Frequently Asked Questions about Wages in Context
By Martin Guzi, WageIndicator / Celsi global wages in context, Tomas Kabina, WageIndicator / Celsi salary and cost of living survey manager, Dirk Dragstra, Paulien Osse WageIndicator directors, JanPaul Grolle, WageIndicator strategist
What is the WageIndicator Approach?
The development of WageIndicator databases began in the year 2000. These databases have taken shape in interaction with the working population that visits its websites and consults its data. The WageIndicator motto was, has been and continues to be 'share and compare' wage data. This resulted in, first of all, the Salary Checks (salary indication by occupation) which are composed of and calculated with the data volunteered by WageIndicator web visitors. By so doing the visitors participate in the WageIndicator online research. These actual salary indications increase in quantity and quality as the popularity of the WageIndicator websites grows. This practice reflects the WageIndicator approach: perfection and completion of its collections of wage and working conditions data while simultaneously sharing the gradually improving results of its work with the participating anonymized public of stakeholders. The other elements which today constitute the Wages in Context are also a result of this broad interaction. The Minimum Wages were added since there appeared to be a worldwide lack of knowledge about their existence and a great need to have them paid. Later still national and World Bank poverty lines were added, which are in effect the bottom lines in all labour markets. More recently still the living wages came to complete the Wages in Context-range. These estimated living wages are the financial expression of working people's desire to be able to lead at least decent lives with their earnings. And all the time the actual wages, as reflected in the Salary Checks, continue to be extended and perfected to ultimately encompass all recognized occupations and all countries. This flexible approach, i.e. improving the quantity and quality of income indicators while working and sharing the results of one's work, is typical for WageIndicator. The Questions & Answers below intend to make this approach fully transparent.
Wages in Context
Wages in Context consists of a range of income figures, i.e. the national and World Bank poverty lines, the national statutory Minimum Wage(s) where these are in force, the estimated living wages per country and if data allows at the regional level within countries, and actual wages of workers in low-, medium-, and high-skilled occupations. This range from the lowest to the higher pay levels in a country provides the context which should enable assessment of the current income positions of working individuals, families and typical families in their occupation, region, and country.
Why does WageIndicator present Wages in Context?
WageIndicator's mission is to increase transparency about wages and workers' living conditions. The assumption is that such increased transparency will facilitate stakeholders and policy makers in their aim to guarantee - at least - minimum income levels that will allow individual working people and their families to lead decent lives. This implies a focus on the lower end of the labour market.
What is a National Poverty Line?
A National Poverty Line is a minimum income which is considered essential to survive. National definitions of poverty and their practical implementation show great variety. In some countries the National Poverty Line is defined as a percentage of the statutory Minimum Wage and revised regularly. In other countries the figure attached to the poverty line has been set once and was never upgraded since. Some countries define the poverty line for one individual, other countries relate it to the income a typical family for that country needs to survive. Wealthy countries deploy more generous living standards to define poverty than poorer countries. Some countries do not define a National Poverty Line at all. Therefore national estimates of poverty lines are not directly comparable across countries. To measure a minimum income needed to survive at a decent level, WageIndicator introduces its own concept of living wage based on real prices of necessary goods in different countries across the world collected through the WageIndicator Cost of Living survey. These living wage figures are calculated by the same method on a monthly basis for different countries in order to between countries and to put them in context with the nationally defined National Poverty Line.
What is the World Bank Poverty Line?
The World Bank defines a poor individual as a person who has to live on less than US$2 (PPP) per day. PPP stands for Purchase Power Parity and is a systematic attempt to relate the national currencies to the internationally comparable US$ by applying country-specific currency conversion rates. WageIndicator uses these publicly available conversion rates and calculates its poverty line-indicator per month (of 30 days) for an individual and a family of four. These figures are then converted from the national currencies to the € at the actual exchange rate, i.e. from day to day.
What is a Statutory Minimum Wage?
