I work for WD-40 Company as head of human resources. We have employees in 15 countries. Every year we do a global compensation analysis to determine what our next fiscal year’s compensation budget is going to be. We use the Hay methodology, which has been around since the late 1940s, and represents one of the more robust analytical methods available, particularly for international companies. In each country where we employ people, the survey information is comprised typically of hundreds of reporting companies, with thousands of incumbents in each salary level. The data was surprising.
This year, our analysis showed a common trend among the developed economies of western Europe and North America. That trend is worrying, in terms of what it may tell about the larger socio-economic dynamics at play in the world. We found that the lower salary grades accelerated income from 2017 to 2018 at a significantly lower rate than the higher salary grades. In some countries, the lower half of the salary grades showed negative movement, that is, compensation actually dropped year over year, compared to advances at the higher salary levels. In some cases, the top of the salary grades moved ahead in double digits, while the lowest grades went backward by 3 to 5 points.
Since the Great Financial Fiasco of 2008-2009, I believe that the fundamental structure of the developed economies changed. The debt transfer from private debtors to the public sector caused a reduction in incomes disproportionately levied on the lower-paid part of the employed population. At the same time, technology advances continued to eliminate more and more of the jobs that previously paid a decent salary, which could be done by people of average or lower mental capabilities. Now, the skills that are in highest demand are those that require more brain power than dexterity and muscle power, at a higher proportion of the available jobs.
What this means for the societies of the western world is pretty straightforward: the poor will get poorer, in real economic terms, even if they are employed. And an economic recession will disproportionately affect the lower half of the employed population at a greater magnitude.
In retrospect, this dynamic is no doubt a large contributing factor to the political upheavals we’ve seen, such as the surprise passage of the vote in the UK to leave the European Union in 2016, at the same time Trump was elected President in the US, to everyone’s surprise. Some would say, to many’s dismay.
Thomas Piketty studied the dynamics of capitalism over its three century history and concluded that in the 21st century, we have returned to a level of wealth inequality not seen since the Gilded Age at the end of the 19th century. Wealth is being concentrated at the top of the economic ladder as it has so many times in the past. When the level of inequality reaches a point where most of the population is working very hard, earning very little and actually falling backwards economically, the historical response has been mass uprisings, sometimes peaceable and sometimes violent.
The trends in the compensation data show that this dynamic is reaching a tipping point, just as the global isolationism impelled by threatened trade wars and saber rattling is beginning to have a material impact to the average person’s already-hammered pocketbook.
The peaceful version of revolution is found at the ballot box. In the US, a litmus test of how testy the population of America is will be completed in November at the mid-term congressional elections, along with various states’ legislative and governorship races. Let’s hope that voting is the preferred choice of attempting to correct a pattern that, if continued, will result in methods of change more dangerous to the population.