tag:theconversation.com,2011:/us/topics/pay-inequality-47598/articlesPay inequality – The Conversation2023-04-05T16:06:29Ztag:theconversation.com,2011:article/2030162023-04-05T16:06:29Z2023-04-05T16:06:29ZWhy Finland is the happiest country in the world – an expert explains<p>Finland has been the happiest country on earth for <a href="https://edition.cnn.com/travel/article/world-happiest-countries-2023-wellness/index.html">the past six years</a>, according to the <a href="https://worldhappiness.report/ed/2023/world-happiness-trust-and-social-connections-in-times-of-crisis/#ranking-of-happiness-2020-2022">World Happiness Survey</a>. This survey relies on the <a href="https://news.gallup.com/poll/122453/understanding-gallup-uses-cantril-scale.aspx">Cantril ladder life evaluation</a> question:</p>
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<p>Please imagine a ladder with steps numbered from zero at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?</p>
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<p><a href="https://newint.org/features/2020/12/07/long-read-finntopia">Finland comes out top</a>, followed by Denmark and Iceland. Just why Finns are happier than others comes down to a <a href="https://worldhappiness.report/ed/2023/world-happiness-trust-and-social-connections-in-times-of-crisis/#ranking-of-happiness-2020-2022">number of factors</a> including lower income inequality (most importantly, the difference between the highest paid and the lowest paid), high social support, freedom to make decisions, and low levels of corruption. </p>
<p>The graph below shows all 44 counties for which there is both happiness data and income inequality data, each as a coloured dot. The vertical scale shows average happiness, the horizontal scale income inequality.</p>
<p><strong>Average levels of happiness and inequality by country</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Forty four countries each shown as a dot on the graph" src="https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=717&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=717&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=717&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=901&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=901&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518511/original/file-20230330-28-wcc5fm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=901&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Average levels of happiness (vertical scale) and income inequality (horizontal scale).</span>
<span class="attribution"><span class="source">World Happiness Survey and OECD income inequality statistics</span></span>
</figcaption>
</figure>
<p>The measure of income inequality used here is the <a href="https://en.wikipedia.org/wiki/Corrado_Gini">Gini coefficient</a> of income inequality, as <a href="https://data.oecd.org/inequality/income-inequality.htm">reported by the OECD</a>. It is the highest rate recorded in each county in any year after 2010 up to the most recent year for which there is data. The graph shows the close relationship between these two measures. In general, <a href="https://academic.oup.com/pnasnexus/article/1/5/pgac224/6754154">when income inequality is larger</a>, money matters more and people are less happy. </p>
<p>Finland also has other attributes that may help people feel happier. It has a <a href="https://www.stat.fi/tup/satavuotias-suomi/suomi-maailman-karjessa_en.html">highly decentralised</a> publicly funded healthcare system and only a very small private health sector. This is far more effective and efficient than some <a href="https://www.ft.com/content/653bbb26-8a22-4db3-b43d-c34a0b774303">alternatives</a> used in other countries. Public transport is <a href="https://www.theguardian.com/cities/2014/jul/10/helsinki-shared-public-transport-plan-car-ownership-pointless">reliable and affordable</a>, and Helsinki airport is ranked as the <a href="https://www.helsinkitimes.fi/finland/finland-news/domestic/21756-helsinki-airport-receives-an-esteemed-airport-industry-award-best-airport-in-northern-europe.html">best in northern Europe</a>.</p>
<p>There is a <a href="https://www.dannydorling.org/?page_id=8303">Finnish proverb</a> that seems relevant here: <em>Onnellisuus on se paikka puuttuvaisuuden ja yltäkylläisyyden välillä</em> (Happiness is a place between too little and too much). </p>
<h2>How Finland compares</h2>
<p>Finland, Norway and Hungary report similar levels of income inequality, yet people in Finland are, on average, happier. Why is this?</p>
<p>According to the <a href="https://wid.world/country/finland/">World Inequality Database</a>, the highest-paid tenth of people in Finland take home a third of all income (33%). That contrasts with the same group taking 36% in <a href="https://wid.world/country/united-kingdom/">the UK</a> and 46% in <a href="https://wid.world/country/usa/">the US</a>. These differences may not appear great, but they have a huge effect on overall happiness because so much less is left for the rest in the more unequal countries – and the rich <a href="https://www.dannydorling.org/books/onepercent/">become more fearful</a>. When a small number of people become much richer, this is an understandable fear.</p>
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<strong>
Read more:
<a href="https://theconversation.com/how-to-ditch-fomo-and-foster-jomo-the-joy-of-missing-out-200400">How to ditch 'fomo' and foster 'jomo' – the joy of missing out</a>
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<p>In 2021, <a href="https://slate.com/news-and-politics/2021/04/finland-happiness-lagom-hygge.html">it was suggested</a> by a sociology professor that simply by having more reasonable expectations, people in Nordic countries appeared to be happier. However, that cannot explain <a href="https://newint.org/features/2020/12/07/long-read-finntopia">why Finland is so very different</a> from Norway on the happiness scale.</p>
<p>All kinds of explanations are possible, including <a href="https://helda.helsinki.fi/bitstream/handle/10138/338664/Language_and_Happiness_MANUSCRIPT_REVISED.pdf?sequence=1">slight nuances of language</a> as well as culture. There is now even the question of whether this global survey is beginning to introduce its own bias, as Finns now know why they are being asked the question (they moved even further ahead of <a href="https://www.thelocal.dk/20230320/worlds-second-happiest-country-denmark-loses-out-to-finland-again/">Denmark</a>in the most recent survey).</p>
<p>However, it is very likely that Finland having more <a href="https://www.dannydorling.org/finntopia/figures_files/page0-1016-full.html">equitable schools</a>, where you are likely to get a good education whichever you choose, as well as a fairer school policy than Norway (almost all Finns go to their nearest school) might actually matter too. So too, a better housing policy with a wide <a href="https://www.dannydorling.org/?p=8977">variety of social housing</a> and <a href="https://world-habitat.org/news/our-blog/helsinki-is-still-leading-the-way-in-ending-homelessness-but-how-are-they-doing-it/">lower homelessness</a>, a health service with waiting times that are the envy of the world – sometimes just being a matter of days (even during the <a href="https://yle.fi/a/3-12496673">worst years of the pandemic</a>) – and numerous other accolades. </p>
<p>Finland <a href="https://www.dannydorling.org/finntopia/contents_files/Finland.pdf">ranks first, second or third in over 100 global measures</a> of economic and social success – better than Norway does. And it has less money overall (and hardly any oil). You could excuse the Finns a little smugness (<a href="https://en.wiktionary.org/wiki/omahyv%C3%A4isyys"><em>omahyväisyys</em></a>).</p>
<p>Why does Hungary do so badly despite the income gap between its people being hardly any wider than in Finland and Norway? One could argue that this is to do with its divided politics. In 2022, the European parliament suggested that “Hungary can no longer be considered <a href="https://www.europarl.europa.eu/news/en/press-room/20220909IPR40137/meps-hungary-can-no-longer-be-considered-a-full-democracy">a full democracy</a>”.</p>
<p>Freedom matters to people greatly, as well as freedom from fear, and that could explain also why <a href="https://reutersinstitute.politics.ox.ac.uk/news/polarisation-misinformation-and-fear-insights-turkish-media">Turkey</a> and <a href="https://www.theguardian.com/world/2023/mar/19/bulldozer-politics-modi-demolition-drive-fuels-muslims-fears-in-kashmir">India</a> have lower levels of happiness than their levels of economic inequality might predict.</p>
<p>In contrast, <a href="https://www.goodthingsguy.com/lifestyle/south-africa-is-happier-than-ever-against-all-odds-2023-world-happiness-report/">South Africa</a> and <a href="https://www.globaltimes.cn/page/202303/1288231.shtml">China</a> may be a little happier than their levels of inequality would suggest. South Africa became a democracy in 1994 shortly after <a href="https://www.youtube.com/watch?v=AgcTvoWjZJU">Nelson Mandela was freed</a>, and many people will remember the previous period. People in China are not as fearful as they are often <a href="http://cgss.ruc.edu.cn/English/Home.htm">portrayed in the west</a>.</p>
<h2>Inequality is a factor</h2>
<p>Most countries exhibit happiness levels (<a href="https://www.dannydorling.org/books/economicinequality/figures-and-tables/figure-5-1.html">and much else</a>) that are very predictable from their inequality levels. The UK is spot on in the middle of what you would expect for one of Europe’s most economically unequal countries.</p>
<p>The graph above also shows that (almost as unequal) Israel is a little happier than it ought to be – although it is not clear that the sample taken there included all groups that currently live under that state. Also, that sample was taken in 2022, before the recent <a href="https://www.reuters.com/world/middle-east/israeli-governments-judicial-overhaul-plan-reaction-2023-03-27/">widespread protests in Israel</a>. </p>
<p>The other outlier shown in the graph is Costa Rica, where the president said in 2019:</p>
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<p>Seventy years ago, Costa Rica did away with the army. This allows for many things. Eight per cent of our GDP is invested in education because we don’t have to spend on the army. So our strength is human talent, <a href="https://www.weforum.org/agenda/2019/01/sun-sea-and-stable-democracy-what-s-the-secret-to-costa-rica-s-success/">human wellbeing</a>.</p>
</blockquote>
<p>So what can the people of a country do if they want to be happier? The most important thing is to <a href="https://www.euronews.com/2023/03/27/everything-you-need-to-know-about-finlands-general-election">elect governments</a> that will ensure the country becomes more equal by income. After that, ensuring your social services – school, housing and healthcare – are <a href="https://newint.org/features/2020/12/07/long-read-finntopia">efficient and equitable</a> matters most. And finally, consider your degree of freedom, whether you are actually including everyone in your surveys, and how fearful your population is.</p><img src="https://counter.theconversation.com/content/203016/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Dorling does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Finns have good schools, public transport, and the difference between the highest- and lowest-paid is quite small. These are factors in high levels of happiness.Danny Dorling, Halford Mackinder Professor of Geography, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1995872023-02-09T19:10:48Z2023-02-09T19:10:48ZAustralia’s new pay equality law risks failing women – unless we make this simple fix<figure><img src="https://images.theconversation.com/files/509079/original/file-20230209-13-d2gtzv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>The Albanese government’s efforts to address the gender pay gap are laudable. Despite all the attention given to the issue over the past decade or so, sectoral pay discrimination is very real and <a href="https://danielle-li.github.io/assets/docs/PotentialAndTheGenderPromotionGap.pdf">workplace biases persist</a>.</p>
<p>But the federal government’s new tool to address the problem, the Workplace Gender Equality Amendment Bill, may not achieve much. </p>
<p>The <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/s1363_first-senate/toc_pdf/2300120.pdf;fileType=application%2Fpdf">amendment</a> to the <a href="https://www.legislation.gov.au/Details/C2016C00895">Workplace Gender Equality Act</a> (enacted by the Gillard Labor government in 2012) requires all companies with more than 100 employees to report their “gender pay gap”. </p>
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<em>
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Read more:
<a href="https://theconversation.com/how-the-jobs-summit-shifted-gender-equality-from-the-sidelines-to-the-mainstream-189869">How the jobs summit shifted gender equality from the sidelines to the mainstream</a>
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<p>Much like the <a href="https://www.legislation.gov.au/Details/C2018A00153">Modern Slavery Act</a>, <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/s1363_ems_c828bc87-8341-420d-9641-981a45c43fc6/upload_pdf/EM_JC008778.pdf;fileType=application%2Fpdf">the idea</a> is that public reporting will concentrate employers’ attention on the problem, leading to greater gender equality.</p>
<p>But will it? </p>
<p>The problem is the type of data companies must report to the <a href="https://www.wgea.gov.au/">Workplace Gender Equality Agency</a>, which has been publishing pay-gap statistics since being established by the Workplace Gender Equality Act in 2012.</p>
<p>As with the other statistics the agency has published over the past decade, the <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/bills/s1363_first-senate/toc_pdf/2300120.pdf">new amendment</a> requires only publishing simple aggregates:</p>
<blockquote>
<p>The Agency must publish aggregate information, for each relevant employer for each reporting period, for the purpose of showing the employer’s performance and progress in achieving gender equality in relation to remuneration for the employer’s workforce"</p>
</blockquote>