A statutory Minimum Wage is a Minimum Wage level ordained by governments, with or without the consent of social partners. In some countries there is only one Minimum Wage which applies to all workers. But in most r countries Minimum Wages show a lot of variety: i.e., they are set differently for various categories of workers and defined by occupation, industry, age or geographic region. The nationally established Minimum Wages enshrined in laws and regulations aim to ensure that working people’s income will not fall below the National Poverty Line. WageIndicator in its Wages in Context overview shows the national Minimum Wage, or, for countries with multiple Minimum Wages, the lowest and highest values.
Some Countries do not Update Minimum Wages Annually. How does WageIndicator Deal with That?
In such cases the latest available Minimum Wages are adjusted for the increase in the average Consumer Prices Index. This CPI-source is the IMF database.
Estimated Living Wages
What is the WageIndicator Living Wage?
The WageIndicator living wage estimates the monthly expenses necessary to cover the cost of food, housing and transportation, as well as a 10% margin for unexpected expenses (such as expenses for other basic necessities like education, health and clothing). Its methodology is permanently improved, since the calculation of living wages on a global scale, also meant for international comparison, is a recent development. Yet, from its outset in 2012, WageIndicator has taken care to use methods that are consistent with other approaches tried, reviewed and revised elsewhere. The ultimate aim is to offer worldwide comparable, actual living wages in all countries where WageIndicator has operations by updating the commodity prices needed for their calculation regularly, at least every quarter. The resulting living wage ranges with their minimum and maximum values are presented for an individual and 2 model families. Ideally living wages should allow all families to lead modest, yet decent working lives. This is why living wages are put in the middle of the whole income range covered by Wages in Context, i.e., above the National Poverty Line and statutory Minimum Wages.
What is the Difference between Living Wage and Minimum Wage?
The statutory Minimum Wages are laid down in laws or government regulations and therefore both a worker's right and and employer's obligation. Moreover Minimum Wages are meant to fix pay levels for a relatively long period of time. By contrast living wages are not prescribed by the law and can therefore not be enforced. Moreover living wages change with the price levels of commodities and services that a person (or family) needs to 'buy' a decent living. So clearly, Minimum Wages and living wages are quite different in nature. Yet they may in practice amount to approx. the same monthly pay. In countries where Minimum Wage levels have not been revised for many years the existing level may be close to the poverty line. But in some richer countries the Minimum Wage level may be even higher than the living wage level calculated by the WageIndicator team. Yet, generally speaking, WageIndicator research shows that the living wage levels in countries all over the world are somewhat above the Minimum Wage levels.
Why Pay a Living Wage?
First of all, paying a living wage that allows people to live decent lives, is a moral obligation. Next to that, there is a rationale for paying living wages. For people not only work, they consume also. Each (working) individual is both a producer and a consumer. Presently the prevailing situation is that workers in poor countries are exploited while making products for consumers in rich countries. This can continue as long as those consumers have enough purchasing power. Yet, if a race to the bottom would impoverish working individuals everywhere in the long run, all would eventually lack the purchasing power to buy consumer goods. The term chosen to indicate decent pay levels is living wage. The life one should be able to lead with that amount of income is called decent. Therefore these two concepts are also used together: living wages for a decent working life.
How does WageIndicator Obtain its Information to Calculate Living Wages?
WageIndicator introduced on its national websites a permanent mini-survey inviting - with the help of radio, tv, Facebook - its visitors to submit prices for a range of basic food items (country specific, i.e. reflecting national food preferences), plus the prices for housing and transportation, as well as a few other items deemed necessary for living a decent life, such as the cost of basic education and health care. Thus the information it continuously collects comes mainly from the online WageIndicator Cost of Living Survey. In a number of countries experiments are under way with face-to-face WageIndicator Cost of Living Surveys. The online/offline data is compatible and presented online for the countries where this combination is tried and tested.
How Many Items are Needed for the Calculation of a Living Wage?
