AVERAGE WAGES DO not tell the story of distribution among different groups. It is a well established fact that during recent decades, wage inequality has increased in many countries.
While some level of inequality reflects differences in workers’ individual and productive characteristics, concerns have been expressed about the adverse social and economic consequences of excessive inequality.
In the most recent years, many countries have adopted or strengthened minimum wages, as one way of supporting low paid workers and reducing wage inequality.
Recent evidence shows that, when set at an adequate level, minimum wages can raise the income of low paid workers – many of whom are women – without significant negative effects on jobs.
The setting of minimum wages, however, is a balancing act; it should be evidence-based and done in full consultation with social partners and, where appropriate, with their direct participation on an equal footing.
Within the overall wage distribution, there are also pay gaps between different groups of workers.
One of these is the gender pay gap, the percentage shortfall in the average wage of women relative to the average wage of men.
Various studies have shown that across most countries for which data are available, the gap has generally narrowed over time but has not been closed.
Wage inequality can be measured in different ways. In most countries, wages climb gradually across most of the wage distribution and then jump sharply for the top ten per cent and, especially, for the highest-paid one per cent of employees.
In Europe, the highest-paid ten per cent receive on average 25.5 per cent of the total wages paid to all employees in their respective countries, which is almost as much as what the lowest paid 50 per cent earn (29.1 per cent).
Although the data are not strictly comparable, the share of the top 10 per cent is even higher in some emerging economies, for example, Brazil (35 per cent), India (42.7 per cent) and South Africa (49.2 per cent).
In South Africa and India, the lowest paid 50 per cent receive, respectively, just 11.9 per cent and 17.1 per cent of all wages paid.
Minimum wages and collective bargaining have the potential to simultaneously reduce inequality between and within enterprises.
But differences in the way collective bargaining is organised have different effects.
When collective bargaining takes place at the national, industry and/or branch level in multi employer settings with coordination across levels, a larger proportion of workers is covered and inequality is likely to be reduced both within and between enterprises.
The extension of collective agreements by governments to all workers in a particular sector or country can reinforce these effects.
Minimum wages play an important role in ensuring that workers are treated in a way that is fair and compatible with notions of human dignity and respect.
Over and above minimum wage levels, policies in the areas of wages, hours and other conditions of work can contribute substantially to fostering social dialogue and collective bargaining, and ensuring a just share of the fruits of progress to all.
Fairness includes equal remuneration for work of equal value, and the elimination of pay discrimination between men and women, or between other groups.
