Wage inequality

Wage Inequality – Work Hard, Pay Hard?

CEO versus average employee

Top CEOs make more in two days than an average employee does in one year. This shocking fact is just an example of the insane income inequality the world is facing today.

The gap between the chief executives and the average employees wasn’t always this big: in 1965, CEOs at the largest companies received 20 times the pay of the average worker and in 1980, the CEO-to-average employee payment ratio was 42-to-1. The gap constantly increased through the years until it hit a high in 2000, with CEOs making 525 times the average worker.

In 2010, the gap narrowed to a ratio of 343-to-1 and continued to decrease slightly in the next years: the ratio was 299-to-1 in 2014, 286-to-1 in 2015 and 271-to-1 in 2016. Even so, the fact that CEOs earn 271 times more than an average employee is outrageous.

According to the latest report on CEO pay from the Economic Policy Institute, the chief executives at the 350 largest companies in the US made $15.6 million on average in 2016. Another interesting finding of this study is that CEO compensation has risen by 937% from 1978 to 2016, while a typical worker’s annual compensation registered a growth of only 11.2% over the same period.


Of course, you can do worse than being paid 271 times less than your CEO: you can be unemployed. The International Labour Organization states that the global unemployment rate was 5.8% in 2017, compared to 5.7% in 2016. This represents an increase of 3.4 million in the number of jobless people, generating a total of 201 million unemployed persons.

More so, the number of workers earning less than $3.10 per day is expected to increase by more than 5 million over the next two years in developing countries. This is alarming as it means that the difference between workers and chief executives will increase, leading to bigger income inequality.

The gender gap in the world of work

Besides the gap between CEOs and average employees, the world of work also faces the problem of gender inequality. The median wage of a woman working full-time is 85% that of a man. This situation is mainly caused by the fact that women outnumber men in positions with lower salaries and little chance of promotion, such as teacher, nurse, secretary or health aide.

Women are substantially less likely than men to participate in the labor market, and once in the job market, they are less likely than men to find a job. In 2017, the global labor force participation rate for women – at just over 49% – was nearly 27 percentage points lower than the rate for men, and is forecast to remain unchanged in 2018.

Globally, the unemployment rate for women was 6.2% in 2017, representing a gap of 0.7 percentage points from the male unemployment rate of 5.5%. In 2018, both rates of unemployment are expected to remain relatively unchanged, keeping the gap, therefore, at its current level, with no anticipated improvement in the gap before 2021 based on current trends.

Other important wage inequalities experienced by workers today include the payment gap between generations of employees, differences in payment for immigrant versus local workforce, artificial segregations between employees working in different industries and in different fields of activity.

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