<p>This may seem like a positive step. But aggregate numbers – which in practice translates into reporting summary statistics – do not help us to either identify or understand the pay gap. Those aggregates also don’t help us come up with the right fixes. </p>
<p>To do that requires better data that enables more precise analysis for the factors affecting pay disparities. </p>
<h2>The problem with averages</h2>
<p>Averages are ubiquitous in statistics. They can serve a important service, such as identifying trends. I’ll even be using averages to illustrate a few points. </p>
<p>But their limitations should be understood. They are particularly problematic when it comes to areas of endemic inequality, such as income.</p>
<p>Consider a company with 101 employees, one being the founder and chief executive. The other 100 employees, split 50/50 between men and women, are all paid the same salary. </p>
<p>But suppose the chief executive pays himself ten times as much as the other employees. This isn’t ridiculous; the average CEO of a listed company in Australia is <a href="https://thenewdaily.com.au/finance/finance-news/2022/07/13/ceos-pay-2021/">paid 132 times</a> the average income. This creates a 17.6% gender pay gap. </p>
<p>Now consider a similar company, run by a “tech bro” who doesn’t draw a salary but does pay every woman 2% less than every man. The aggregate numbers will show no gender pay gap.</p>
<p>In the first case, where there’s no explicit gender discrimination, aggregate numbers can be misread as indicating there is. In the second case, actual gender discrimination is obscured. </p>
<hr>
<p><strong>The WGEA’s pay gap results</strong></p>
<figure class="align-center ">
<img alt="Workplace Gender Equality Agency's pay gap results, 2013-14 to 2021-22" src="https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=535&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=535&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=535&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=673&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=673&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509108/original/file-20230209-28-a6yq1r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=673&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.wgea.gov.au/publications/australias-gender-equality-scorecard">Workplace Gender Equality Agency</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<h2>Poor data leads to poor analysis</h2>
<p>The widespread use of averages often skew our sense of things. If you compare your own income to the Australian average (<a href="https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/average-weekly-earnings-australia/may-2021">A$90,324 a year in 2021</a>), the probability is you’ll feel left behind. But if you compare yourself to the median income – the income at which half the population earns more, and half less – you’ll feel much better: it’s only $62,868 a year.</p>
<p>Bad data leads to bad analysis, and bad policy responses.</p>
<p>Here’s another scenario. Consider our first company again. The CEO is concerned about the publicity from reporting a 17% gender pay gap to the agency. So he employs his wife as deputy CEO, paying her five times the rest of the staff, and cuts his own salary by half. He no longer has a gender pay gap to report. </p>
<p>This is progress of a kind, but not the progress needed to address the complex causes of gender pay inequality for ordinary people. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/women-are-as-likely-as-men-to-accept-a-gender-pay-gap-if-they-benefit-from-it-151524">Women are as likely as men to accept a gender pay gap if they benefit from it</a>
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<h2>How to fix this problem</h2>
<p>So how then to improve the reporting of gender pay statistics generally?</p>
<p>Reporting <em>median</em> statistics would help mitigate the skewing problem with averages. Unless the government demands this, the agency will more than likely keeping taking the same approach as over the past decade – relying on averages. </p>
<p>There’s also a case for companies to report other relevant factors that could influence pay, such as qualifications, skill, tenure, seniority and productivity. </p>
<p>This would enable the Workplace Gender Equality Agency to provide more sophisticated analysis, breaking down the factors contributing to the figures that get the headlines.</p>
<p>The agency <a href="https://www.wgea.gov.au/pay-equity">defines equal pay</a> as “men and women performing the same work are paid the same amount”. To achieve this, it is essential to ensure apples are being compared with apples. This is only possible if we control for the factors that can influence pay, and don’t lose the necessary nuance. </p>
<p>Blunt data does not properly inform us about the pay gap, why it arises, nor how to solve it. This risks policy responses that focus on the wrong issues and which achieve little. </p>
<p>Decision-makers, both in public and private sectors, risk making bad decisions on poor-quality data. The wrong fixes could even <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4308670">make things worse</a>. We will not eradicate the gender pay gap using bad statistics.</p><img src="https://counter.theconversation.com/content/199587/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Humphery-Jenner does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We will not eradicate the gender pay gap using bad statistics. Here’s what we need to do instead.Mark Humphery-Jenner, Associate Professor of Finance, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1927092022-11-09T10:40:10Z2022-11-09T10:40:10ZStrikes: why soaring CEO pay could help explain UK’s recent industrial action<figure><img src="https://images.theconversation.com/files/492322/original/file-20221028-61541-8q7gv4.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C1000%2C663&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Lower earners are counting the cost of a growing wage gap.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/compare-wage-gap-tax-differences-equal-1997565632">Andrey_Popov / Shutterstock</a></span></figcaption></figure><p>The pay gap in UK business is eye-watering. Bosses of the largest UK companies earn <a href="https://www.financialfairness.org.uk/en/media-centre/media-centre-news-article/pay-ratios-2022#:%7E:text=Across%20the%2069%20companies%20that,2021%2C%20at%2034%3A1.">around 100 times more</a> than the lowest-paid employees in their organisations, according to some estimates. This year, chief executives from the top 100 UK companies saw their pay rise by nearly a quarter on average, <a href="https://www.pwc.co.uk/press-room/press-releases/executive-pay-at-ftse-100-firms-recovers-to-pre-pandemic-levels.html">research from PwC</a> shows. This is at a time when many employees are being offered <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2022#:%7E:text=The%20rate%20of%20annual%20pay,outside%20of%20the%20pandemic%20period.">below-inflation pay rises</a>.</p>
<p>The sense of unfairness about this among workers is intensifying. We have seen this during the “<a href="https://speakerpolitics.co.uk/strikes-set-to-continue-as-unions-meet-at-tuc-congress/">summer of strikes</a>” this year, which has continued into the colder months and does not look likely to let up <a href="https://www.theguardian.com/uk-news/2022/nov/05/nurses-across-uk-vote-to-strike-in-first-ever-national-action">any time soon</a>.</p>
<p>The average gross salary in the UK at the moment is £38,131 for a full-time role, according to data from the <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/latest">Office for National Statistics</a>. Not bad, you might think. But this figure obscures the dramatic variations in pay among UK workers in different industries and at various company levels. Indeed, the UK has <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-7484/#:%7E:text=International%20comparisons,than%20in%20the%20United%20States.">a higher level of income inequality</a> than many other developed countries.</p>
<p>The size of the pay gap varies with firm size. For the largest UK companies, such as those listed in the FTSE 100, the median CEO-to-employee pay ratio in 2020/21 was 67:1, while CEOs earned <a href="https://www.financialfairness.org.uk/en/media-centre/media-centre-news-article/pay-ratios-2022#:%7E:text=Across%20the%2069%20companies%20that,2021%2C%20at%2034%3A1.">93 times more</a> than employees on the lowest levels of pay.</p>
<h2>A growing gap</h2>
<p>As stark as these ratios are, they might actually understate the magnitude of pay inequality. </p>
<p>First, the figures above fail to account for low-paid workers such as contractors or staff on zero hour contracts. A recent <a href="https://www.financialfairness.org.uk/docs?editionId=1ed52299-9fee-4245-b20f-ac2b47c87bce">High Pay Centre</a> analysis of 69 company reports in the first quarter of 2022 calculates that a CEO at the average UK company earns 117 times more than their lowest-paid employees when these so-called “indirectly employed” workers are taken into account.</p>
<p>Second, the above analysis reveals that median CEO to employee pay ratios almost doubled from 34:1 to 63:1 between 2021 and 2022. This indicates a significant pandemic rebound in top-level pay is widening the gap further. But even before the pandemic, the gap was widening, if at a slower pace. During the ten-year period to the end of the 2021 financial year, median incomes for the poorest fifth of the UK population have <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddisposableincomeandinequality/financialyearending2021#:%7E:text=Median%20household%20disposable%20income%20in,(ONS)%20Household%20Finances%20Survey">stayed broadly the same</a>, versus a 9.1% increase in average pay for the richest fifth of the population.</p>
<p>Interestingly, the size of the gap is not constant across the spectrum of wages (or the income distribution) paid to people in the UK. It is wider towards the top, which means a very small fraction of individuals are earning a disproportionately large fraction of total pay in the UK.</p>
<p><strong>Annual UK full-time gross pay by occupation, April 2022</strong></p>
<iframe height="603px" width="100%" src="https://www.ons.gov.uk/visualisations/dvc2189/beeswarm/index.html"></iframe>
<h2>Why is the pay gap so wide?</h2>
<p>There are a number of reasons why we see such large and persistent differences in pay within UK companies, particularly at this upper end. First, an <a href="https://www.jstor.org/stable/1830810#metadata_info_tab_contents">economic theory</a> called tournament models argues that “winner-takes-all” pay arrangements – where CEO pay exceeds all other employees (including the next highest paid executive) by a large multiple – create the strongest incentives for leaders. This is the same principle used to justify offering massive lottery jackpots rather than multiple smaller wins.</p>
<p>Second, variable pay structures such as bonuses and options linked to company share prices, are more common for company executives. Established <a href="https://www.sciencedirect.com/science/article/pii/0165410185900266">corporate governance</a> codes <a href="https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-uk-corporate-governance-code-final.pdf">recommend</a> that salaries with large variable elements – typically, a low salary paired with a large performance-related component such as a bonus – incentivise performance. </p>
<p>But this means executives bear additional pay risk (that they may not make much of a bonus one year), and so are compensated for that with higher expected pay when performance conditions are met. In other words, when pay is directly linked to performance via a bonus, your level of remuneration will typically be higher.</p>
<p>Other factors could reinforce disproportionately high pay for senior executives, such as weak (too easy) performance conditions in executive pay contracts. Also, the labour market for executive talent tends to be more competitive than for other employees because it draws on a smaller talent pool. Pay is driven up when companies have to compete harder to attract potential candidates. </p>
<p>These competitive effects are magnified because consultants tend to advise that CEOs must receive above-median pay to be competitive, which leads to <a href="https://www.jstor.org/stable/4166216#metadata_info_tab_contents">pay ratcheting</a>. The <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2022">gender pay gap</a> may also play a role: men consistently earn more than women (even when holding roles constant) and men are disproportionately <a href="https://www.bbc.com/worklife/article/20220222-proof-verus-potential-problem">more likely</a> to hold senior executive positions.</p>
<figure class="align-center ">
<img alt="A cardboard sign held up at a strike says: " src="https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=412&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=412&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=412&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=518&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=518&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=518&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Workers in many UK industries have been striking for pay rises recently.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-29th-july-2020-nhs-1787843108">John Gomez / Shutterstock</a></span>
</figcaption>
</figure>
<p>It is often said that sunlight is the best disinfectant. And with this in mind, UK companies with more than 250 employees have been subject to rules on pay ratio reporting <a href="https://www.gov.uk/government/news/new-executive-pay-transparency-measures-come-into-force#:%7E:text=Pay%20ratio%20regulations%20will%20apply,relate%20to%20wider%20employee%20pay.">since January 2019</a>. This means that pay inequity is now more visible and so the debate should now be more informed. </p>
