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.1.10, panel B).The gap between CEOs and other executives was far less dramatic:Dutch CEOs earned only 1.9 times more than the average executive in 2007, up from1.4 in 2003.Figure 1.10.Evolution of executive pay versus average employee wagesin the Netherlands, 2003-2007Panel A.Average annual increase in pay by category of employee, Panel B.Ratio of CEO compensation to average employee wagesadjusted for inflation, per cent40 12030.7102.710025.3308071.820 6053.14010200.60 0CEO Average executive Average employee 2003 2005 2007Source: IILS estimates based on the annual reports of 15 of the largest companies in the Netherlands.191.Trends in employment and inequality Table 1.3.Increase in executive pay components,Netherlands, 2003-2007, per centSalary and Bonus Share-based Deferredperquisites compensation paymentCEO pay 50 174 5391 8Average executive pay 35 163 3706 -9Source: IILS estimates based upon on the annual reports of 15 of the largestcompanies in the Netherlands.In the Netherlands, executive compensation has also undergone some interestingdevelopments in recent years as regards the composition of compensation.The relationbetween fixed and variable remuneration in Dutch compensation packages has tradition-ally been different from the corresponding packages in US and UK companies, in thatbasic salary constitutes the most important component of compensation.However, theshare of variable compensation is increasing in importance.Fixed compensation, which comprised more than 70 per cent of both CEO andaverage executive compensation packages in 2003, fell to 61 per cent and 57 per cent,respectively, in 2007.Interestingly, this is mainly due to developments in share-based com-pensation a fairly recent phenomenon, in the Netherlands which increased by morethan 5000 per cent for CEOs and more than 3700 per cent for average executives between2003 and 2007, albeit from relatively low levels (table 1.3).In fact, while share-based com-pensation played only a marginal role in 2003, it constituted about one third of the com-pensation package for both CEOs and executives in 2007.28Looking forward: potential impact of foodand commodity price hikesWhile some developments in the global economy have clearly benefited those in the highestincome brackets, others have made the poorest worse off.This is particularly the case ofrising food and commodity prices particularly fuel prices.These increases are part of ageneral inflationary trend of prices for raw materials, partly linked to increasing demandfor food and fuel from newly industrialized economies such as China.Declining stocksof crude oil and disappointing harvests have also contributed to the inflationary pressure.Other factors, including, speculation in financial markets and changing consumption pat-terns, are also likely to be contributing to rising food and commodity prices.The peculiarity of food and fuel is that they have virtually no substitutes.An increasein their price does not, therefore, generate a large decrease in consumption, so any increasein food prices affects households purchasing power.Moreover, low-income households arelikely to be more adversely affected, in that they spend a large proportion of their incomeon such goods, as illustrated by the examples of India and the United States.In India, since 2006, food prices have grown by 9 per cent, compared with 6.3 percent for non-food prices.This is predicted to have a negative effect on the purchasingpower of all urban households (fig.1.11).The only exception, of course, is those households28.It should be noted that even before 2005 many Dutch companies had share-based incentive programmesin place.However, as share-based compensation is a relatively recent phenomenon in the Netherlands,numerous stock awards and options had not, in 2007, yet vested.In addition, various share-based20 compensation programmes gave only limited value, as stock prices were relatively low at that time.World of Work Report 2008: Income Inequalities in the Age of Financial Globalization Figure 1.11.Estimated decline Figure 1.12.Estimated declinein purchasing power of Indian urban in purchasing power of householdshouseholds resulting from rising food in the United States resulting fromprices, 2007 (percentage points) rising fuel prices, 2007Poorest householdsQ1(less than 300 Rupees)300-350Q2350-425Q3425-500Q4500-575575-665Q5665-775All775-9150 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8915-1120Percentage points by income quintile(Q1 poorest quintile)1120-1500Source: IILS estimates based on consumer expendituresurvey (US Bureau of Labor Statistics).1500-1925Richest householdsNote: Y-axis refers to monthly per capita(over 1925 Rupees)expenditures (in Rupee).All households Source: IILS estimates based onHousehold Expenditure Survey, India.0 1 2 3 4 5 6that produce food and benefit from the increase in food prices but this is less likely inurban areas than rural ones.Food price inflation affects those who spend a larger proportion of their income onfood, in particular poorer households.For example, the poorest households in urban Indiaexperienced an estimated drop in purchasing power of over five per cent, while the richestin urban areas in 2007 experienced only a drop of 2.2 per cent
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