With the size of Wall Street bonuses commonly being compared against the median household income, income inequality has quickly become a hot-button political issue in the United States.
And someday soon, companies are expected to be required to disclose the ratio of pay between CEOs and their median employees.
But the widening income gap between top managers and the people who work for them isn’t just an issue here in America. Globally, according to a recent study from the consulting firm Hay Group, the pay disparitybetween what senior managers and lower-level workers make is getting wider in two-thirds of the 63 countries that the firm examined. The size of the gap was also lopsided: The average increase in pay disparities was about 20 percent, while the average decrease was just 5 percent.
The data were pulled from the consulting firm’s pay database, which it says includes data for more than 16 million job holders in 24,000 organizations in more than 110 countries. The country with the largest increase in its gap was Bahrain, where seniors managers now make 7.9 times what lower-level workers make, compared to the 3.6 times more they made in 2008.
The highest current gap, meanwhile, was in China, where senior managers make 12.7 times the pay of lower-level employees, according to Hay Group’s data. In the United States, senior managers make four times more than entry-level workers, a multiple that has grown 10.6 percent since 2008.
Interestingly, the report did not focus on measuring the pay gap at the extremes — by comparing, say, CEO pay against that of the absolute lowest paid unskilled worker at the same company. Rather, it looked at the median base salary of a skilled worker, factory production supervisor or new graduate and compared that with a senior manager, someone who is “a few steps down from the CEO” and is “often at the level where people first start to be called ‘head of’ something,” the report stated.
As a result, the multiples offer a more reasonable measure of the disparity between average workers and the firm’s bosses.
Not all the countries Hay Group looked at, however, showed a rise in the pay gap. Some countries, particularly those in Europe, showed a tightening in the pay disparity between what senior managers and average workers make. That’s due to stronger labor unions, tax rates that offer little incentive to raise the pay of senior managers, and the way companies responded to the recession in different regions, it reported.
As a Hay Group consultant explained in the release about the report, many European countries made communal pay cuts to avoid job losses. In the United States, meanwhile, many companies cut jobs and increased the work of senior managers.
Image and article via The Washington Post