<p>But a potential consequence of a more informed debate is more conflict with employees. In the prevailing economic climate this could fuel pressure for strikes. But it’s hard to argue that keeping the scale of pay inequity in the shadows to reduce strike pressure is a better alternative. Increased conflict (in the form of debate) is almost certainly a necessary step on road to change.</p><img src="https://counter.theconversation.com/content/192709/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Young receives or has previously received funding from the Economic & Social Research Council, Finance Reporting Council, Financial Conduct Authority, CFA Society UK, Pensions & Lifetime Savings Association, Institute of Chartered Accountants in England & Wales, The Leverhulme Trust, The European Commission, and RailPen. </span></em></p>The pay gap is growing in UK, which has seen increased strike activity this year.Steven Young, Professor of Accounting, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1887512022-08-22T15:46:17Z2022-08-22T15:46:17ZZambia’s copper mines hard-baked racism into the workplace by labelling whites ‘expats’<figure><img src="https://images.theconversation.com/files/479156/original/file-20220815-19-b8qdl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Expatriates and locals faced similar risks and hazards but for different pay</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>Zambia’s Copperbelt has been a centre of the world copper industry <a href="http://www.scielo.org.za/scielo.php?pid=S2225-62532016000600003&script=sci_arttext&tlng=es">for almost a century</a>. When mining began on an industrial scale in the 1920s, the mines employed both migrant white and African workers. By the time of Zambia’s independence <a href="https://www.sahistory.org.za/dated-event/zambia-gains-independence-britain">in 1964</a>, around 7,500 white workers and 38,000 African workers were <a href="https://doi.org/10.1163/9789004467347_010">employed on the mines</a>.</p>
<p>Although they worked alongside each other, white and African mineworkers did not do the same jobs. There was a clear racial division in the workplace during the colonial period. The best-paid skilled jobs were reserved for white workers, who had organised themselves into a trade union and enforced a “colour bar”. The average white mineworker was paid almost ten times the average African mineworker in 1960.</p>
<p>What is puzzling is that this continued after Zambian independence, when there were hopes that it would disappear. Blatantly racist organisation of workplaces had become increasingly unacceptable in the 1950s and the colour bar had been dismantled in the early 1960s under heavy pressure from the African mineworkers’ union.</p>
<p>This presented the Copperbelt mining companies with a problem. White mineworkers were paid very high wages and the dismantling of racial divisions meant these wages and benefits could be extended to Africans, with frightening implications for operating costs.</p>
<p>The solution was the creation of an “expatriate” category for white employees. This was explicitly a racial category. All African employees were designated as “local”, even if they had been born in Malawi or Tanzania. All white employees were designated “expatriates”, even if they had been born on the Copperbelt. The companies’ definition of expatriate was “skilled, white”.</p>
<p>Expatriates are common in the extractive industries and many other sectors on the African continent. Usually, “expats” are seen as skilled professionals who take up a short-term job in another country, frequently move around the world and are paid much better than anyone recruited locally.</p>
<p>In the Copperbelt’s case, the category of expatriate recreated a dual wage structure, and one that persists. Expatriates received wages and benefits that no African employee could receive regardless of skill or experience. The companies hoped this would get around “aspirations” among African mineworkers for higher wages.</p>
<p>Even the term “expatriate” was chosen to emphasise that wages received by white workers were unattainable for African workers. </p>
<h2>Racial divides</h2>
<p>I have been <a href="https://www.ascleiden.nl/organization/people/duncan-money">researching the mining industry</a> and, in particular, the Zambian Copperbelt. My main interests are in labour, race, the ways in which the mining industry connected seemingly disparate and distant places across the globe and the consequences that emanated from this. </p>
<p>One consequence was the spread of militant trade unions to the mines. Until independence, all white mineworkers were union members as their union ran a closed shop: you had to be a union member to get a job on the mines. This inadvertently provided a good example to African workers of how to improve their position, and they too formed a trade union that soon established a combative reputation.</p>
<p>Both unions fought tenaciously and successfully for better pay and conditions, but separately. Workplace segregation was replicated in the trade unions and there was never a union representing both African and white workers on the mines.</p>
<p>I also became interested in how “<a href="https://doi.org/10.1163/9789004467347_008">expatriate</a>”, a term that has become a normal part of the industry, developed.</p>
<p>On the mines of Zambia’s Copperbelt it developed from deliberate corporate policy. Designating white employees as expatriates was the proposed solution to the spectre of rapidly rising wages.</p>
<p>Paradoxically, this meant that racial divisions were strengthened in some ways after Zambia became an independent country in 1964.</p>
<p>Zambian independence was seen as a major opportunity by the mining companies to reorganise the industry. As one executive put it, it was:</p>
<blockquote>
<p>the time when the industry has an opportunity to set the pattern and get matters the way they would like them. Large scale industry rarely gets this sort of opportunity and it is not likely to be repeated.</p>
</blockquote>
<p>Politically, the companies thought this would be a hard pill for the government to swallow. The <a href="https://eap.bl.uk/project/EAP121">United National Independence Party</a> was officially multiracial and white Zambians had played a prominent role in the independence struggle.</p>
<p>There was a policy of “<a href="https://doi.org/10.1080/03057070.2019.1658406">Zambianisation</a>” to replace white workers with Zambian nationals, but there were other policies to limit wage growth for mineworkers, which were already much higher than wages for African workers in other economic sectors.</p>
<p>Shrewdly, company executives suggested they emphasise to government “that a local person, unskilled” should not earn as much as a cabinet minister. Zambia’s new independent government accepted the plan to create categories of “expatriate” and “local” employment.</p>
<p>The outcome was that African workers promoted into skilled jobs received a fraction of the wage that white workers got. African artisans (a job category that included carpenters, electricians and mechanics) were paid around 50% of the wage of white artisans.</p>
<p>Other benefits were also reduced. At one mine, promoted African employees who moved into mine houses previously occupied by whites even found that the appliances that were provided for white employees had been removed.</p>
<p>African mineworkers did not accept this willingly. Shop stewards at one mine argued forcibly that “they saw no reason why any differential should be established between themselves and the expatriate”. Major strikes took place after independence and mineworkers secured significant pay increases. <a href="https://doi.org/10.1111/j.1467-6443.2005.00260.x">This provoked conflict</a> with the government, which cracked down on the Mineworkers’ Union of Zambia and brought the country’s labour movement under tighter state control.</p>
<h2>Corporate legacies</h2>
<p>The category of expatriate is rooted both in the colonial-era racial divisions and corporate decisions about how to resolve these divisions after independence. Expatriate was deliberately created as a racial category on Zambia’s mines.</p>
<p>The creation of very different wage scales was a solution to control costs. Two separate wage scales with no way to bridge them placed a limit on the wages that could be paid to “local” workers. </p>
<p>Expatriates and locals were in the same workplaces, facing similar risks and hazards, but with a very different experience of work.</p><img src="https://counter.theconversation.com/content/188751/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Duncan Money does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the Copperbelt the category of ‘expatriate’ recreated a dual wage structure that still persists.Duncan Money, Researcher, Leiden UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1364722020-05-26T12:20:42Z2020-05-26T12:20:42ZClap all you like now, but workers with meaningful jobs deserve to be valued in a post-coronavirus economy too<figure><img src="https://images.theconversation.com/files/337042/original/file-20200522-124840-1lrlsvn.jpg?ixlib=rb-1.1.0&rect=8%2C107%2C5982%2C3880&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Grocery workers have been essential during the pandemic. so should we be paying them more?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/fresh-direct-worker-in-protective-face-mask-and-gloves-news-photo/1226288895?adppopup=true">Rob Kim/Getty Images)</a></span></figcaption></figure><p>The coronavirus recession has laid bare how illogically the U.S. labor market values work that matters.</p>
<p>In the United States, as elsewhere, citizens have been extolling the role of essential workers – such as nurses, grocery suppliers and delivery drivers – by, for example, <a href="https://abc7ny.com/health/quarantined-new-yorkers-clap-for-essential-workers-%7C-video/6060936/">rewarding them with nightly claps</a>. Yet many of these employees <a href="https://www.washingtonpost.com/business/2020/04/06/why-do-so-many-essential-workers-get-paid-so-little-heres-what-economists-have-say/">receive low pay</a> and <a href="https://theconversation.com/coronavirus-shows-key-workers-need-better-pay-and-protection-heres-what-has-to-change-137037">few protections</a>, suggesting a different appreciation of their worth in the market.</p>
<p>But in highlighting this disconnect, perhaps the crisis has also provided an opportunity to reimagine an economy that values jobs for something more than just wealth creation: meaningfulness.</p>
<h2>A moral market?</h2>
<p><a href="https://doi.org/10.1007/s10551-019-04389-0">Meaningfulness</a> has to do with how much one’s work matters in a moral sense, which is not always signified by how much money a job pays. It often relates to personal fulfillment from work but may also concern the social contribution work makes and what, morally, we ought to value. Contemporary social scientists and philosophers cite historical thinkers as diverse as <a href="https://hbr.org/2011/12/adam-smith-was-not-a-schizophr">Adam Smith</a> and <a href="https://www.theschooloflife.com/thebookoflife/the-great-philosophers-karl-marx/">Karl Marx</a> as recognizing the potential for meaningless work to detract from human well-being.</p>
<p>Unfortunately, our labor market tends not to account adequately for morality. For example, it often assigns less tangible value, such as money, to meaningful work that is intangibly valuable. A high school teacher may have a harder time accounting for her share in the success of a former student’s business venture than does the investment banker who helped fund the startup. </p>
<p>Workers who risk their well-being to clean bedpans at hospitals and stock shelves at grocery stores may have only the reassurance that their work is essential to augment their relatively meager compensation.</p>
<p>To suggest that moral values should be more integral to the free market is neither anti-capitalist nor partisan. As an <a href="https://business.stthomas.edu/faculty-research/faculty-bios/michaelson-christopher/">ethics professor and business adviser</a>, I know it is widely accepted that markets are imperfect and require mediation to balance out inequities.</p>
<p>Even a celebrated market economist like <a href="https://www.goodreads.com/book/show/51877.Capitalism_and_Freedom">Milton Friedman recognized</a> that the free market undervalues some things. Accordingly, disruptions from events like the current pandemic warrant public and private sector coordination to ensure an adequate supply of essential goods and services. </p>
<h2>Checks and bank balances</h2>
<p>The recently passed <a href="https://www.wsj.com/articles/house-lawmakers-race-to-washington-to-ensure-coronavirus-stimulus-passes-11585318472">bipartisan stimulus</a> package that offers proportionately more to people who have less is consistent with this view that markets warrant intervention when it can stave off human suffering.</p>
<p>Similarly, wealthy individuals often <a href="https://www.businessinsider.com/billionaires-spending-hundreds-of-millions-on-coronavirus-research-2020-3">act generously</a> when they perceive distress that may be caused by unfairness in market mechanisms – for example, by <a href="https://www.si.com/nba/2020/03/14/nba-teams-players-help-pay-workers">donating money to make up for lost wages</a>. But this only highlights a system that rewards some people with so much wealth that they can cover the missed paychecks of hundreds or thousands of others.</p>
<p>But I would argue that bailout checks and individual acts of kindness are not nearly enough. They may even have the <a href="https://hbr.org/2016/10/praising-customers-for-ethical-purchases-can-backfire">unintended consequence of moral licensing</a> – creating the false impression among individuals that they have fully done their part to mitigate the problem. </p>
<p>Laid-off workers having to look for new work in what could be a <a href="https://www.bloomberg.com/news/articles/2020-05-19/global-downturn-risks-becoming-prolonged-recession-wef-says">prolonged, post-pandemic recession</a> will not find long-term stability in temporary infusions of cash and charity. Economic and social recovery will require the creation of <a href="https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html">tens of millions of jobs for those who have filed unemployment claims</a>. But we should also be looking to promote meaningful work in a post-pandemic economy through the rewarding of pay that is proportional to a work’s meaningfulness.</p>