In the WageIndicator Cost of Living Survey prices for 80 different items are asked and collected. The calculation of WageIndicator living wages disregards items that are not consistently and regularly bought and consumed. Basically it takes into account the actual costs of three basic inputs any household needs to survive: i.e. food & drink, transportation between home and workplace, housing (including utilities), plus a 10% margin for incidental expenses to purchase miscellaneous items and services (such as costs for basic education of children, health care or clothing). Therefore the number of items that enter into the calculation remains limited. It is the food items that show most variation, with on average at least 50 items which are indispensable for cooking proper meals (the items vary with food habits, of course). The items chosen have been proven to effectively serve as proxies for many other items that could replace them.
What does the Transportation Cost Consist of?
The purpose of the living wage is to assess the wage required to cover basic human needs for living a decent life. Therefore WageIndicator assumes in its calculation of living wages that working individuals cannot afford their own car or motorbike and must commute by means of public transport. In most urban areas around the globe such systems are in place. In the urban areas the transportation cost for an adult individual is determined as the price of a monthly urban public transportation pass. For the rural areas, where no local public transport is available, the transport costs are determined by the cost of a return ticket to the nearest town once a week for adults. For a family household twice these monthly transportation costs are taken as input for the calculation of the living wage. In many places children commuting to schools can travel for free or with a high discount. Therefore, we generally assume that children travel for free.
How is the Housing Cost Determined?
The housing cost for a family used to determine a living wage is the typical rent for a 2-bedroom apartment in an average urban area (i.e. not centrally located or up-market). Similarly, the housing cost for an individual is determined by the rent for a studio apartment outside the city center. Rental prices include utilities, i.e. electricity, water, garbage collection, etc. The rent is determined by taking the 25th and 50th percentile level of the whole range of housing costs in a given urban area, based on the assumption that this price level for housing cost is affordable still from the modest earnings that a living wage represents.
What if a Person Lives in a 1-bedroom Apartment or in a 3-bedroom Apartment? How to Indicate the Correct Price for the Apartment? What if a Person is not Renting but Owns the House or Room? How does WageIndicator Deal with That?
The purpose of the living wage is to assess wages required to live a decent life for all people living in a certain region, not just for people owning real estate or premises. A decent life of house or apartment owners does not depend on earning a living wage at all, as they could sell their real ;estate and live from the returns for many years. Therefore, we assume that people who have to make do with a living wage do not own but need to rent the place where they live. The living wage includes such basic housing costs required for an individual (i. e. a studio apartment) or for a family who want to live a decent life. In order for the family members to live together yet maintain their privacy, a 2-bedroom apartment (i.e. three rooms: living room + two bedrooms, one for the parents and one for the children) is required. For living wage purposes, living in larger apartments is considered a luxury and such individuals/families could possibly move to a smaller apartment with lower rental costs.
Why is Clothing not Included in the Calculation of Living Wage?
The actual living wage calculations are not yet perfect, nor will they ever be. They are and must remain calculated estimates. Presently (2015) clothing items are not included, since there are no internationally agreed criteria for adequate clothing. Moreover it is assumed that people do not buy clothes regularly, but incidentally. Therefore such expense may fall under the 10% margin of miscellaneous purchases.
Why is the 10% Provision for Unexpected Expenses Included?
Data of food prices and housing costs are reasonably reliable. However, to estimate costs for items that are not bought regularly and consistently on a weekly/monthly basis presents a much more complex challenge. To cover for such miscellaneous purchases the 10% margin has been added, in keeping with living wage calculation methods applied by other institutes.
How Often are the Living Wage Estimates Updated?
A major part of the price input for the calculation of living wage comes from the online WageIndicator Cost of Living Survey, i.e. this data is collected continuously. WageIndicator reviews and adjusts its living wages at least on a quarterly basis and possibly also for different regions within countries. Clearly, as time goes by and more people submit their data these adjustments may increase in scope and frequency. For the living wage calculations WageIndicator uses only price data collected during the last 12 months in order to keep the estimates reasonably up-to-date. Other reference figures which are presented in the Wages in Context, such as the statutory Minimum Wages of countries, the Purchase Power Parities and its associated conversion rates, as well as the National Poverty Lines are reviewed each half a year and where needed updated.
