According to a report by Korn Ferry, Latin American companies pay their executives about 5 to 11 times more than to their other workers.

There are three Latin American countries where executives of large companies have at least 10 times the income of, for example, recently graduated employees.

One of the reasons is that these firms offer salaries to their executives that are equivalent to the “international market”, according to Benjamin Frost, general manager of Reward Products at Korn Ferry.

Meanwhile, those who are in the lowest position of the professional ladder, are paid according to the cost of living of every country.

“Therefore, there are larger gaps in those countries were living costs are lower, which usually tend to be poorer countries”, Frost explained.

The economic weight of the country is another factor. Frost said that in “mature economies” the ratio between both salaries goes from 2.5 to 4.5. For instance, in the United Kingdom, it is 3.4, which means that executives earn 3.4 times more than other workers.

The countries that surpass the 10 ratio tend to have economies that “are growing very fast”, such as China, where the ratio is 12.1.

In semi-emerging nations, such as most of the Latin American countries, it is between 5 and 10. But there are three countries in the region where the wage gap is clearly larger.

Dominican Republic

Since 2003, the country has been going through an economic boom, and it has managed to triple its GDP, reaching u$s71.580 million in 2016.

Mining, construction and tourism have led growth, which has reduced poverty from 42.2% in 2012 to 30.5% in 2016.

Nevertheless, this positive macroeconomic results may have also increased inequality. While an executive earns about u$s145.885 per year, an employee earns u$s12.654, which is 11.5 times less.

Guatemala

Guatemala is growing above 3% due to sectors such as tourism, but also because of the remittances that many Guatemalans abroad send to their families. Last year, remittances reached the record figure of u$s8.192 million, nearly twice the amount registered in 2010. However, growth has not reduced poverty.

Around 60% of the population live in “absolute poverty” and 23% in extreme poverty, as reported by the High Commissioner of the UN for Human Rights, Zeid Ra’ad Al Hussein.

Therefore, it is quite a surprise to find that executives in this country are the best paid: around USD 162,938 per year. This is 10.3 times higher than what other workers earn, which is around USD 15.753 per year.

Costa Rica

Along the Dominican Republic, last year Costa Rica was among the five countries with largest growth in Latin America, according to the estimations of the Economic Commission for Latin America and the Caribbean (ECLAC).

Even though the World Bank considers this country as a “story of success in terms of development”, it also points out that the persistent inequality is one of its main challenges.

Costa Rican employees earn around USD 12,937, while executives have incomes around USD 132,654. In other words, 10.3 times less.

“In the lower levels, there is no lack of workers, while it is hard to fill top level positions”, said Frost, who thinks that having a small gap also brings along inconveniences.

“In Norway, bosses earn 2.5 times more than workers. But they have their own problems”, he explained. “You can be promoted 7 or 10 times, but you will only get paid 2.5 times more”, he stated.

In these cases, the company needs to persuade the employees to take in more responsibilities for a salary increase that may not be that attractive.

The bottom line is that wage gaps are always a challenge for business management.