<p><a href="https://fortune.com/2020/03/20/essential-workers-government-list-employees-coronavirus/">Work deemed essential</a> in the pandemic has taken on more meaning because it is urgent to people now. However, even after this crisis has passed, much of this work will continue to be essential to our society.</p>
<p>Meaningfulness can also apply to work that seems less urgent but nonetheless important, such as the concerts and performances that we are now missing. Unfortunately, funding for the <a href="https://www.forbes.com/sites/leeseymour/2020/04/16/de-blasios-new-budget-would-decimate-new-york-theaters-already-reeling-from-pandemic/#662456d41b40">arts</a> and <a href="https://timesofsandiego.com/education/2020/05/16/california-teachers-face-layoffs-as-pandemic-forces-big-state-budget-cuts/">public education</a> is an easy target when budgets are strapped.</p>
<p>In times of disaster, those who are most vulnerable are often those who are harmed the most, a phenomenon called <a href="https://www.goodreads.com/book/show/1376863.At_Risk">differential exposure</a>. For example, during the pandemic, the lower an employee ranks in an organizational hierarchy, the <a href="https://time.com/5795651/coronavirus-workers-economy-inequality/">more likely they are to encounter frontline hazards</a>.</p>
<p>Similarly, when we emerge from the economic aspect of this disaster, as after the <a href="https://www.epi.org/publication/the-new-gilded-age-income-inequality-in-the-u-s-by-state-metropolitan-area-and-county/">Great Recession</a>, those who already had the greatest financial means are likely to be the most prepared to <a href="https://www.reuters.com/article/us-wealthreport/worlds-rich-got-richer-amid-09-recession-report-idUSTRE65L36T20100622">increase their wealth</a>.</p>
<h2>More than applause</h2>
<p>If we allow that return to economic normalcy, ordinary workers who have suffered greater losses in the downturn will also be in the most uncertain position to benefit from the recovery. Americans could redress this by reprioritizing the place of meaningfulness in how they measure and remunerate work that matters.</p>
<p>Of course, restructuring the economy to recognize meaningfulness is complex and some would say fanciful. But I believe the moral values of our markets are a reflection of our individual and social values. And there are things that can be done to move in that direction: Prospective employees can pursue work that makes a moral contribution to society, companies can adopt more socially conscious statements of purpose and policymakers can look at ways to better acknowledge the nonmonetary contribution of work to society. </p>
<p>After this pandemic is over, health care workers should still be <a href="https://www.timeout.com/newyork/news/watch-videos-of-tonights-massive-citywide-clap-for-essential-workers-040320/">greeted with nightly applause</a>, grocery store workers <a href="https://www.latimes.com/california/story/2020-03-25/supermarket-clerks-heroes-new-first-responders-coronavirus">should still be treated as heroes</a> and delivery drivers should still be <a href="https://www.goodmorningamerica.com/living/video/man-left-hand-sanitizer-toilet-paper-doorstep-delivery-69924269">surprised with gifts</a>. It would be nice if they were paid accordingly too. </p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/136472/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Michaelson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After the pandemic is over, grocery workers and nurses will still be essential. But will they be paid any better?Christopher Michaelson, Professor of Ethics and Business Law, University of St. ThomasLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1195772019-07-01T10:53:43Z2019-07-01T10:53:43ZThe US economy likely just entered its longest ever expansion – here’s who’s benefiting in 3 charts<figure><img src="https://images.theconversation.com/files/281918/original/file-20190630-105200-1553v13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Not everyone gets an equal share. </span> <span class="attribution"><span class="source">TimeShops/Shutterstock.com</span></span></figcaption></figure><p>The <a href="https://www.bea.gov/news/glance">U.S. economy</a> likely surpassed an important milestone last month: <a href="https://www.ai-cio.com/news/economic-expansion-sets-twin-records-length-weakness/">Americans are now experiencing</a> the <a href="https://www.nber.org/cycles.html">longest economic expansion</a> in the nation’s history, assuming the <a href="https://www.bea.gov/data/gdp/gross-domestic-product">data still being collected</a> bears this out. </p>
<p>This is certainly good news and something to celebrate. But, as an <a href="https://www.tandfonline.com/author/Pressman%2C+Steven">economist who focuses on income inequality</a>, I believe it’s important to look deeper into the data to see who really has gained from this record economy. </p>
<p>Economic growth represents two things – how much more the U.S. economy produces from one year to the next and how much more income Americans have relative to the previous year. </p>
<p>These are two sides of the same coin. When items get produced and sold, businesses and ultimately workers receive income. In theory, economic growth should represent a higher standard of living for Americans. </p>
<p>Unfortunately, economic growth during the current expansion has neither been deep nor broadly distributed among most Americans. </p>
<h2>1. A shallow expansion</h2>
<p>First, the shallow part. </p>
<p>The economy grew an average of just <a href="https://www.ai-cio.com/news/economic-expansion-sets-twin-records-length-weakness/">2.3% a year</a> since the <a href="https://www.nber.org/cycles.html">expansion began in June 2009</a>, at the end of the Great Recession. That’s <a href="https://fas.org/sgp/crs/misc/IN10520.pdf">almost half the 4.3% average growth rate</a> of the 10 previous economic expansions since World War II. </p>
<p><iframe id="bHrIu" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/bHrIu/5/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>2. CEOs vs. teachers</h2>
<p>More troublesome is the fact that the record economic growth has not been broadly shared. </p>
<p>Economic growth figures summarize what is happening overall and on average. But averages can be deceptive. If <a href="https://paywizard.org/salary/vip-check/celebrities-world-richest-people/bill-gates">Bill Gates</a> walks into a soup kitchen, average incomes will suddenly far exceed US$1 million. But this figure poorly describes the economic condition of those eating there.</p>
<p>To gauge the breadth of our economic expansion, we need to look at how its economic gains have been distributed. Over the past decade, <a href="https://eml.berkeley.edu/%7Esaez/saez-UStopincomes-2014.pdf">60% of all income gains have gone to the top 1%</a>, roughly those making more than $500,000 a year. Income gains for everyone else has been less than 5%, or under 1% per year. </p>
<p>The narrowness of the current economic expansion can be seen by focusing in on two occupations: secondary school teachers and CEOs at companies in the Standard & Poor’s 500.</p>
<p>Teachers make average salaries despite having <a href="https://www.bls.gov/emp/tables/educational-attainment.htm">significantly above average education levels</a>. Since the current economic recovery began, inflation-adjusted salaries of secondary school teachers declined slightly to $64,340 in 2018, down about 0.3%. </p>
<p>In sharp contrast, median pay including non-salary compensation for the top CEOs in the U.S. jumped an inflation-adjusted 65% since 2009 to a <a href="https://www.wsj.com/articles/many-s-p-500-ceos-got-a-raise-in-2018-that-lifted-their-pay-to-1-million-a-month-11552820400">record $12.4 million</a> in 2018. </p>
<p><iframe id="BDLJr" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/BDLJr/12/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Flat wages and rising CEO pay help explain why the ratio of CEO pay to median wages at the largest 350 companies by sales <a href="http://fortune.com/2017/07/20/ceo-pay-ratio-2016/">has soared from 200 to 271 times average worker wages</a> during the present economic recovery.</p>
<h2>3. Where the wealth went</h2>
<p>What is true of income is also true of wealth. </p>
<p>Wealth is distributed even more unequally than income and has grown worse during the current economic expansion. While all income groups have experienced gains since 2009, the biggest beneficiaries of the economic expansion by far have been the very richest families. </p>
<p><iframe id="XhHsi" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/XhHsi/9/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>One main reason for this is that the rich have a large share of their wealth in financial assets, such as stock shares, <a href="https://www.spindices.com/indices/equity/sp-500-growth">which have nearly doubled</a> in price since their peak before the Great Recession.</p>
<p>In contrast, middle-income households <a href="https://247wallst.com/economy/2018/10/04/how-much-of-americans-personal-wealth-is-tied-up-in-their-home/">have most of their wealth</a> tied up in their home. </p>
<p>While home prices have gone up a lot in big cities on the coasts, <a href="https://fred.stlouisfed.org/series/CSUSHPISA">average home prices are up only 13%</a> since their pre-Great Recession peak in 2006 – <a href="https://www.usinflationcalculator.com">that’s less than the inflation rate</a> over the same period. What’s more, many families are still living in homes <a href="https://www.doi.org/10.1080/00213624.2019.1603765">with little or no equity</a>.</p>
<h2>Spreading the prosperity</h2>
<p>Of course, financial metrics aren’t the only ones worth looking at to see who benefited from a growing economy. </p>
<p><a href="https://www.bmj.com/content/363/bmj.k5118">Life expectancy</a> and <a href="https://www.vox.com/science-and-health/2018/5/22/17376536/fertility-rate-united-states-births-women">fertility rates</a> have been falling in recent years, <a href="https://www.ncbi.nlm.nih.gov/pubmed/22066128">particularly among those at the bottom</a> of the income and wealth distribution.</p>
<p>And more young adults are <a href="https://www.pewresearch.org/fact-tank/2018/04/05/a-record-64-million-americans-live-in-multigenerational-households/">living with their parents</a> and <a href="https://www.pewsocialtrends.org/2014/09/24/record-share-of-americans-have-never-married">delaying marriage</a>. </p>
<p>These are things that normally happen during economic recessions and depressions.</p>
<p>One positive trend during the current economic expansion has been the <a href="https://www.nytimes.com/2019/04/24/upshot/why-america-may-already-have-its-highest-minimum-wage.html">gains for workers in low-wage occupations</a>. However, these gains have not occurred because of the economic expansion. Rather, they are the result of <a href="https://ballotpedia.org/Minimum_wage_increases_in_2019">policy choices</a> made by legislators in dozens of states such as California, Colorado and New Jersey and cities such as New York and Seattle that raised their minimum wages in the face of national inability to do so. </p>
<p>Ideally, everyone gains equally from an economic expansion, regardless of its length. And gains need to be broad and deep because expansions do not last forever. </p>
<p>Overall, a well-performing economy should be one where most families take two steps forward during expansions and one step back during recessions. But that’s not America’s reality today.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/119577/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Pressman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Most of the gains from the record economy went to those at the top, while everyone else saw much smaller gains – if any – in income and wealth.Steven Pressman, Professor of Economics, Colorado State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1067002018-11-14T01:24:18Z2018-11-14T01:24:18ZThere are many good ideas to tackle inequality – it’s time we acted on them<figure><img src="https://images.theconversation.com/files/244975/original/file-20181112-38449-xrljj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Forida, who earns about 35 cents (AUD) an hour as a garment worker, subsists on watery rice when her family's money runs out so her son may eat better.</span> <span class="attribution"><span class="source">GMB Akash/Panos/OxfamAUS</span>, <span class="license">Author provided</span></span></figcaption></figure><p><em>This is the final article in the <a href="https://theconversation.com/au/topics/reclaiming-the-fair-go-61200">Reclaiming the Fair Go</a> series, a collaboration between The Conversation, the <a href="http://sydneydemocracynetwork.org/">Sydney Democracy Network</a> and the <a href="http://sydneypeacefoundation.org.au/">Sydney Peace Foundation</a> to mark the awarding of the <a href="http://sydneypeacefoundation.org.au/peace-prize-recipients/2018-joseph-stiglitz/">2018 Sydney Peace Prize</a> to Nobel laureate and economics professor Joseph Stiglitz. These articles reflect on the crisis caused by economic inequality and how we can break the cycle of power and greed to enable all peoples and the planet to flourish. The Sydney Peace Prize will be presented on November 15 (tickets <a href="https://www.stickytickets.com.au/spp/events?page=1">here</a>).</em></p>
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<p>Forida says that if she were paid a little more money, she could one day send her son to school. She could live happily; her family could live a better life.</p>
<p>Forida, 22, lives in Dhaka, Bangladesh, with her infant son and husband. They live in a dark compound built mostly of tin and wood with six other families and just one toilet. It floods and leaks when it rains, and beside the compound is a polluted pond that attracts mosquitoes.</p>
<p>Forida makes clothes bound for Australia as part of the global fashion industry. She earns about 35 cents (AUD) an hour.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/to-tackle-inequality-we-must-start-in-the-labour-market-105729">To tackle inequality, we must start in the labour market</a>
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</em>
</p>
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<p>Forida’s story is not rare.</p>
