Pay gap widens most in North America, Asia: Study

Income inequality could lead to slower economic growth, IMF had warned

The pay gap between senior managers and lower-level employees has widened much more sharply in North America and Asia than in Europe since the financial crisis, a study showed on Wednesday.

The report by Hay Group, a global management consultancy, showed that pay disparity between the likes of clerical or graduate-entry jobs and senior managers had increased in every region worldwide since the start of the global recession.

In North America the pay gap rose by 7.2 per cent between 2008 and 2014, while the gap in Asia increased by 12.5 per cent. Europe experienced the smallest widening at 2.2 per cent.

"Despite an average global increase in the job-level pay gap, Europe and America have diverged, in part due to local employment practices," Hay Group consultant Ben Frost said.

The International Monetary Fund warned last year that income inequality could lead to slower or less sustainable economic growth.

Many companies in Europe introduced across-the-board pay cuts to avoid job losses while businesses in the United States cut jobs more often and raised senior management pay to reflect increased duties, the Hay report showed.

The pay gap in the United States widened by 10.6 per cent between 2008 and 2014, with workers in senior management roles paid an average of four times the amount earned by workers in lower-level jobs last year.

Within Europe, the gap in Britain increased 5.3 per cent to 3.3 times but by only 0.3 per cent in Germany to 2.8 times.

In Asia, the gap in China grew by 7.8 per cent to 12.7 times and in Japan it rose by 2.1 per cent to 3.3 times.

Hay Group said the increase in the pay gap was driven by the increasing automation of low-level jobs or their transfer to lower-pay countries. Such cost-cutting resulted in increased competition for remaining jobs, keeping pay down.

In contrast, senior management pay has risen to reflect increased responsibilities and more complex work, it said.

Hay Group said the data used for the study was drawn from more than 16 million employees in 24,000 organisations.

Budget 2015: Complete Coverage