Presentation for 'Malaysian Capitalism in Comparative Perspective' : Day 2 Prof. Michel-Pierre Chélini 8 November 2017

1. A Malaysian French International Conference
Malaysian Capitalism, in Comparative Perspective

2. “Wage and globalisation in the long-
run since the 1950s: main issues”
Prof. Michel-Pierre Chelini (Univ. of Artois)
Kuala Lumpur Conference 7-8 Nov. 2016
Malaysian Capitalism
Khazanah Research Institute

3. [Introduction]
• Today an active on two in the world is an
employee paid by wage. The global payroll
represents perhaps 40% of global GDP.
• > In advanced countries, wages currently
account for 40/50% of GDP, 50/70% of
household incomes and 90% of the workforce.
• > In emerging countries: 35/40% of GDP,
40/50% of household incomes and 50% of the
workforce.

4. Problematics
• Main question: wage convergence in time or
not and wage equalization inside individual
states or not?
• Check-list of the main issues
• Some examples (we cannot deal with all
aspects)

5. Presentation plan
• 1. Wage evolution from 1950s through today
• 2. Wage dispersion
• 3. Wage policy

6. 1. Wage evolution from 1950s through today
• Wage system : No one wage is isolated
• Every wage is part of a very differentiated system
(Salary scale) formed of thousands of levels of
compensation related to the qualification of the
individual, its responsibilities and its place in the
economic circuit
• With globalisation, no one labour market is
closed and the international labour market gets a
growing importance

7. In advanced economies, rapid wage growth until 1980,
slower from 1980 through today
France yearly annual net wage 1951-2010

8. From 1950s, a reversed evolution of salaries in
advanced countries compared to emerging countries
• Between 1950 and 1980, wages in advanced
economies have grown faster than those of
the (future) emerging countries.
• The situation is reversed in the 1980s: wages
in emerging countries are growing faster than
those of developed countries

9. Since 2000, wages are increasing rapidly in Asia, but
slowly in developed countries (and in Middle East)
0
50
100
150
200
250
Wage levels reached in 2011 (100 = 2000)
Wage levels reached in
2011 (100 = 2000)

10. Since 1995, global wages evolve around 2% per
year and GDP of around 4%
• World GDP : 3.5 to 3.8% per year
• Average wages : 2%
• Advanced countries : 1%
• Emerging countries : 3 to 5% (heterogeneity)
• China : 10%
• India and Brazil : around 3%
• ILO Global Wage Reports, passim (2008-2015)

11. Example of issues in comparison : inflation rate
Below: inflation rates 1970-1995, examples in log value

12. 2. Wage dispersion
• Dispersion: arithmetic distribution of values
relative to the average
• Disparities: deemed disproportionate
distribution by a given society

13. Geographic wage dispersion between world areas
Gross monthly average wage in US $ PPP 2012
0
500
1000
1500
2000
2500
3000
World
average
Major
advanced
economies
Big
emerging
countries
Developing
countries
(others)
Monthly average wage PPP 2012
Monthly average wage
PPP 2012

14. Monthly average wage (gross) in advanced and
emerging countries in U.S. $ PPP 2012
0
500
1000
1500
2000
2500
3000
3500
Monthly Salary Monthly Salary

15. Example of internal disparities within emerging
countries: gross monthly wages in 2012 (US $ PPP)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
SouthAfrica
Israël
Turkey
Russian…
Argentina
Chile
Bostwana
Malaysia
Brazil
Kazakhstan
Colombia
China
Mexico
Georgia
Egypt
Thailand
India
Philippines
Pakistan
Tajikistan
Monthly average wage (gross)
Monthly average…

16. Inter-deciles ratio, especially D9/D1
[since 1995]
0
2
4
6
8
10
12
14
16
Interdecile ratio D9/D1
Interdecile ratio D9/D1

17. Low wages rate [since 1995] in %
Proportion of employees paid at the minimum wage and in the vicinity of the
minimum wage (from 1.2 to 1.4 min. wage)
0
5
10
15
20
25
30
35
Advanced countries Latin America South Africa
Low wages rate
Low wages rate

18. Gender wage gap: France 1951-2010
(as significant example for developed countries)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
Ratio female wage / male wage (average)
Ratio female wage / male
wage (average)

19. Pay attention to bias, especially to qualification
gaps
• France 1952 • France 1995

20. Global gender wage gap (with very
heterogeneous data by country)
• In emerging and developing countries, the gender
wage gap is higher, between 30 and 50%: women
less qualified, more rural employment + informal
economy
• With the economic acceleration, the structure of
employment is moving from agriculture to
industry, services and technologies
• The gap may decrease if the qualification of
women precedes the general development.
• Gap reduction = a kind of Social Development
Index

21. 3. Wage policy
• Main possible orientations
• State policy for officials, civils servants
• State policy for minimum wage
• Companies wage policies
• Unions wage strategies
• Individual wage strategy : qualification or
entrepreneurship

22. [1] Addressing the causes of average wage evolution:
inflation is not a very convincing factor
France, net annual constant wage/inflation

23. [2] Addressing the causes of average wage evolution:
unemployment as better convincing factor (WS/PS)
France, net annual constant wage/unemployment rate

24. [3] Addressing the causes of wage evolution: economic
growth (exactly: productivity) quite good convincing factor
France, net annual constant wage/GDP
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Wages
GDP

25. Importance of minimum wage policy, example of
France
Chronological steps in France
• 1936: first definition in some sectors (steel)
• 1950: legal minimum wage for all sectors (SMIG)
indexed on price evolution
• 1970: legal minimum wage indexed on economic
growth (SMIC)
• In Europe people think that the minimum wage is
good for workers, although it remains low: it
allows a formalization and institutionalization of
the employment relationship