<p>Oxfam did a <a href="https://www.oxfam.org.au/wp-content/uploads/2018/01/2018-Davos-fact-sheets.pdf">comparison earlier this year</a> of the salaries of top CEOs of large Australian retail clothing brands and the earnings of the women, like Forida, who work in their supplier factories.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=652&fit=crop&dpr=1 600w, https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=652&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=652&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=819&fit=crop&dpr=1 754w, https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=819&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/244696/original/file-20181109-74783-1aqxfn2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=819&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Salary gap between CEOs and garment workers (click to enlarge).</span>
<span class="attribution"><a class="source" href="http://whatshemakes.oxfam.org.au/wp-content/uploads/2017/10/2018-Davos-fact-sheets.pdf">Sources: Annual reports for Wesfarmers, Premier Investments, Woolworths Holdings; Oxfam Australia (2017), What She Makes: Power and Poverty in the Fashion Industry.</a>, <span class="license">Author provided</span></span>
</figcaption>
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<p>We found that the workers’ wages have increased at a snail’s pace, while the CEOs’ pay has shot up by millions. Annual pay for the workers who make their clothes remains appallingly low.</p>
<p>As a case in point, one CEO in a top fashion company in Australia earns up to $2,500 an hour, including returns from shares and bonuses. A garment worker in Bangladesh like Forida should earn at least the legal minimum wage of A$0.39 an hour. At this rate, garment workers earning the minimum wage in Bangladesh would have to work more than 10,000 years to earn what a highly paid CEO in Australia makes in a year.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=691&fit=crop&dpr=1 600w, https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=691&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=691&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=868&fit=crop&dpr=1 754w, https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=868&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/244978/original/file-20181112-35554-10d6xgz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=868&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Even after her pay increases, the garments Forida makes will still earn her only about half of what’s needed to live a decent life.</span>
<span class="attribution"><span class="source">GMB Akash/Panos/OxfamAUS</span>, <span class="license">Author provided</span></span>
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<p>In December, a <a href="https://www.reuters.com/article/us-bangladesh-garments/bangladesh-raises-wages-for-garment-workers-idUSKCN1LT2UR">new minimum wage</a> – just over 60 cents AUD an hour – will apply to garment workers in Bangladesh. But even with this improvement, the women in these factories will still only earn about half of what they need to live a decent life – enough money for adequate housing and food, health and education for their families.</p>
<p>There is perhaps no starker example of global inequality.</p>
<p>Wealthy men – for it is mostly men – are at the top of global supply chains in which a mostly female workforce toils to bring in ever more revenue. The Australian fashion industry alone was <a href="http://whatshemakes.oxfam.org.au/wp-content/uploads/2017/10/Living-Wage-Media-Report_WEB.pdf">worth about A$27 billion</a> in 2016.</p>
<p>So when our leaders flatly <a href="https://www.abc.net.au/news/2017-07-26/rba-says-inequality-getting-worse/8746594">deny the notion that inequality is growing</a> – that it is a real and serious problem that demands action – it is hard not to find this perspective jarring.</p>
<p>It’s certainly not the case for the many women and men at the bottom of Australian-owned global supply chains. </p>
<h2>Inequality is on the rise in Australia, too</h2>
<p>The evidence is strong that <a href="https://www.theguardian.com/business/2017/oct/12/imf-says-australia-has-one-of-the-fastest-rising-income-inequality-rates">inequality is also on the rise in Australia</a>. If you read <a href="https://www.theaustralian.com.au/national-affairs/inequality-report-is-areality-check-forlabor/news-story/1b631d7155f89ad4db583d9c54c5de2f">some accounts</a> of the recent Productivity Commission <a href="https://www.pc.gov.au/research/completed/rising-inequality">report on inequality</a>, you’d be forgiven for thinking inequality isn’t a problem Australia needs to tackle. </p>
<p>But that media coverage hasn’t focused on some of the key trends found in the report, which offers a rather more balanced view, as <a href="http://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Peter Whiteford</a> has clearly pointed out. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Don't believe what they say about inequality. Some of us are worse off</a>
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<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=519&fit=crop&dpr=1 600w, https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=519&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=519&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=652&fit=crop&dpr=1 754w, https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=652&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/244700/original/file-20181109-74766-z9m4ju.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=652&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australian wealth distribution in 2017 (click to enlarge).</span>
<span class="attribution"><a class="source" href="http://whatshemakes.oxfam.org.au/wp-content/uploads/2017/10/2018-Davos-fact-sheets.pdf">Source: Credit Suisse (2017), Global Wealth Report</a>, <span class="license">Author provided</span></span>
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<p>The commission’s report shows, for example, that inequality is a problem for people in lower-income brackets. It explores how generational inequality is entrenched in Australia – while many people move between income brackets over time, the richest and the poorest Australians don’t do this nearly as much. Poorer Australians are more likely to stay trapped in the bottom bracket while, at the top, wealth begets wealth.</p>
<p>And, as Gary Barrett and Stephen Whelan have shown in the <a href="https://theconversation.com/the-fair-go-is-a-fading-dream-but-dont-write-it-off-105373">first article in this series</a>, income inequality remains a problem in Australia. So does wealth inequality. Today the <a href="https://www.credit-suisse.com/corporate/en/research/research-institute/global-wealth-report.html">wealthiest 1% of Australians own more than the poorest 70%</a> combined.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-fair-go-is-a-fading-dream-but-dont-write-it-off-105373">The fair go is a fading dream, but don't write it off</a>
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<p>The <a href="https://www.acoss.org.au/wp-content/uploads/2018/10/ACOSS_Poverty-in-Australia-Report_Web-Final.pdf">ACOSS Poverty in Australia 2018 report</a> includes data showing that one in eight adults and more than one in six children are living in poverty today. </p>
<p>At the same time, at the global level, organisations like the International Monetary Fund (IMF) have been having an entirely different discussion: they know inequality is continuing to increase. Instead of arguing the reality, they’ve invested in researching and discussing solutions. And, while its own loan program still requires some change to be better aligned with fighting inequality, over the past few years, the IMF and others have been calling on governments to act.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/uy0dKw7HMVA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The IMF warns that the increase in excessive inequality in most countries in the last 30 years is detrimental to growth, but it is not inevitable.</span></figcaption>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/how-rising-inequality-is-stalling-economies-by-crippling-demand-99075">How rising inequality is stalling economies by crippling demand</a>
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<p>Inequality worsens poverty and marginalisation – especially for those who already have less power than others. What Oxfam has seen around the globe is that rising inequality disproportionately impacts women, people of colour, Indigenous people, people with disabilities and LGBTIQ communities – and others who already face challenges when it comes to access to power.</p>
<p>Forida is one of millions of women who are trapped in poverty. They fuel a global economy that lines others’ pockets while they are unable to escape hardship, no matter how hard or how long they work. </p>
<p>That Forida’s home lacks facilities like safe, internal running water and is built beside a polluted pond is linked to this global challenge of rising inequality. Governments in developing countries like Bangladesh are being starved of funds. Of course, these governments also need to make the right choices and invest in health, education and infrastructure – essential things their communities need. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/244976/original/file-20181112-39548-1eo6udo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Forida’s home lacks facilities like safe, internal running water.</span>
<span class="attribution"><span class="source">GMB Akash/Panos/OxfamAUS</span>, <span class="license">Author provided</span></span>
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<p>At the same time, the global estimate of the money ripped out of poor countries due to the tax-avoiding practices of wealthy firms sits at more than <a href="https://www.oxfam.org.uk/media-centre/press-releases/2017/11/five-steps-the-uk-government-should-take-to-end-tax-scandals">US$170 billion a year</a>. </p>
<p>This huge amount should rightfully be used to invest in safe water and sound infrastructure for women like Forida in developing countries around the world. These women bear the burden of the lack of investment. Forida looks after her family when they are sick from water-borne diseases and only eats watery rice so her son may eat better when they run out of money at the end of each month. </p>
<p>We must challenge the policies and practices that are fuelling inequality, or women like Forida will continue to be left behind. </p>
<h2>We know how to reduce inequality</h2>
<p>Engage with the ideas to tackle inequality: there are many. And they are good.
Organisations at the forefront of combating inequality, both in Australia and globally, have proposed a whole range of powerful solutions. It is time the government listens and engages. </p>
<p>In Australia, the <a href="https://www.acoss.org.au/raisetherate/">campaign to raise the rate of Newstart</a>, led by ACOSS, is gaining steam. It has the support of both former Prime Minister <a href="https://www.smh.com.au/politics/federal/freeze-has-gone-on-too-long-john-howard-calls-for-a-dole-increase-20180509-p4ze83.html">John Howard</a> and the <a href="http://www.bca.com.au/publications/submission-to-the-senate-inquiry-into-the-adequacy-of-the-allowance-payment-system-for-jobseekers-and-others">Business Council of Australia</a>. </p>
<p>The <a href="https://www.oxfam.org.au/what-we-do/indigenous-australia/close-the-gap/">Close the Gap campaign</a>, which Oxfam helped to launch over 10 years ago, has taken stock in 2018 and produced a range of recommendations for the government to close the Indigenous health gap. And a thorough, national consultation process has culminated in the <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/UluruStatement">Uluru Statement from the Heart</a> and the legitimate call for an Indigenous voice to parliament. </p>
<p>Unions, NGOs and Australians from all walks of life are concerned about <a href="https://theconversation.com/why-are-unions-so-unhappy-an-economic-explanation-of-the-change-the-rules-campaign-105673">flat-lining wages</a>. They want to see cuts to penalty rates reversed – along with a raft of other changes to our industrial system to make it fairer. The union movement’s <a href="https://changetherules.org.au/">Change the Rules</a> campaign makes these calls resoundingly clear. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/why-are-unions-so-unhappy-an-economic-explanation-of-the-change-the-rules-campaign-105673">Why are unions so unhappy? An economic explanation of the Change the Rules campaign</a>
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<p>On a global level, Oxfam and civil society organisations have been calling on governments to act not only on rising inequality within their borders but also to help tackle it around the globe. </p>
<p>This means comprehensive action on business supply chains that skirt human rights – which includes paying poverty wages to women like Forida – through <a href="https://www.ohchr.org/en/issues/business/pages/nationalactionplans.aspx">national action plans on business and human rights</a>. It also means acting to ensure the tax affairs of large businesses are public – right across the globe – to help stop money being hidden in tax havens and ripped out of both Australia and the developing countries that need this revenue.</p>
<p>The ideas being put forward from across Australia are legitimate. They deserve greater attention. It is time for our dialogue to be about action, rather than arguing whether inequality is a problem at all. </p>
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<p><em>This article was co-authored by <a href="https://www.oxfam.org.au/what-we-do/about-us/our-people/our-executive-team/chief-executive-dr-helen-szoke/">Helen Szoke</a>, chief executive of Oxfam Australia.</em></p><img src="https://counter.theconversation.com/content/106700/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Sydney Peace Foundation receives funding from the City of Sydney. Marianna Brungs is a board member of NCOSS (the NSW Council of Social Service). Oxfam Australia is an Impact Partner of the Sydney Peace Foundation to support Professor Joseph Stiglitz’s visit to Australia to accept the 2018 Sydney Peace Prize.
