Abstract:
Income inequality has attracted much interest in recent years and has become one of
the key challenges of our generation. In countries where income earned through
wages forms the bulk of an individual s wealth, disparity of wages can be a significant
factor of income inequality. There has also been a growing trend in the world towards
larger firms that have the ability to pay workers higher wages than smaller firms. For
the purpose of this research paper, the researcher focuses on the wage segment of
income inequality, and more specifically how the size of firms, over time, influences
income inequality.
Using secondary data, in the form of listed companies annual financial statements
and various other data sources, the researcher conducted a study focusing on five
developing (Indonesia, Philippines, India, Poland and South Africa) and five developed
countries (United Kingdom, Germany, Sweden, Australia and the United States of
America), totalling 644 sample firms, with the aim of assessing the following
hypotheses: the first stated that the mean growth rate of average wages per employee
for larger firms would be higher than smaller firms; the second stated that the mean
growth rate of average wages per executive would be higher for larger firms than for
smaller firms; lastly, within firms, the mean growth rate of average wages per
executive would be greater than the growth rate of average wages per of the rest of
the firms.
The findings suggest that, when considering all employees, larger firms do not pay
higher increases in wage than small firms. However, executives in larger firms in the
Philippines, India and South Africa have higher increases in their wages than
executives in smaller firm. This may be a contributing factor to income inequality within
those countries. Lastly, this paper looks at wage disparity within firms and the findings
suggest a high prevalence of increasing wage inequality, within firms.