Where Economic Conditions Vary greatly between Regions of a Country, can Regional Living Wage Estimates be Calculated as well?
The income it takes to live a decent working life is not uniform throughout a country. The most significant living cost variances are primarily regional housing cost levels, which may even differ quite substantially between neighbouring urban areas. Yet, this input in principle allows to distinguish geographic regions within a country. WageIndicator starts to calculate living wage estimates for different regions only when its data is sufficient.
How Reliable is the Data when it is Based on Voluntary Individual Contributions to the WageIndicator Cost of Living Surveys?
There are a few good reasons to qualify WageIndicator data as reliable. One such reason is that scattered individuals from regions wide apart and from diverse cultures do not lie about concrete and practical matters in a systematic, coordinated way. Moreover, individuals who buy food, rent a house and use public transport may be considered price experts: they know exactly how much they spend on each item, especially when they have limited means. Many such individuals together create collective, yet anonymous, expertise. Some respondents do introduce biases in the data, but people cannot possibly misreport prices in the same way everywhere and simultaneously. Next, the national WageIndicator Cost of Living Survey data is handled, cleaned and updated in exactly the same way by WageIndicator data managers as the input from its voluntary Work and Wages Survey. Standard practice is to benchmark its data with relevant data from other sources, such as data from national bureaus of statistics, using universally applied statistical methods. From the experience gathered over the past 15 years, i.e. from 2000 onwards, it appears that WageIndicator data are comparable in quality with those from other surveys. However, they offer the additional advantage of becoming available more timely. WageIndicator data are on a quarterly basis used to calculate and update the online Salary Checks which reflect actual earnings in hundreds of occupations in all countries where WageIndicator has operations. The calculation and updating of living wages falls under the same strict data handling regime that is applied to the calculation and updating of the actual Salary Checks.
How Many Observations are Needed to Estimate a Living Wage Properly?
Given the nature of living wage estimates, i.e., in principle they need continuous adjustment, the estimation/calculation of living wages is subject to permanent perfection. WageIndicator embarked on their calculation given its public outreach (30 million visitors are expected in 2015) and its tried and tested methodological experience. It is quite possible to collect reliable data online - even if the contributions of visiting individuals are voluntary. Over the past 15 years WageIndicator found that its data when matched with data from other sources, such as data from national bureaus of statistics, are consistent and reliable indicators for use as guidelines in both individual and collective action and policies. The items chosen have been proven to effectively serve as proxies for many other items that could replace them. However, a minimum sample of 5 observations per item is needed to at least estimate the price of a single item in a given country or region. Presently (in 2015) in 40 countries the calculation of living wages is based on more than 3,000 prices for 80 items that are not older than 12 months. These numbers are increasing continuously, allowing for ever greater perfection and outreach.
What is the Minimum Amount of Calories for an Adult? Is that in Every Country the Same or Different and why?
Poverty lines are typically anchored to nutritional requirements, which tend to be similar between people in poor and rich countries. A nutritional requirement for good health proposed by the World Bank equals 2,100 calories per person per day. The prices from the WageIndicator Cost of Living survey are used to calculate the cost of the food basket which reflects the current food supply in a country, scaled to 2,100 calories. While food-energy requirements are fixed, there are (of course) multiple food bundles that can yield this food energy intake. The variety of food baskets between countries is considered in the living wage calculation.
How does WageIndicator Calculate the Cost of Food?
The UN-Food and Agriculture Organization (FAO) publishes the food balance sheet, which monitors the consumption of food per capita in the world's major food groups. For the living wage calculation the composition of the food basket mimics the actual food consumption in a country as presented in this FAO food balance sheet. Subsequently the value of the food basket is estimated using the current food prices generated by the WageIndicator Cost of Living Survey. The food expenses are calculated on (at least) a quarterly basis and scaled to cover the daily calorie intake of an adult individual (the energy intake of particular food items are taken from the FAO database). These are then presented for the individual household, for a standard household of 2+2 (children) and for a typical family, representative for a country and its specific fertility rate.