</span></em></p>We wear the evidence of extreme inequality – clothing made by workers in Bangladesh for 35 cents an hour. But we know how to reduce inequality – we just have to do it.Marianna Brungs, Director, Sydney Peace Foundation, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/990752018-07-17T01:45:45Z2018-07-17T01:45:45ZHow rising inequality is stalling economies by crippling demand<figure><img src="https://images.theconversation.com/files/227530/original/file-20180713-27018-1kewy4g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Aggregate demand is being hit by the concentration of income growth among the top earners and is now a drag on economic growth.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/1113684434?src=8oXmAPGkSOA-CZRU1zjJ-w-1-60&size=huge_jpg">Shutterstock</a></span></figcaption></figure><p><em>Rising inequality is a concern across the developed economies, including Australia where top earners’ pay has soared to a 17-year high while ordinary workers’ wage growth has been the lowest on record. And that’s ultimately bad news for economic growth. This is longer than the usual Conversation article, so allow some time to read and enjoy.</em></p>
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<p>In the last decade or more, economic growth has slowed across the Western world, although a belated though weak recovery has been under way since around 2017. In the US, for example, growth in <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=US">gross output per capita averages around 1% a year</a> this century. That’s about half the average rate during the second half of the 20th century.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=897&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=897&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=897&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1127&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1127&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227317/original/file-20180712-27036-1upvw26.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1127&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Captured Economy.</span>
<span class="attribution"><a class="source" href="https://global.oup.com/academic/product/the-captured-economy-9780190627768?cc=us&lang=en&">OUP</a></span>
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<p>American economist Arthur Okun famously <a href="https://www.brookings.edu/book/equality-and-efficiency-the-big-tradeoff/">argued there was a trade-off</a> between equality and economic efficiency, implying little chance of high inequality and sluggish economic growth occurring together. Yet this is exactly what is happening in the US. What has gone wrong?</p>
<p>In <a href="https://global.oup.com/academic/product/the-captured-economy-9780190627768?cc=us&lang=en&">The Captured Economy</a>, Brink Lindsey and Steven Teles explore US economic sectors such as finance, land use, occupational licensing and intellectual property rights. They argue powerful interests have captured these sectors and are using the state to distort markets to their advantage. This kind of <a href="https://www.investopedia.com/terms/r/rentseeking.asp">rent-seeking</a> is weakening growth and driving up inequality. As the authors put it:</p>
<blockquote>
<p>Across a number of sectors, the US economy has become less open to competition and more clogged by insider-protecting deals … Those deals make our economy less dynamic and innovative, leading to slower economic growth … At the same time, they redistribute income and wealth upwards to elites in a position to exploit the political system to their favour.</p>
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Read more:
<a href="https://theconversation.com/why-businesses-want-the-ear-of-government-and-are-willing-to-pay-for-it-90688">Why businesses want the ear of government and are willing to pay for it</a>
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<p>This special dealing is but one facet of a much wider problem of competing claims for economic resources increasingly damaging Western economies. The arguments by Lindsey and Teles concern dysfunctions on the supply side of the economy. </p>
<p>In our recent book, <a href="https://www.mup.com.au/books/9780522872279-fair-share">Fair Share: Competing Claims and Australia’s Economic Future</a>, Michael Keating and I argue that even bigger competing claims and distributional problems are now affecting the demand side of Western economies. These problems are also producing weak economic growth and rising inequality.</p>
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<strong>
Read more:
<a href="https://theconversation.com/politics-podcast-michael-keating-on-a-fair-share-94503">Politics podcast: Michael Keating on a Fair Share</a>
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<h2>Time to pay attention to demand</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=906&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=906&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=906&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1139&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1139&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227318/original/file-20180712-27030-1mf7obf.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1139&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.mup.com.au/books/9780522872279-fair-share">MUP</a></span>
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<p>But how are these two outcomes connected? In Fair Share, we argue that rising inequality is weakening economic growth across the advanced economies by reducing <a href="https://www.investopedia.com/terms/a/aggregatedemand.asp">aggregate demand</a>. Our account differs from mainstream economics, which argues that growth stems mainly from the supply side of the economy. </p>
<p>In recent decades many neoliberal, supply-side policies have been implemented. The recent sluggish pattern of growth calls the supply-side theory into question. Indeed, the gap between theory and reality has prompted former US treasury secretary <a href="http://www.piketty.pse.ens.fr/files/Summers2015.pdf">Lawrence Summers to argue</a> that “the events of the last decade should precipitate a crisis in the field of macroeconomics”.</p>
<p>Some salient facts on the demand side are increasingly hard to ignore. Most Western economies have been marked by <a href="https://wir2018.wid.world/">increased inequality since the 1980s</a>. <a href="https://en.wikipedia.org/wiki/Wage_share">Wage shares</a> have <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5260.0.55.002Feature%20Article32016-17?opendocument&tabname=Summary&prodno=5260.0.55.002&issue=2016-17&num=&view=">fallen</a>.</p>
<iframe id="datawrapper-chart-EgYE6" src="https://datawrapper.dwcdn.net/EgYE6/1/" scrolling="no" frameborder="0" allowtransparency="true" style="width: 0; min-width: 100% !important;" height="400" width="100%"></iframe>
<p>Even more important has been the rise in income inequality. The wage increases that have occurred have been largely concentrated among the top income earners. These “winners” have a lower propensity to consume than those in the lower deciles of earnings distribution. As a result, too much income inequality and slow wages growth relative to productivity growth risk a continuing shortfall in demand and hence weaker economic growth.</p>
<p>Prior to the Global Financial Crisis (GFC), many economic policies sought to avoid this shortfall in aggregate demand. This did so either by maintaining a very competitive exchange rate to support export-led growth (e.g. China, Germany) or, more often, by increasing the availability of consumer credit to support consumer demand (e.g. the US, UK). </p>
<p>Neither of these strategies has proved viable in the longer run. First, not all countries can be net exporters at the same time. Second, the required growth in consumer credit became increasingly risky, and eventually helped fuel the GFC. </p>
<p>Since then, the advanced economies have experienced protracted stagnation and a weak recovery due to a shortfall in aggregate demand. The longer this shortfall continues, the greater the risk that the rate of increase in potential output will also slow. </p>
<p>The impact on economic output is due to lack of new investment, on which technological progress depends, and atrophying of workforce skills when labour is not fully employed. Indeed, the combination of low unemployment and slow economic growth suggests this slowdown in potential output growth is already occurring in the US.</p>
<p>More generally, however, competing economic claims can potentially deliver various combinations of inflation, wage stagnation, growing inequality, weak demand and slower economic growth. Our central proposition in Fair Share links income distribution and economic growth. </p>
<h2>Why growth depends on balanced distribution</h2>
<p>Western capitalism has always run on a fairly narrow distributional path. If the distributional balance gets too far out of kilter in either direction the threats of inadequate aggregate demand and weak growth are likely to emerge. </p>
<p>As we saw in the 1970s, pursuit of excessive wage increases risks <a href="https://www.investopedia.com/articles/economics/08/1970-stagflation.asp">stagflation</a>, resulting in inadequate investment and rising unemployment. On the other hand, and as is happening now, a significant shift towards wage stagnation and increased income inequality risks slower growth through inadequate demand and consumption.</p>
<p>Hence, it is the distributional shifts, in pursuit of higher wages in the 1970s and more recently in favour of capital and the highest-income groups, that have largely been responsible for the difficulties in both epochs in maintaining growth in the advanced capitalist economies. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=927&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=927&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=927&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1164&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1164&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227319/original/file-20180712-27042-1ndnhv5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1164&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Game of Mates.</span>
<span class="attribution"><a class="source" href="https://gameofmates.com/">gameofmates.com</a></span>
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<p>Our theory thus suggests that the problems of stagflation in the 1970s were not as far removed from today’s problems as one might think. The root cause of the problems across both eras has essentially been distributional changes.</p>
<p>Some analysts argue that regulatory and other changes have altered the relative power of those involved in competing claims, with workers and wage levels, in particular, losing out. Others, such as Lindsay and Teles, argue returns are skewed by oligopolistic competition, rent-seeking and other forms of market power and powerlessness (see also <a href="https://theconversation.com/profiles/cameron-murray-172480">Cameron Murray</a> and <a href="https://theconversation.com/profiles/paul-frijters-3277">Paul Frijters</a>’ <a href="https://gameofmates.com/">Games of Mates</a> on Australia). </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/speaking-with-cameron-murray-on-grey-corruption-and-the-game-of-mates-81085">Speaking with: Cameron Murray on grey corruption and the 'Game of Mates'</a>
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<p>We acknowledge both of these changes but argue that the biggest changes in income distribution have come from technological changes that have hollowed out middle-income jobs, while any relative labour shortages have tended to be skill-biased. These two factors are the main drivers of increased income polarisation.</p>
<p>Furthermore, to the extent that trade-union power matters, we think changes in the industrial and occupational structure of the workforce, in response to technological change, have largely been responsible for reduced trade union membership and the loss of bargaining power.</p>
<h2>What should governments do about this?</h2>
<p>In response, governments should aim to boost wages and redress growing income inequality. Any such strategy will be most effective if it focuses on responding to the technological changes that are the prime cause of rising inequality. As <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Thomas Piketty concluded</a> in the most <a href="https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs">significant analysis of inequality</a> published this century:</p>
<blockquote>
<p>To sum up: the best way to increase wages and reduce wage inequalities in the long run is to invest in education and skills. </p>
</blockquote>
<p>We argue therefore that education and training need to be boosted to help workers cope with changing markets and job opportunities. This approach can be expected to boost both aggregate demand and supply. Direct measures to boost lower incomes may also be needed to improve the social safety net for those who miss out.</p>
<p>More generally, the successful continuation of the open-economy model, and indeed the sustainability of capitalist democracy, will depend upon the successful resolution of competing claims. In particular, this requires a fair sharing of the gains from increased economic production and a tight link between wages and productivity growth.</p>
<p>It is certainly clear that the supply-side, neoliberal policies of recent decades have largely run their course in many advanced economies. Too often the starting premise of the supply-side agenda is that the role of government should be minimised through further deregulation and tax cuts. However, the nature of many of today’s problems requires government to be more interventionist rather than less, while still maintaining the key strengths of an open, liberal, market economy.</p>
<p>The new focus of policy must be on the demand side. The failure to reasonably share income and educational opportunities is creating a highly volatile mix of unhappy “losers”. Hence, we see a growing political backlash, the rise of right-wing populism and extremism, Brexit, Trump etc. </p>
<p>The backlash against globalisation and economic restructuring is real and growing. It poses a threat to economic development and to liberal democratic capitalism.</p>
