The pay gap between lower-level employees and senior managers has grown in every region of the world since 2008, according to a new study published by Korn Ferry. The study, which draws on data from Korn Ferry’s world-class pay database, shows the pay gap increasing in 77 percent of 58 countries in the analysis.
Eight out of the nine countries in Asia saw moderate increases in their pay gaps between lower-level and higher-level employees. Singapore’s increase is at 12.1 percent, the fourth-highest in the region, but still lower than the average increase of 15.3 percent across the nine countries. India bucks this trend with a dramatic increase of 66 percent in the pay gap.
The Korn Ferry analysis points to several reasons for the widening gap.
“At the lower end of these labor markets, automation and offshoring means that enhanced productivity results in an abundance of available labor – more people than jobs – which slows the increases in pay,” said Bob Wesselkamper, Korn Ferry Global Head of Rewards and Benefits Solutions. “Meanwhile, at the higher end, there’s a shortage of people with important hard skills and proven experience, such as STEM. Organizations also have to compete for senior managers with in-demand soft skills, such as emotional intelligence, creative thinking and the ability to manage large and complex teams. Therefore, pay at this level is going up – and is likely to increase faster than other jobs.”
While a widening gap is the norm in the majority of nations, there are areas where the gap is narrowing. The pay gap is shrinking in countries like France and Italy, as a result of higher tax rates for big earners, fewer pay increases at top-levels, and government and union intervention in pay at the lower levels.
“Whilst the average increase in Asia at 15.3 percent seems moderate for a 10-year period, salaries at senior level have risen steadily due to the increased need to have talent that can grow the business and take organizations global,” said Korn Ferry Singapore Associate Client Partner, Kartikey Singh. “At the same time, economic and inflationary growth have also contributed to significant salary increases at lower level, which in turn leads to moderation in the pay equity gap. Going forward, as businesses feel the pressure of technological disruption and the crunch of good middle and top-level leaders, the gap might widen at a faster pace.”
Following is a breakdown by region:
North America: United States sees larger increases than Canada
The United States saw a pay gap growth of 12 percent, which was significantly higher than the regional average of 9 percent, while its neighbor, Canada, saw a relatively low pay gap growth of 5 percent.
Europe: Majority of countries where gap is narrowing are in this region
On average, the pay gap increase is only 2 percent in the region. Of the 13 countries that have reduced the pay gap between lower-level and higher-level employees, most are in the European region. Notable among these are France (-6 percent), Italy (-3 percent), Poland (-13 percent), and the Russian Federation (-3 percent). The United Kingdom’s pay gap increased by 9 percent, with only three countries in Europe recording higher increases than the U.K. – Portugal (10 percent), Greece (11 percent) and Ukraine (79 percent).
Middle East and Africa see most dramatic increases in pay gap
The pay gap increase between lower-level and higher-level employees is significantly larger in the Middle East and Africa than in other regions, with increases of 58 percent and 49 percent respectively. Six of the 10 countries with the biggest increase in their pay gap are in the Middle East. This includes Bahrain, which, at 118 percent, saw the largest increase of any country included in the study.
Latin America narrows the pay gap in two countries
Most countries in Latin America experienced an increase in the pay gap, with an average 13 percent increase in the region. Colombia saw the highest increase in pay gap of 32 percent. Argentina and Venezuela were the exceptions for the region, with narrowing pay gaps of 2 percent and 18 percent respectively.
The Pacific has second smallest increase in average pay gap
With an average of 7 percent, the Pacific saw the second smallest average increase in pay gap, after Europe’s average increase of 2 percent. Australia saw an increase of 8 percent and New Zealand saw an increase of 5 percent.