivity are synchronized… Moldova total labour income share (2000 -14) Moldova wage vs productivity (2006 -14) Data from ILO global wage database Calculation based on ILO wage database Index 80% 160 70% Wage 150 60% 140 50% Productivity 40% 130 30% 120 20% 110 10% 10 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 20 00 0% Major Trends in Wages 100 2006 2007 2008 2009 2010 2011 2012 2013 2014

In conclusion … 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 11 Major Trends in Wages Coordination of wage policies should take into account the relationship between wages & productivity, and labour income shares.

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 12 Global Wage Report 2016/17

Motivation and Data Sources Motivation for Part II Excessive inequality is bad for economic growth; It reduces social mobility and creates divisions within society. 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. 13 Wage Inequality in the Workplace Data sources for Part II For Europe, we use EMPLOYEREMPLOYEE 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

Wage inequality increases sharply at the top Gross monthly wage of employee (2010) Weighted average by centile; data from 22 European economies, Euro (thousand) 7. 4 x 14 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 4. 4 x 6. 5 x 160 13. 3 x 6. 2 x 12 15 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, % 3. 6% D 90 16 Wage Inequality in the Workplace

Education is correlated with wage levels, but does not explain everything Education of wage employee (2010) Weighted average by centile; data from 22 European economies, % Having college degree does not help you move to top 1% 17 Wage Inequality in the Workplace

Economic sector and other factors also play a role Economic sector of wage employee (2010) Weighted average by centile; data from 22 European economies, % 1 in 5 top 1% wage earner work in Real estate and Finance 18 Wage Inequality in the Workplace

Next, we therefore bring enterprises into the analysis Between enterprise s According to recent research, increases in inequality are due in part to growing difference in productivity and wages between enterprises Within But what about inequality within enterprises? Let us also consider what is going on within enterprises 19 Wage Inequality in the Workplace

Inequality between enterprises A recent chart from the OECD 20 Wage Inequality in the Workplace

Inequality within enterprises • About 80% of employees earn less than the average wage in their enterprises • Wage inequality is much higher among enterprises that pay high average wages • A few workers in a few enterprises earn extremely high wages 21 Wage Inequality in the Workplace

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 Within-enterprise inequality is as nearly important as between- establishments inequality 22 Wage Inequality in the Workplace

Countries with more “between” inequality also have more “within” inequality Decomposition of variance (2010) Average hourly wage; data from 22 European economies s 2 (ln) 23 Wage Inequality in the Workplace

Fewer women in top deciles; more woman in low-pay Gender of wage employee (2010) Weighted average by centile; data from 22 European economies, % 4 x 1. 4 x 24 Wage Inequality in the Workplace

Gender wage gap is even wider among top 1% of wage employees Gender of wage employee (2010) Ratio of female to male hourly earnings among total population; data from 22 European economies, % 25 Wage Inequality in the Workplace

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 26 Global Wage Report 2016/17

Proposing country-specific measures to reduce excessive wage inequality 1 Productivity growth for sustainable enterprises • No necessary trade-off between growth and inequality Minimum wages & collective bargaining Gover nment • ILO Conclusions concerning the promotion of sustainable enterprises Sustainable Wage Policies Emplo yer Top salaries 27 Summary & Conclusion Trade Union Gender & other pay gaps

Proposing country-specific measures to reduce excessive wage inequality 1 Productivity growth for sustainable enterprises Gover nment Minimum wages & collective bargaining • The need for institutions • How to design sustainable wage policies? Sustainable Wage Policies Emplo yer Top salaries 28 Summary & Conclusion Trade Union Gender & other pay gaps

Proposing country-specific measures to reduce excessive wage inequality 1 Minimum wages & collective bargaining Productivity growth for sustainable enterprises Gover nment Sustainable Wage Policies Emplo yer Trade Union • Regulation or self-regulation? • Transparency and shareholder “say over pay” Top salaries 29 Summary & Conclusion Gender & other pay gaps

Proposing country-specific measures to reduce excessive wage inequality 1 Minimum wages & collective bargaining Productivity growth for sustainable enterprises Gover nment Sustainable Wage Policies Emplo yer Trade Union • Equal pay legislation • Job evaluations Top salaries 30 Summary & Conclusion Gender & other pay gaps

THANK YOU FOR YOUR ATTENTION! For further information on Global Wage Report or research conducted by the ILO wage group, please refer to: Global Wage Report 2016/17 http: //www. ilo. org/global/research/globalreports/global-wagereport/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 31 Global Wage Report 2016/17