<p>All this has led commentators such as German sociologist Wolfgang Streeck to refer to “<a href="https://newleftreview.org/II/71/wolfgang-streeck-the-crises-of-democratic-capitalism">the crises of democratic capitalism</a>”, featuring “an endemic and essentially irreconcilable conflict between capitalist markets and democratic politics”. Perhaps so, yet capitalist democracies have managed to do much better in the past, especially during the post-war golden age of the 1950s and 1960s. </p>
<h2>What does this mean for Australia?</h2>
<p>Even today some countries are handling the situation better than others, suggesting politics and policies can make a difference. </p>
<p>Australia is a case in point. In recent decades reforms to improve market flexibility in Australia have underpinned one of the <a href="https://theconversation.com/therell-be-no-records-set-this-week-by-australian-economic-growth-figures-78830">longest expansions in capitalist history</a>. At the same time the <a href="https://en.wikipedia.org/wiki/Wage_share">wage share</a> in Australia in 2015 was about the same as in 1990 and a bit higher than in 1960. </p>
<p>In addition, Australia has possibly the most <a href="https://theconversation.com/who-gets-what-who-pays-for-it-how-incomes-taxes-and-benefits-work-out-for-australians-98627">efficient redistributive system</a> of all the advanced economies. Under the Hawke and Keating Labor governments’ <a href="https://theconversation.com/australian-politics-explainer-the-prices-and-incomes-accord-75622">Accord</a> with the trade unions, the social wage increased substantially faster than other incomes. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/who-gets-what-who-pays-for-it-how-incomes-taxes-and-benefits-work-out-for-australians-98627">Who gets what? Who pays for it? How incomes, taxes and benefits work out for Australians</a>
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<p>Nevertheless, although income inequality has risen less in Australia than in many overseas countries, it has risen here too. In the last few years there are clear signs that <a href="https://theconversation.com/vital-signs-poor-wage-growth-means-interest-rates-could-be-low-for-a-long-time-98240">wages are stagnating</a> and <a href="http://www.abc.net.au/news/2018-06-25/household-debt-in-australia-has-risen-since-the-gfc/9905588">household debt levels are now very high</a>.</p>
<p>Thus, it is imperative for Australia that it adopts a more growth-oriented income distribution. Key elements include wage-supporting measures and ensuring people are better equipped to change the organisation of existing jobs and, in many cases, move to the higher-skilled and well-paid jobs that technology is often creating.</p>
<p>A new agenda is needed. We have to recognise that economic growth inevitably involves economic transformation, based on innovation and technological change. Thus, contrary to the assumptions many economists make, it is highly probable that economic growth will impact on the distribution of incomes. This of itself can create future problems for the sustainability of that growth. </p>
<p>The bottom line, economically and politically, is that governments need to be prepared to promote demand as well as supply. Increasingly, we can no longer escape the distributional issues at hand. The winners will need to help the losers through more effective support and a degree of redistribution – especially if things get worse through ongoing wage stagnation and rising resistance to the perceived inequities of the present economic system.</p><img src="https://counter.theconversation.com/content/99075/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Bell receives funding from Australian Research Council. </span></em></p>News that Australian CEO pay has soared to a 17-year high at a time when ordinary workers’ wages are flatlining is ultimately bad news for economic growth and prosperity.Stephen Bell, Professor of Political Economy, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/959622018-05-27T19:51:07Z2018-05-27T19:51:07ZI can see clearly now: ‘pay secrecy’ fades as more transparency becomes the norm<figure><img src="https://images.theconversation.com/files/220095/original/file-20180523-51130-13ko0cr.jpg?ixlib=rb-1.1.0&rect=0%2C24%2C1495%2C970&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Would you share your pay information?</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Pay transparency is becoming a more visible management topic as a number of pressures force companies to consider how open to be about their pay structures, pay levels and pay gaps. As well as legal pressures, the sharing of information via social media and expectations of new generations are also encouraging change.</p>
<p>Some companies are leading the way. They are publishing their remuneration levels, policies and practices while others are more resistant. As well as potential risks, are there perhaps benefits of being more transparent?</p>
<h2>A transparency momentum</h2>
<p>Pressures on companies for greater <a href="https://www.sciencedirect.com/science/article/pii/S0007681317300356">pay transparency</a> come from both a regulatory push in the <a href="http://ec.europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-671-F1-EN-MAIN-PART-1.PDF">EU</a> and <a href="https://www.corporateboard.com/ArtArchive.aspx">US</a> and a broader debate in society about unfairness of pay secrecy. Taboos around sharing pay information are being eroded, particularly among <a href="https://scholarship.law.uci.edu/ucilr/vol4/iss2/11/">Millennials</a>. Individuals can access pay information on various websites such as <a href="http://www.glassdoor.com/">Glassdoor</a> and share on <a href="https://www.shrm.org/hr-today/news/hr-magazine/pages/0914-salary-transparency.aspx">social media</a>. In fact almost two-thirds of Europeans would <a href="https://data.europa.eu/euodp/data/dataset/S2154_87_4_465_ENG/resource/85037076-fb51-46d3-9115-115463336f57">support more transparency</a> of remuneration.</p>
<p>Perhaps unexpectedly companies are also leading the change. Surveys confirm growing openness of employers towards pay transparency – both <a href="https://www.cipd.co.uk/Images/reward-management_2017-focus-on-pay_tcm18-34496.pdf">big and small</a>. Meanwhile Human Resource professionals, required to consider ethical issues related to fair treatment of employees, are <a href="https://www.sciencedirect.com/science/article/pii/S0007681317300356">interested</a>. A number of <a href="https://www.theguardian.com/media/2018/jan/30/bbc-pay-review-claims-no-evidence-of-gender-bias">high-profile cases</a> also demonstrate the costs of unexpected disclosure of pay disparities.</p>
<h2>Some hidden benefits of being transparent</h2>
<p>Recent studies show that a range of companies across countries increasingly support pay transparency measures for a variety of <a href="http://www.chicagotribune.com/business/ct-pay-gap-transparency-push-20170901-story.html">reasons</a>. They hope for potential economic, ethical and reputational <a href="http://www.businessinsider.com/why-companies-have-open-salaries-and-pay-transparency-2017-4">benefits</a>. Such measures may allow employers to differentiate themselves from competitors and to strengthen their “<a href="http://www.chicagotribune.com/business/ct-pay-gap-transparency-push-20170901-story.html">employer brand</a>” – resulting in increased <a href="https://www.fastcompany.com/40416506/is-pay-transparency-right-for-your-company-we-asked-a-few-that-tried-it">job applications</a> from candidates who value fairness and transparency.</p>
<p>They vary in size and activities but examples exist across the world, including – Buffer, SumAll and Whole Foods (USA); SAP, Thermador and Lucca (France); Rocketwerkz (New Zealand); and CareerFoundry (Germany).</p>
<p>Some potential <a href="https://www.sciencedirect.com/science/article/abs/pii/S1053482215000388">benefits</a> can be linked to perceptions of fairness and organizational justice which improve the employee-employer relationships and influence employee engagement. Studies show that pay transparency can boost employee job satisfaction, motivation, performance, productivity, decision-making, morale, and overall atmosphere, whilst and turnover intentions decrease.</p>
<p>There is also the possibility of reducing <a href="http://www.businessinsider.com/why-companies-have-open-salaries-and-pay-transparency-2017-4">gender pay gaps</a>. Pay transparency addresses the ‘<a href="http://www.nber.org/papers/w18511">negotiation gap</a>’ between men and women which disappears when pay information is available, and explicitly stated as negotiable. It could also allow for more accurate comparisons taking into account specific criteria in compensation decisions.</p>
<p>Unwarranted gender pay gaps not only pose reputational threats but also legal ones. Action to address pay gaps via pay transparency measures can help prevent <a href="https://www.cambridge.org/core/journals/canadian-journal-of-law-and-society-la-revue-canadienne-droit-et-societe/article/div-classtitlestrategic-litigation-for-gender-equality-in-the-workplace-and-legal-opportunity-structures-in-four-european-countriesa-hreffn78-ref-typefnadiv/98623DE47504A05D64528DB28E4510FF">litigation and reputational damage</a>. In knowing that salary decisions will be visible, managers and employers have incentives to engage in preventive action to correct flaws in pay structures.</p>
<p>Managers may also implement clearer policies and make better decisions. Improved decision making can avoid costly and burdensome <a href="http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2014/swd_2014_0059_en.pdf">court proceedings</a>. Also, <a href="https://www.sciencedirect.com/science/article/abs/pii/S1053482215000388">clarity</a> of pay determination criteria and outcomes, and the management’s readiness to provide <a href="https://www.emeraldinsight.com/doi/abs/10.1108/02683940810894765">explanations</a> and procedures enhance perceptions of fairness among employees.</p>
<p>A number of high-profile cases illustrate the legal and reputational risks of unjustifiable pay gaps. These include BBC in the UK is now facing around 300 <a href="https://www.theguardian.com/media/2018/jan/31/bbc-in-real-trouble-over-equal-pay-carrie-gracie-tells-mps">equal pay claims</a>. Other companies facing lawsuits for gender pay disparities include <a href="https://www.theguardian.com/business/2018/feb/07/tesco-equal-pay-claim-could-cost-supermarket-up-to-4bn">supermarket chains</a> while in the public sector a UK <a href="https://www.theguardian.com/business/2018/feb/07/tesco-equal-pay-claim-could-cost-supermarket-up-to-4bn">City Council</a> faces legal action.</p>
<h2>Also some risks in transparency…</h2>
<p>There are of course some risks related to pay transparency. Although some research suggests that when people knew why they earn what they earn they were less likely to quit there is mixed evidence on turnover. Pay transparency may lead to pay inflation and ‘<a href="http://www.theweek.co.uk/86939/bbc-pay-list-should-all-salaries-be-made-public">poaching</a>’ of talented employees by competitors who might not be so transparent. Also some employees who still believe they are underpaid may be more <a href="https://www.fastcompany.com/40416506/is-pay-transparency-right-for-your-company-we-asked-a-few-that-tried-it">likely to leave</a> following pay disclosure.</p>
<p>Other concerns related to pay transparency include <a href="https://www.ft.com/content/32e1132c-918c-11e7-a9e6-11d2f0ebb7f0">upward pressure</a> on wages, potential <a href="https://www.sciencedirect.com/science/article/pii/S0007681317300356">tensions and conflicts</a>, and breach of <a href="https://www.sciencedirect.com/science/article/abs/pii/S1053482215000388">employees’ privacy</a>. Furthermore, while transparency may be a way to promote gender equality, it may highlight the rewards to men’s more continuous and linear career paths and underline disadvantage women’s access to <a href="https://www.fastcompany.com/3058447/why-salary-transparency-didnt-eliminate-the-gender-wage-gap-at-this-start">higher pay and hierarchical levels</a>.</p>
<h2>Not a miracle but a step in the right direction</h2>
<p>What is clear is that transparency needs to be supported by a certain level of equity in the existing pay structure to avoid the negative consequences of perceptions of injustice. Overall pay transparency may have benefits for both individuals and employers and despite the risks the benefits for organisations seem to outweigh the potential downsides.</p>
<p>There are also potential societal benefits in addressing the gender pay gap, albeit within rather than between firms. Since women are often <a href="https://eeas.europa.eu/delegations/un-geneva/25625/2017-report-equality-between-women-and-men-eu_en">concentrated in sectors</a> with low pay, low status, and poor career prospects such measures can help. Yet informal working arrangements and limited scope for collective bargaining still hamper the potential to leverage the information resulting from greater pay transparency.</p>
<p>Given the growing momentum it seems that turning back the clock is not possible. This is supported by regulations and greater public acceptance of the principles of pay transparency. Reputational concerns and pressure from various stakeholders – via social media – are likely to contribute to further adoption of pay transparency measures. Thus maintaining pay confidentiality may prove costly for organisations in terms of reputation, exposure to litigation, and employee performance. The future seems a little clearer.</p><img src="https://counter.theconversation.com/content/95962/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>A range of pressures are forcing companies to consider being more open about pay structures, levels and gaps. What are the risks and potential benefits of being more transparent?Mark Smith, Dean of Faculty & Professor of Human Resource Management, Grenoble École de Management (GEM)Maria Gribling, Research associate, Grenoble École de Management (GEM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/916362018-03-08T00:01:52Z2018-03-08T00:01:52ZHow to ensure more women run for public office<figure><img src="https://images.theconversation.com/files/209212/original/file-20180306-146691-eckuvf.jpg?ixlib=rb-1.1.0&rect=1417%2C0%2C2425%2C1670&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Women face myriad barriers running for office and it's time to knock down those obstacles starting at the municipal level.
