Salary gap between top execs and junior staff widens in Asia
The salary gap between top management and junior staff widened in nine Asian markets in 2016, as senior executive base salaries got close to, and in some locations, exceeded those in the U.S., while those in junior positions saw theirs lag far behind, according to a new study by Willis Towers Watson.
The widening salary gap between top management and entry-level positions in companies, revealed in the Asia Pacific (APAC) section of Willis Towers Watson's 2016/2017 Global 50 Remuneration Planning Report, indicates that compensation growth is playing little part in reducing the wealth divide.
The findings also show the salary gap at lower levels of the corporate ladder in developing Asia being as wide as ever with more developed parts of the world.
The report enables cross-country pay competitiveness comparisons across the region, by providing base salary information using a consistent framework for job levels. It shows that in 2016, nine out of the 15 APAC markets surveyed saw the salary gap widen from 2015. These nine markets are China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
Asia's largest salary gap in Indonesia
The biggest base salary gap in 2016 was seen in Indonesia where top management earn around US$190,000 a year, 15.8 times that of professional-level staff who earned about US$12,000. The differential there widened from 12 times in 2015 and 11.8 times in 2014.
Following close behind Indonesia is Thailand. Top management in Thailand earn about US$202,000 a year, 14.9 times that of professional-level staff (US$13,600), a gap markedly wider than 8.7 times in 2015 – the biggest year-on-year jump in salary gap seen in Asia last year. The gap in Vietnam also stood at 14.9 times in 2016.
Elsewhere in the region, the salary divide in China rose from 9.7 times in 2015 to 10 times in 2016. During this period, Hong Kong's salary gap also rose from 6.2 to 7.5 times. The change in Singapore was minimal, rising from 6.3 to 6.5 times. Although China saw the gap widen between 2015 and 2016, base salaries for top management and professional-level staff actually grew at similar speeds, by 18% and 16%, respectively.
The findings echo The Global Risks Report 2017 from the World Economic Forum (WEF) which ranked rising income disparity the most serious of five key risks that will shape the world in the next decade.
Against the backdrop of anti-globalization sentiment, the WEF called for new systems to minimize this disparity.
"Income gap is something that both governments and institutions like the WEF look to address to ensure that ordinary people on the street can tangibly benefit from economic growth to ensure sustainable globalization," said Sambhav Rakyan, Data Services Practice Leader, Asia Pacific at Willis Towers Watson.
"For businesses, it's essential to have a strategy that addresses this issue. That includes having a clear career path and objectives for junior staff so they can feel confident about their future and understand their targets. It is especially important for listed companies if their business performance isn't good enough, because they can easily become targets of shareholder activists when bloated CEO pay packages fail to produce better outcomes."
Top executive base salaries in Asia overtake U.S., but junior levels lag far behind
Top executives in the U.S. may want to take a look at Hong Kong and Singapore, where total guaranteed cash (base salaries plus total fixed allowances) last year were more than 25% higher than the average US$233,000 earned in the U.S. In 2016, for every US$100 that top management in the U.S. earned in base salary, their peers in Singapore and Hong Kong made US$132 and US$128, respectively.
On the same basis, top management in China (US$98), Thailand (US$87), Indonesia (US$82) and South Korea (US$82) also earned similar total guaranteed cash to their counterparts in the U.S. However, it's worth noting that many top executives in the U.S. receive short- and/or long-term incentives, so their overall compensation is normally higher than their peers in Asia.
While top executives in many Asian markets earned salaries close to or above those in the U.S., at lower levels in the corporate hierarchy was a different story. Among the above markets, for every US$100 that professional-level staff earned in the U.S., their peers in China (US$35), Thailand (US$21) and Indonesia (US$18) made just a fraction. Noteworthy too is in India, where the figure was just US$15.
Meanwhile, the difference was less pronounced in Japan (US$70) and South Korea (US$63), but still very discernible.
Note that for this survey, professional-level refers to a grouping that includes supervisory positions and junior managers, with skills and responsibilities covering areas such as accounting, computing, marketing, engineering and personnel.
Rakyan said that although hiring top management in Asia is getting more expensive, the region remains an attractive destination for companies because of the much lower salaries and the availability of skilled workers.
"In countries such as China, there are a lot of workers who don't necessarily have a higher education, but they do possess very good manufacturing skills – skills vital for a manufacturing business to succeed," said Rakyan. "In contrast, a lack of such workers in developed markets is pushing salaries higher."
He added that businesses should continue to keep labour costs in mind, because automation – along with artificial intelligence and machine learning – have yet to reach maturity. They are still some way off in many markets, and there are some jobs where humans can't be replaced.
"Technology is radically reshaping the world and in the process, creates new jobs and puts others at risk. Workers with a higher education and better skills are better positioned to cope with the rapid changes. For businesses, this shows the importance of providing relevant training so employees can develop their skills, add more value and to get a greater sense of security as well," said Rakyan.