What’s on the Horizon for Global Wages: Takeaways from Our Most Recent Whitepaper

Pay is a key factor when workers select their jobs. According to our research, The Global Workforce of the Future 2022, 46% of the 34,200 respondents (both desk and non-desk workers) surveyed across 25 countries indicated that salary and benefits were decision-makers for choosing their current job over another one.  Although other factors may determine job satisfaction -- such as well-being, flexibility and purpose -- remuneration frequently ranks number one. In our latest whitepaper on wages, we explore agency work as a triangular model of employment and labour market flexibility.  We look at how wages apply to agency work and the impact of inflation on wages. One of our key findings – and maybe contrary to common perception – is that agency work is remunerated. Our research shows that overall, Adecco associates earned more than 2.5 times the national minimum wage. To that end, we’ll highlight some noteworthy findings and recommendations.

How wages are defined and regulated

Minimum wage

Approximately 90% of the world sets statutory minimum wages — the minimum amount of remuneration that an employer is required to pay its workers. That said, approximately 327 million earners are paid below the applicable hourly minimum wage, according to the International Labour Organization estimates.

This represents 19% of all earners. On the other hand, a 2018 analysis encompassing 21 EU countries indicates that, on average, only 7% of workers earn 105% or less than the national minimum wage.

Tax wedge

Another important element in discussions about wages? The total labour cost is generally larger than the amount that a worker takes home. In addition to wage, withholding taxation, mandatory social security premiums and other social charges on wages are also significant elements. Known as a “tax wedge,” this consists of 34.6% on average of labour costs for employers in OECD countries. While many elements that make up the tax wedge can benefit workers, a larger tax wedge may put negative pressure on job creation. It is therefore crucial to find the right balance to avoid negative side-effects.

Wages and inflation

When inflation soars, real wages are reduced and less valuable. This could raise questions on the adequacy of minimum wages, and so we asked legal experts in nine countries for input.

The experts concluded that the structure of minimum wage regulation has not changed because of the economic crisis. Despite cost-of-living increases, structural measures are lacking to help support the remuneration of workers.

However, one major development emerged: the agreement of a European Directive on Minimum Wages. This requires all EU countries to have a system to determine minimum wage; however, it doesn’t introduce an EU-wide minimum wage for all workers in the block. When the directive will be implemented in 2024, EU minimum wages may increase. 

Agency workers and wage

Agency work is an employment relationship that’s recognized and regulated on national levels. An agency worker engages in an employment contract with the employment agency and the worker is then assigned to a client firm, working under the firm’s guidance and supervision.

At Adecco we strongly believe that this so called “triangular relationship” between the temporary agency worker, the agency and the client company is a unique and valuable addition to the labour market. It allows workers to flexibly gain access to different employment options. Simultaneously, businesses can identify new talent and are able to quickly scale up or down as needed.

As agency workers are employed by the agencies, they are protected by minimum wage provisions just like all employees. Crucially, in most cases, workers are also protected by equal pay requirements. This means that agencies are required to pay wages that are in alignment with the wages of comparable employees at client firms. Adecco is committed to workers’ rights and equal treatment of agency workers.

Understanding wages and inflation 

Taking a closer look, our research analyzed agency workers’ wages from Adecco in 17 countries. As mentioned earlier, Adecco associates earned more than 2.5 times the national minimum wage. Moreover, comparing the average Adecco associates wages from these 17 countries to the average pay, we see these slightly surpass the OECD average wages.

There are some differences between national averages - these can be explained by looking at the Adecco footprint across the various economic (low, middle and high income) sectors.

Generally, as agency workers are protected by equal pay regulations, a positive difference in Adecco associates’ wages compared to national average wages indicates more associates are present in higher paying jobs, while a deviation downward showcases a predominant presence in occupations that pay less than the national average.

At Adecco, we are convinced that agency work is a valuable and much needed form of work for both, people and businesses.  The data from this paper further underline this. One of the takeaways includes the importance of fair wages for workers: We believe that paying fair wages is one key element to being seen as a responsible employer.

This leads us to the following recommendations.

1. Equal pay regulation needs to be talked about. In political conversations where discussions about wages and agency work are addressed, the existence of equal pay should be a key consideration.

2. Agency work is a flexible and formalised form of work. In situations where labour flexibility includes questionable independent contracts, agency work should be promoted as a well-regulated, well-established form of flexibility. This framework provides workers with rights and income.

3. Focus on skills to drive sustainable employment policies need to promote and support re- and upskilling. Skilling’s an integral part of policy responses to costs of living increases.

4. Lower labour cost by decreasing the tax wedge. This way, labour cost can remain stable (or even decrease) while allowing for higher take-home pay.

Increase collaboration between public and private employment services to mitigate potentially layoffs. This can be done by sharing labour market knowledge, expertise and networks or through outsourcing labour market policies to private experts. In turn, this qualified private party can provide meaningful career guidance, training and labour market support.