Food Preferences Differ between Countries, how does WageIndicator Deal with That?
The UN-Food and Agriculture Organization (FAO) publishes a food balance sheet which reflects the food preferences of a country. The food balance sheet includes 50 food items, the per capita food supply, its dietary energy value and fat content. For instance figures show that Spain and Portugal consume the largest amount of rice in the EU (more than 100 grams per person per day) but that the rice consumed in Serbia or Poland is only 10 grams per capita per day. The calculation of living wages takes these differences in food consumption patterns into account. The food requirements for children and adults are assumed to be identical.
Is the Skin of a Banana seen as Food or as Waste? How does WageIndicator Clarify such Issues?
From its research, which is a mix of online data collection, desk research, offline surveys and fact finding debates on the ground, WageIndicator is confronted indeed with these not-so-trivial issues. It is not just the banana peeled or not-peeled, but also other assumptions that must be questioned, e.g. not all people in all cultures use standards such as kilogram and litres. Moreover, when buying pre-packed food items in the local supermarket they find that these not always come neatly in kilograms or litres. Therefore, such practical issues have to be tackled when they present themselves. In the case of bananas: the skin is generally discarded, i.e. not consumed and therefore not counted as food for calorie-intake.
People Live in Households of Varying Size and Composition. How does WageIndicator Deal with this Fact of Life?
WageIndicator presents its living wages for three model situations: i.e., the one person household, the standard 2+2 family composed of 2 working adults and 2 children, and the typical family which takes into account the fertility rate which differs between countries. Other characteristics of the model families are that the adults are of economically active age, live in an urban environment, that all household members are in a good health, and family members are competent to manage their family budget efficiently.
Why is a Living Wage for a One Person Household Presented?
A one person household consists of an adult working individual. The living wage estimate for one individual provides a baseline estimate and permits a direct comparison with Minimum Wages and actual wages, since WageIndicator defines these wages also at the individual level.
What is a Standard 2+2 family?
A 2+2 family is composed of two adults and two children. Its living wage estimates the income needed to support a small family with children, adjusting for a two-parent employment rate, i.e. both parents have a paid job. This approach provides for a global comparison of living wages, focusing on price variation only while keeping the family composition constant. The same approach is adopted by other living wage campaigns (e.g. in the UK, New Zealand, and Canada) which makes their results mutually comparable. And, last but not least, the family with two children is the minimal procreation unit required to ensure population replacement, allowing for long term comparisons as well.
What is a Representative (typical) Family?
A typical family is composed of two adults, whereas the number of children varies with the actual fertility rate in the country. This approach accounts for variations in household composition worldwide. As in the standard 2+2 family the income is adjusted for two-parent employment rate, i.e. both parents have a paid job.
How Many Wage Earners are there in a Family?
The living wage is estimated for a full-time worker. The calculation adjusts for the gender differences in the employment rates, so that the total household income earned by two parents should always amount to a living wage, i.e. be sufficient to cover the basic family expenses. The equivalent of full-time workers in the family is obtained as the sum of participation rates of both genders, adjusted for the national unemployment rate (figures from the ILO EAPEP-database).
Is WageIndicator Living Wage Gross or Net?
The WageIndicator living wage indicates net income.
Actual Wages
How are the Actual Wages of Low-, Medium-, High-skilled Workers arrived at?
Reported monthly earnings of workers in low-, medium-, and high-skilled occupations are obtained from the WageIndicator voluntary web surveys of 2014 and 2015. The definition of groups follows the one-digit ISCO-classification of occupations where ISCO 1-2 are clustered into high-skilled, ISCO 3-8 into medium-skilled and ISCO 9 into low-skilled groups. The minimum and maximum values represent the 25th and 50th percentiles of the wage distribution per occupation. WageIndicator prefers to offer this wage range instead of just one figure, which is usually the 40th percentile, since a range reflects the real situation better.
How does WageIndicator Collect the Data for the Actual Salary Indications?