In this November 2017 photo, Foreign Affairs Minister Chrystia Freeland sits between Maryam Monsef, Minister of Status of Women, right, and Marie-Claude Bibeau, Minister of International Development and La Francophonie.</span> <span class="attribution"><span class="source">(The Canadian Press/Sean Kilpatrick)</span></span></figcaption></figure><p>On Feb. 24, more than 50 women gathered at Guelph City Hall for the city’s first-ever women’s “campaign school,” hosted by <a href="https://guelph.ca/person/councillor-june-hofland/">city councillor June Hofland</a>. </p>
<p>The enthusiasm at the event was palpable, but so too were concerns about the harassment the potential candidates were likely to endure for the sake of running for office. </p>
<p>The barriers facing women entering politics are well-established. For example, because women earn lower wages than men on average, and are disproportionately responsible for caring for their families, there are significant obstacles due to campaign financial requirements, the need for flexible work schedules and lack of access to child care.</p>
<p>These barriers can be exaggerated for racialized women, Indigenous women and women with disabilities. They face even larger pay inequities. </p>
<p>Another barrier is <a href="http://heinonline.org/HOL/LandingPage?handle=hein.journals/unblj64&div=13&id=&page=">women’s social capital</a> — the benefits that come through personal and professional networks — which is not as advantageous as men’s when it comes to accessing political power or drumming up campaign financing. </p>
<p>Structural issues, including our <a href="https://books.google.ca/books?id=rsvBqIXfJbYC&pg=PA19&lpg=PA19&dq=Truly+more+accessible+to+women+than+the+legislature?+Women+in+municipal+politics.&source=bl&ots=bovXwDkYgv&sig=b-fWqWKObfDMLMKYsOcPvJmt8hU&hl=en&sa=X&ved=0ahUKEwj_mJS2ydjZAhWlzlkKHTQ2Av4Q6AEIJzAA#v=onepage&q=Truly%20more%20accessible%20to%20women%20than%20the%20legislature%3F%20Women%20in%20municipal%20politics.&f=false">first-past-the-post electoral system that favours incumbent candidates</a>, and a masculine political culture are also problematic, not to mention racism, heterosexism and the experiences of Indigenous women — who did not even have the right to vote federally until 1960 — with colonization. </p>
<h2>Lack of representation</h2>
<p>Related to the struggle is evidence highlighting <a href="https://www.mckinsey.com/%7E/media/McKinsey/Global%20Themes/Women%20matter/The%20power%20of%20parity%20Advancing%20womens%20equality%20in%20Canada/MGI-The-power-of-parity-Advancing-womens-equality-in-Canada-Full-report.ashx">persistent barriers to women’s equality</a> more broadly. While there is some variation in the severity and form of these barriers across various sectors, it’s safe to say that many women have to leap significant obstacles to seek office at any level of government.</p>
<p>With these and other barriers come the longstanding issue of lack of representation. With the exception of the Canadian Senate, women still hold on average less than 30 per cent of seats in government whether at the federal, provincial, or <a href="https://fcm.ca/home/programs/women-in-local-government/about-women-in-local-government.htm">municipal level</a>. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/209223/original/file-20180307-146650-cupwf3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Senator Linda Frum is one 44 female senators in the 105-member Canadian Senate.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span>
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<p>The numbers for heads of governments are lower still. And contrary to commonly held beliefs, women are <a href="https://www.cambridge.org/core/journals/canadian-journal-of-political-science-revue-canadienne-de-science-politique/article/do-women-do-better-in-municipal-politics-electoral-representation-across-three-levels-of-government/2E56EAEFE93789391D66A49F08B0B127">no better represented at the municipal level of government</a> than at any other level of government. </p>
<p>Lack of gender diversity is not our only problem.</p>
<p>An unpublished 2015 survey of just over 600 elected municipal officials in Ontario, conducted by Leanne Piper, then a master’s student and still a Guelph city councillor, paints a very homogenous picture of our representatives. </p>
<p>Seventy per cent are over age 50; 91 per cent were born in Canada; 92 per cent identify as Christian. Eighty per cent are married, and only 2.1 and 1.4 per cent identify as visible minorities and Indigenous people respectively.</p>
<h2>Social media abuse</h2>
<p>During and following elections, women face a particularly difficult additional problem — harassment by staff, colleagues and even citizens. Last month, Toronto Star reporter Samantha Beattie wrote about the fact that <a href="https://www.thestar.com/news/city_hall/2018/02/02/torontos-female-elected-officials-face-sexual-harassment-threats-on-job.html">several women who are Toronto city councillors and school board trustees have experienced constituent harassment</a>. </p>
<p>Nearby, the problem has also been documented related to women councillors in <a href="https://www.insidehalton.com/news-story/8111122-burlington-councillor-calls-for-antibullying-task-force-at-city/">Burlington, Ont.</a>, and is of course a problem that affects women seeking and holding office across the country and around the world. </p>
<p>Women at Guelph’s campaign school, and in other forums where political women gather, discuss the particularly pernicious attacks that they fear, or have faced, on <a href="https://www.thestar.com/news/canada/2017/02/24/twitter-and-facebook-are-a-minefield-of-threats-hate-and-anger-for-many-female-politicians.html">social media</a>.</p>
<p>As with all complex social and political challenges, a narrow solution will not work. But a number of things could help.</p>
<h2>How to bring about change</h2>
<p>Internal anti-harassment policies are one essential piece of the solution. Many municipalities have these policies in place.</p>
<p>A <a href="http://www.emeraldinsight.com/doi/abs/10.1108/02610150110786796">somewhat dated study</a> focused on American case law related to sexual harassment. It offers a number of suggestions to municipalities seeking to thwart harassment, including “creating efficient and responsible complaint channels,” using anonymous surveys to monitor changes in harassment incidences and experiences and offering diversity training as a way of working “[towards better] communication [and respecting] each other’s differences.”</p>
<p>A broader need, though, is to focus on creating more inclusive policies at the municipal level, which we can reasonably expect will help to create a climate that is more welcoming of diversity and less tolerant of harassment. </p>
<p>There are a number of resources to help with the task. In Canada, the <a href="http://www.cawi-ivtf.org/">City for All Women Initiative</a> (CAWI) is a longstanding partnership of “women from diverse communities, organizations and academia working with municipal decision-makers to create a more inclusive city and promote gender equality.”</p>
<p>Their work includes the creation of important tools such as the <a href="http://www.cawi-ivtf.org/sites/default/files/publications/advancing-equity-inclusion-web_0.pdf">Guide to Advancing Equity and Inclusion</a> in municipalities. </p>
<p>The Alberta Urban Municipalities Association Welcoming and Inclusive Communities (WIC) initiative has also <a href="http://citiesofmigration.ca/wp-content/uploads/2017/10/AUMA-Welcoming-and-Inclusive-Communities-Toolkit.pdf">created a toolkit</a> they describe as being “designed to help your municipality become a better place for everyone.”</p>
<p>Organizations such as <a href="http://www.womentransformingcities.org/">Women Transforming Cities</a>, and policy documents such as <a href="http://vancouver.ca/docs/council/Women%27sEquityStrategy.pdf">Vancouver’s Gender Equity Strategy (2018-2028)</a>, are critical for building broad-based equity commitments. </p>
<p>The principles underpinning the Vancouver initiative include a commitment to inclusive decision-making and to recognizing that women’s experiences can also be affected by their physical ability, Indigenous status, race, age and many other factors.</p>
<p>We have a long way to go to combat widespread issues of harassment, but doing so at the municipal level can be advanced through initiatives that make cities and towns safer and more inclusive places for everyone.</p><img src="https://counter.theconversation.com/content/91636/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Leah Levac receives funding from the Social Sciences and Humanities Research Council and the Ontario Ministry of Research, Innovation, and Science. She is also affiliated with the Canadian Research Institute for the Advancement of Women.</span></em></p>Canadian women are under-represented in politics and are hesitant to run for office for myriad reasons. Here’s what needs to be done, especially at the municipal level, to get more women in office.Leah Levac, Assistant Professor of Community Engagement and Political Science, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/882432018-01-04T20:32:22Z2018-01-04T20:32:22ZWhy so many tennis players go pro even though few ‘make it’<p><em>In this series we’re looking at how the <a href="https://theconversation.com/au/topics/economics-of-sport-47162">economics of sports</a> is doing away with hunches and intuition. Using data and research to evaluate players, strategies and even leagues.</em></p>
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<p>Tennis players take on a <a href="https://www.vu.edu.au/news-events/news/even-tennis-top-200-struggle-to-earn-a-living">huge risk</a> in deciding to turn pro - the odds of earning a stable income through tennis, let alone vast riches, are vanishingly small. <a href="http://people.bath.ac.uk/klp33/tennis.pdf">Our research</a> suggests it’s this very riskiness that drives tennis players to turn professional. </p>
<p>Just like gamblers, tennis players are enticed by the small possibility of a large payoff.</p>
<p>By our calculations an 18 year old boy ranked 100 in the world in 1997 had a less than one-thousandth of a percent (0.001%) chance of earning more than US$10 million in prize money over his tennis career. This isn’t a lot of money when you subtract the cost of competing - which <a href="http://www.itftennis.com/procircuit/about-pro-circuit/player-pathway.aspx">averaged</a> US$38,800 for male players and US$40,180 for female players in 2013, not including the cost of a coach. </p>
<p>We calculated the average career prize earnings of tennis players at around US$300,000. Around 80% of professional tennis players earn close to nothing, but there is a very wide range of values above this that people might earn – up to the US$65 million <a href="http://www.atpworldtour.com/en/players/roger-federer/f324/bio">Roger Federer</a> earned by the age of 30.</p>
<p><iframe id="soCZX" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/soCZX/4/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>As you can see in the chart above, tennis has some of the most extreme levels of inequality in any sport. Highly ranked players, both men and women, can earn significant prize money, while those ranked between 200 and 2,000 earn almost nothing.</p>
<p>Of the 128 players that qualify for each of the four <a href="https://www.tennis.com.au/news-and-events/pro-tournaments/grand-slams">Grand Slam tournaments</a>, the winners take home around 18% of the total prize money. Those who exit in the first round get only 0.3%. This does not factor in the sponsorships and endorsements that top-ranked players receive.</p>
<p>Teenagers who are ranked very highly in the world have a better chance of becoming stars as adults, but they still face a lot of uncertainty. For example, <a href="http://www.atpworldtour.com/en/players/kristian-pless/p491/overview">Kristian Pless</a> was ranked number one as a junior but his highest rank as a professional was 65, and he earned just US$1.1 million in prize money over his ten-year career.</p>
<p>Teenagers who are ranked poorly are almost certain to make close to zero over their tennis careers. However, there remains a minuscule chance they could make it big. Our research suggests this small chance of a big payoff is why players decided to continue their tennis careers.</p>
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Read more:
<a href="https://theconversation.com/rich-rewards-for-those-at-the-top-in-tennis-but-what-of-the-rest-35961">Rich rewards for those at the top in tennis, but what of the rest?</a>
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<p>Both <a href="http://faculty.citadel.edu/sobel/All%20Pubs%20PDF/Gamblers.pdf">experimental</a> and <a href="http://www.jstor.org/stable/10.1086/250007?seq=1#page_scan_tab_contents">observational</a> studies of gambling behaviour suggest that people are attracted to a “skewed” gamble - where there is a small possibility of a big payoff. </p>
<p>For example, imagine two lotteries. One pays out either nothing or $1, each with 50% probability. The other has a 50% probability of paying nothing, a 49% probability of paying 80 cents and a 1% probability of paying out $10. </p>
<p>Even though the first lottery has a high average payoff and less uncertainty, the research suggests gamblers are strongly attracted to a skewed gamble, and so to the $10 payoff in the second lottery.</p>
<p>Our research found that this same effect is evident in players’ decisions to continue in tennis (which is a big, career-sized gamble). We found that players whose potential lifetime earnings are highly skewed – so that they had a very low probability of a high payoff – are more likely to stick with tennis for at least one more year.</p>
<p>In other words, tennis players behave the same way when choosing their career path as gamblers do when backing a horse. </p>
<p>Further, boys appear to be more attracted to highly skewed earnings than girls. If we eliminate the tiny chance that they make a massive amount of money, teenage boys would be 20% less likely to continue in tennis from one year to the next, while teenage girls would be 5% less likely.</p>
<p>These effects are much smaller in our study of tennis players than in studies of gamblers. But they are still large, and, combined with the poor earnings prospects for most tennis players, indicate that many would be better off pursuing a different career than trying to be the next Serena Williams.</p>
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Read more:
<a href="https://theconversation.com/numbers-game-the-australian-open-and-predicting-success-11442">Numbers game: the Australian Open and predicting success</a>
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<p>This same effect can be seen in many other industries and pay inequality has been increasing in many occupations in recent decades. </p>
<p>Technology, such as television and the internet, may be partly to blame. They have helped create a small number of superstars who are able to capture a lot of the earnings available in a particular occupation. For example, Taylor Swift sells millions of records across the world while countless street performers can only dream of making a living from music.</p>
<p>Our findings also suggest that the existence of superstars may attract people to a particular career. </p>
<p>This is not necessarily irrational – people get pleasure from long-shot chances. But the fact that tennis players appear to be gambling with their careers suggests that many may end up regretting their decisions.</p><img src="https://counter.theconversation.com/content/88243/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Jetter is affiliated with IZA and CESifo.</span></em></p><p class="fine-print"><em><span>Kerry L. Papps and Wayne A. Grove do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Only a few professional tennis players make a stable income, let alone vast riches. Research suggests it’s this small chance of a huge payoff that drives players to play professionallyMichael Jetter, Senior Lecturer in Economics, The University of Western AustraliaKerry L. Papps, Senior Lecturer in Economics, University of BathWayne A. Grove, Professor of Economics, Le Moyne CollegeLicensed as Creative Commons – attribution, no derivatives.