26. Minimum wage in France, how much people is
concerned?
• Average part of employees/workers payed to
minimum wage: 10% (2 million people)
• Average part of employees/workers in the
vicinity of minimum wage : 20 to 30%
• Average level of minimum wage: 40 to 50% of
average wage (with evolution 1950-2015)

27. Example of intra-European disparities: gross monthly
minimum wage (21 countries). January 2014
0
500
1000
1500
2000
2500
Luxembourg
Belgique
Pays-Bas
Irlande
France
Royaume-Uni
Slovénie
Espagne
Malte
Grèce
Portugal
Croatie
Pologne
Estonie
Slovaquie
Hongrie
République…
Lettonie
Lituanie
Roumanie
Bulgarie
Salaire minimum 2014 Salaire minimum 2014

28. Qualification as the best strategy for earning more
India 2002/2011
On the left: GDP per capita, on the right: literacy rate

29. Conclusion
• Importance of wages for all-day life and for the
global economy (40 to 50% of GDP)
• Wage growth rather indexed to the overall
growth and productivity, then to the volume of
employment, finally on prices
• Importance of public wage policy (public service,
minimum wage, education system), of individual
strategies (qualification), with help of unions and
support of a positive wage strategy of companies

30. [Appendix 1] WAGE project
Wage Analysis in a Globalising Environment
• Around 40 researchers and 20 Universities
• Paris, London, Arras, Lille, Amsterdam,
Bochum, Padua, Marrakech, Montevideo,
Hyderabad, Moscow etc.
• International Labour Organization (Geneva)

31. Set of conferences or workshops
• Marrakech (March 2015), Arras (April),
Geneva (ILO, July), Kyoto (WEHC, August),
Padua (Nov)
• Arras (March 2016), Geneva (ILO, July), Kuala
Lumpur (Nov), Amsterdam (Nov)
• Lille (Feb. 2017), Marrakech (April 2017),
possibly Montevideo (Nov 2017)
• Moscow (March 2018)…

32. Three main research areas
• 1. Global convergence of regional wage
• Wages and economy/technology
• Wages and migration
• 2. The issue of a decent wage/wage dispersion
• Youth wages
• Gender wage gap
• Migrant wages
• Elderly people wages
• 3. Influencing wages: wage policy
• Trade unions and Employer’s organisations
• Government policy

33. Coming deliverables
• A website dedicated to salaries, an inventory of
publications on wages and wage archives
• An international database on wages since 1950,
• Recommendation notes for companies,
employees and the public authorities to improve
a more positive wage strategy.
• Publication forthcoming soon: Wages and
globalisation since the 1950s: convergence and
disparities, Bern, Peter Lang, early 2017

34. Appendixes 2: methodological aspects

35. . Definition of wages and wage statistics
• Payroll : totals of all salary costs for employers,
including social security contributions.
• Annual average net wage : wage received by the
employee, after deduction of any social
contributions
• Gross hourly wage : wage limited to gross hourly
value, net of expenses of employers, but before
deducting expenses of employees
• Then: public / private companies, organised /
unorganised sector etc.

36. Statistical sources (abundance and
heterogeneity)
• In all countries : surveys and investigations of wage
statistics (hourly, monthly, yearly, gross and net) usually
collected in national Statistics Yearbooks
• In advanced countries : annual salary declarations
addressed identically by employers to social and tax
services
• In emerging countries, statistics are more partial because
of the importance of the informal economy (Variable
data according to the period or to the sectors)
• Since 2008, the ILO publishes an Annual Report on wages

37. Published sources and archival sources
• Published: Journal articles, edited books, conference
proceedings, official Publications (ILO, OECD, IMF),
opinion polls (real wages and socio-cultural
perception of wages)
• Archived: Generally, archives of ministries of Labour,
since the years 1900-1920, organized in the same
way (Labour direction, Wages subdivision etc.)
• Examples: France 19760121 series, East Germany
(1945-1990): DQ2 and DQ3 series
• But : Other services: Ministries of Finance (GB:
Treasury), Prime Minister etc.

38. . Comparison developed / emerging countries: a
certain conditionality
• 1. Large share of agricultural workers in developing
countries: generally lower wages.
• 2. Importance of the informal and family economy,
poorly recorded (under-monetized, under-taxed).
• 3. Relative importance of the self-employed
(craftsmen, traders, workers under contract) : there are
not employees
• 4. High rate of working poors (more than employees) in
the vicinity of the minimum wage
• 5. The significant difference between men and women:
less cultural enhancement of women and girls
• 6. Relative lack of Welfare state and social insurance

39. Gini coefficient (all income, including wage)
since 1945-50

40. GDP/capita 2012 (nominal)
(Burgundy colour: >51 000 $, cream colour < 400 $)

41. Convergence hypothesis: trend to price equalization
of wage labour through international trade
• The trend to price equalization of wage labour would
spread through international trade and globalization.
HOS Theorem (Heckscher-Ohlin-Samuelson, 1919-
1933-1941).
• Equalization of relative and absolute income of
factors between nations: wage equalization within
engineers, within middle staff, within workers, for all
countries that trade together.

42. The slow filling of gaps between countries is
partly due to the specifics of the labour market:
• Many labour markets remain national: spoken
language, different social and fiscal rights, non
explicit norms (habits), the trade union action
• The mobility of labor is much lower than that of
capital: familial, social networks, rooting of assets
(real estate, education of children)
• A number of subsets remain protected: salaried
officials, regulated professions etc.