WageIndicator collects data by means of a voluntary web-based survey available at national WageIndicator sites. The WageIndicator questionnaire is offered (in 2015) in 46 languages and is operational in 84 countries. The survey questionnaire is similar to those used by statistical agencies for standard labor force surveys, it is user-friendly and consists of multiple-choice questions only. The collected data is anonymized and subject to strict security measures, safeguarding the privacy of the participating individual. In 30 countries with less strong internet WageIndicator also collects salary data on the basis of face-to-face surveys. This data is used for salary indications as well.
Is the Wage Information Reliable?
The wage information used for the calculation of Salary Checks and as presented in Wages in Context is based on voluntarily submitted data. Therefore 100% accuracy cannot and will not be guaranteed. WageIndicator encourages its respondents to provide accurate and precise information about their personal and employment characteristics, pointing out that they provide their professional peers with an improving Salary Check-tool, which they themselves profit from as well. And all along WageIndicator guarantees their anonymity. The Salary Check is updated twice a year. Wages in Context is updated four times a year. Through increasing participation in the Salary Surveys results improve so that they provide the most timely, accurate and actual wage information. In addition, before calculation the dataset is cleaned and compared to other relevant datasets applying universally accepted statistical methods. In this way WageIndicator eliminates from its datasets most non-trustworthy cases, such as for example extremely high or low hourly wages, and highly unlikely combinations such as starters boasting of astronomical earnings etc.
What is an Occupation? And what is an Occupation Group?
WageIndicator recognizes more than 1700 different occupations. Its classification of occupations is based on the International Standard Classification of Occupations (ISCO) provided by the International Labour Organization (ILO). WageIndicator follows the latest classification ISCO-08 released in March 2008, amending it whenever a more detailed classification is necessary. ISCO-08 classification is a tool for organizing jobs into a clearly defined set of groups according to the tasks and duties undertaken on the job. ILO classifies occupations into smaller and larger occupation groups (either 4-digit, 3-digit, 2-digit or 1-digit ISCO code). The smallest occupation groups are referenced with a 4-digit ISCO-08 code. At the top level occupations are clustered into 10 major occupation groups described by the 1-digit ISCO-08 code. For example the occupation group Professionals includes the occupations: Biotechnologist, Aircraft engineer, Translator, University professor in social sciences, etc. Each of these occupations is then broken down into more narrowly defined ones, e.g. University professor in social sciences, into sociologist, politologist, and the like. In addition to these ILO-defined groups WageIndicator defines exact occupations with 13-digit ISCO-08 codes, in such a way that the first 1,2,3 or 4 digits of the 13-digit ISCO-08 occupation code exactly match the ILO-defined occupation groups under which a certain occupation falls.
How Many Observations Suffice for a Reliable Estimate?
On the country level experience suggests that a minimum of 2000 observations is necessary to get reliable estimates to base the first Salary Checks on for a limited number of occupation groups. We provide such wage estimates only when at least two conditions are met: first a minimum of 10 observations and second, these observations must be statistically reliable. WageIndicator uses modern statistical methods to test whether the estimates are statistically meaningful and sufficient to base the wage profiles in a particular country on. This practice means that all estimates are based on 10 observations or more, which are found to be statistically reliable. Ideally there should be enough reliable observations - 10 minimum - for each of the 1700 exact (13-digit ISCO-08 code) occupations. However, if there are already some but not yet 10 observations for a particular occupation, it may be grouped on a higher level of aggregation in accordance with the ISCO-system: i.e. from the 4-digit up to the 1-digit ISCO-08 code, to the level where the two conditions of minimum 10 observations and reliability are fulfilled. However, one should keep in mind that even though statistically tested, all salary indications are always estimates and therefore include an element of uncertainty.
How does Data in a Salary Check differ from Official National Data?
From the experience gathered since the year 2000 it appears that WageIndicator data are comparable in quality with those from other surveys. However, they offer the additional advantage of becoming available more timely. WageIndicator data are on a half year basis used to calculate and update the online Salary Checks which reflect actual earnings in hundreds of occupations in all countries where WageIndicator has operations. The survey itself is versatile and detailed. Its results can be used to monitor and address significant developments in the labor market as they emerge. However, the survey is not based on a representative sample of the labor force, and therefore no conclusions can be drawn regarding the working population as a whole. In some countries groups in certain wage brackets, or of a certain age, may not visit the Internet as frequently as other groups. This accounts especially for those with very high pay and equally for those who are paid very low. Yet, WageIndicator data is proven to be highly apt for research into the income situation of specific occupational groups in the labor market.
How Often are the Salary Check and Wages in Context Updated?
All WageIndicator Salary Checks are updated at least twice a year. The Salary Check is updated more frequently in countries with high inflation rates. Wages in Context is updated four times a year.
What Happens with Outdated Data?
WageIndicator securely stores its data. The presented indicators are always the latest, having replaced the older batch, based either on fresh data, or by indexing data for which no new input is available. The calculation of Salary Checks is based on uninterrupted series of data collected during the last five years.
Is the Wage Information in the Salary Check and Wages in Context Controlled for Inflation?
As the he calculation of the Salary Check is based on data collected from the last five years, it adjusts the wage information for the annual inflation rate using the Consumer Price Index of the IMF database. If some latest available Wages in Context figure (apart from living wage) is older than 12 months, it is always adjusted for inflation. The living wage is always based on only recent prices data (the last 12 months), there is no need to adjust these prices for inflation if the inflation rate is close to the international average. However, in countries with an exceptionally high inflation rate the inflation adjustment of all living wage estimates, Wages in Context and Salary Check wage estimates are performed on a quarterly basis.
Which Period does the Data for the Salary Check Cover?
Five years.
Are Overtime and Bonuses Included?
WageIndicator adjusts calculations for hours worked. Bonuses are not included in the calculation of salaries.
What about the Difference between Gross and Net Wages?
The Salary Checks are calculated based on the gross hourly wage rate, computed from gross earnings and the number of hours worked. However, in some countries the proportion of respondents who report only their net earnings is significant. In these cases other statistical techniques are applied to impute the gross earnings.
Why are Questions about Personal Characteristics Included in the Survey?
Personal characteristics significantly affect the wages individuals earn. Therefore, knowing these characteristics is essential for the calculation of the statistical rules that assign wages to any occupation and worker’s profile. In fact, these state-of-the-art statistical methods allow WageIndicator to predict wages even for workers‘ profiles which are not present in its data. For example, these techniques allow to predict the wage of a plumber of 33, even if no plumber aged 33 shared his data by completing and submitting the survey.
Why is Gender Important for Wages?
Research shows time and again that men and women earn different wages. While some part of the observed differences can be explained by differences in individual characteristics, such as tenure, another part cannot be explained in this way. The aim of WageIndicator is to provide the most reliable wage information for any specific occupation and worker’s profile. By providing reliable information about empirically observed gender pay differentials WageIndicator contributes to a more transparent and - possibly- equitable labor market.
Why is Education Important for Wages?
The worker’s wage profiles in the WageIndicator dataset are also defined by the level of education. In general the level of education determines the productivity of an individual. More educated individuals may be assigned more complex tasks, more responsibility, or simply use their time at work more efficiently. Differences in educational attainment give rise to wage differentials even within the same occupation and for individuals sharing other characteristics. Therefore controlling for education is crucial for the reliability of WageIndicator data.
Why is Tenure Important for Wages?
In general, more productive workers earn higher wages, and more experienced workers tend to be more productive. The reason is that over the years that they are already working they most probably also learned how to perform their tasks more efficiently. However, one typically observes diminishing returns on work experience over time. For example, workers with 20 years of experience may earn 45% more than workers at the beginning of their career, but only 15% more than workers with 10 years of work experience. The wage profiles in WageIndicator therefore are also defined by tenure.
Why is it Important for Wages whether the Employee has a Supervisory Position?
In general a supervisory job carries more responsibility which workers in such positions are compensated for. Also, typically the most able and productive workers (next to other characteristics) are selected for supervisory jobs. The information about any supervisory job is important as it co-determines the worker’s profile in the WageIndicator.
What is the Meaning of Minimum and Maximum Wages?
The minimum wage is the lowest wage reported in WageIndicator data for a given occupation (Note: this figure is not necessarily identical with the national legal Minimum Wage, where it applies). The maximum wage is the highest wage reported in WageIndicator data for a given occupation. As the applied statistical methods also permit predicting wages outside the sample, it is possible, and correct, that in certain cases the wage predicted by the Salary Check is higher than the reported maximum wage, or lower than the reported minimum wage. For example, if for a given occupation all respondents in the data have between 2 and 12 years of tenure, and the profile entered in the Salary Check involves 28 years of tenure, it is well conceivable that the wage corresponding to this profile is higher than any wage, including the reported maximum wage, observed in the sample.
Is the Physical Beauty of a Person Reflected in the Salary Check?
Some researchers explored whether appearance matters in occupations where attractiveness is economically important. They found that the beauty premium does not account for the entire wage premium. In most cases the impact of beauty on wages is overestimated and personal characteristics such as self-confidence, diligence or creativity are neglected. In the current version of the Salary Check physical appearance is not reflected in the wage information.
The Salary Check Indicates a far Higher/Lower Salary than my Actual One. How Come?
The Salary Check predicts the expected wage for a given profile of individual characteristics. It answers the question how much can an individual of given characteristics expect to earn. Clearly, the quality of the prediction depends on the accuracy of information entered into the Salary Check. First of all, it is very important to correctly report one's occupation. WageIndicator recognizes some 1700 occupations and although some of the occupational titles are almost similar, sometimes they differ substantially in the tasks and duties. If the wage information in the Salary Check does not match one's current salary, it is possible that one has not chosen the proper occupation. For example, a logistics worker earns much less than a logistics manager. WageIndicator tries to capture the most important determinants of wages, but clearly, discrepancies between one's actual and predicted wages may be due to factors that are not covered by the Salary Check. To illustrate this point, not all female logistics managers with 13 years of tenure and a university degree earn the same salary. If one's salary is higher than that reported by the Salary Check, congratulations are in place for such outstanding perseverance or talent that is rewarded in the labour market but not known to WageIndicator. Conversely, if one's salary is lower than that predicted, this may mean that one works for a company that pays less, but perhaps offers benefits that compensate for the lower pay, such as free kindergarten on the company's premises, or an especially nice team of co-workers. However, it may also be the case that one is underpaid indeed and might consider looking for another job.
The Salary Check does not Give my Profession, how Come?
Try to refine the occupation search. Currently WageIndicator recognizes some 1700 different occupations and works on scaling up to 5000 occupations, making it a truly encompassing tool. However if one's profession is very specialized and unique within a country it may not have been defined in the WageIndicator yet. In that case, please get in touch to have one's occupation included in the Salary Check as soon as possible. Just to get the idea: WageIndicator registers 20 different specific driver’s occupations. Mail: office@wageindicator.org .
Can the Outcome of the Salary Check be Used for a Pay Rise?
The aim of the Salary Check is to provide the most accurate information about the expected wage for a worker in a specific occupation with a given set of individual characteristics. However the calculation of wage information in the Salary Check does not include aspects such as self-confidence, diligence, creativity, work attitude, and the like. These characteristics are part of one's individual human capital and co-determine one's salary. Therefore the wage predictions from the Salary Check have a great informative value but can be only part of one's input in wage bargaining. However, one may certainly try to make one's employer raise their pay, referring to one's occupational peer group as a benchmark.
How is the Median Wage Calculated?
The median wage is the wage in the middle (when observed wages are sorted into ascending order). Because more people earn low wages than big salaries, the wage distribution is not symmetrical. In countries with high income inequality the wage distribution is highly skewed and the median wage is substantially lower than the average wage. Yet, the median wage as an indicator is not sensitive to outlying values and better expresses the situation of an ordinary worker, which most people are.
