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1 INTRODUCTION
The labour market at sea is one of the few examples of
the market with the structure and principles of
functioning similar to the theoretical model of perfect
competition. This is possible due to elimination of
factors that, to a greater or lesser extent, limit access to
the market of employees and employers. In the case
of seafarers, their place of residence and nationality
do not limit employment opportunities on a ship with
regard to the nationality of the employer, the place of
registration of a ship or the area, where the ship is
operating. This is a result of the lack of barriers to
provision of maritime labour services, the lack of
barriers to access seafarers, more effective recruitment
methods, uniform requirements for knowledge and
skills of crew members (STCW), which eliminated
diversity in the quality of education (Skrzeszewska,
2014). It makes the labour market at sea an element of
the global labour market (Wu & Morris, 2006).
However, despite the global access to both employers
and labour resources (which could facilitate
elimination of all the phenomena of market
imbalance) - the labour market at sea is unbalanced
due to insufficient elasticity of demand and supply,
which are exposed to many determinants. This, in
turn, reduces the possibility of achieving balance on
The Degree of Wage Differential as an Indicator of the
Balance Between Demand and Labour Supply
K. Skrzeszewska
Gdynia
Maritime University, Poland
ABSTRACT: The purpose of the article is to use the Gini index to indicate supply gaps in the labour market at
sea. In order to determine the size of imbalance in the labour market at sea, a measure of concentration
(unevenness) of distribution of a random variable was used. To determine in which positions the largest deficit
of employees occurs (and probably will occur in future), positions from the deck and the engine room were
selected, both among officers and ratings. Wages received on dry ships and on tankers were analysed
separately. The next step was to select nations that to the greatest extent join crews of sea-going vessels (China,
Croatia, India, Latvia, Philippines, Poland, Romania, Russia, Ukraine, the United Kingdom). First, the GDP per
capita was compared for individual economies, from which seafarers were selected for the analysis. Then,
salary levels were compared for each selected position. Differences in the GDP per capita calculated using the
Gini coefficient were in line with differences in positions among ratings - mostly among cooks, ordinary
seamen, wipers and messmen, regardless in which ship (dry or tanker) they were employed. Among the
positions on which nationality had little impact on the amount of remuneration were: chief engineer on tankers
and on bulk carriers: master, chief officer and 2nd engineer. Knowledge of the level of market imbalance and
market trends may be helpful for crew departments/ crew agencies, while developing a policy of hiring people
to work at sea. Additionally, it may indicate areas in which education and training of seafarers should be
activated.
http://www.transnav.eu
the
International Journal
on Marine Navigation
and Safety of Sea Transportation
Volume 14
Number 1
March 2020
DOI:
10.12716/1001.14.01.27
216
this market in a short term (Skrzeszewska & Beran,
2016).
One of the reasons is that the demand for work at
sea is a secondary demand generated by the demand
for maritime services. This, in turn, is a derivative of
global economic activity (Oxford Economics, 2016),
where sudden demand or supply crises strongly
affect conditions of the market of maritime transport
services, and hence the maritime labour market.
Changes in demand for work at sea have many
sources, among which the most important are: an
increase in the size of the global fleet, changes in the
regulations governing the length of work at sea (MLC,
2006), a personnel policy of shipowners and crewing
ship managers/agencies (e.g. replacement ratio,
preferences with regard to the origin of crews of
officers and ratings) (Skrzeszewska, 2014). Manning
costs are one of the largest categories in the ship's
operating costs (Drewry Research, 2015). That is why,
a lot is being done to reduce the number of people
employed at sea by innovation - automation and
robotisation of processes related to the operation of a
ship, as well as there are works carried out on
autonomous units. This is reflected in the quality of
life of seafarers and in the requirements regarding
their competences and skills. Reduced crews mean
lower costs for the owner, but from the point of view
of seafarers - a smaller crew is associated with more
duties and the need for higher competences and skills
than it was necessary previously on a given position
(Exarchopoulos, Zhang, Pryce-Roberts, & Zhao, 2018).
This is one of the reasons why at present a career at
sea finishes faster than a career on the shore.
2 IMBALANCE IN THE LABOUR MARKET FOR
SEAFARERS
The process of globalisation, acceleration of which
took place at the beginning of the political
transformation of non-democratic states, caused
internationalisation of economic activity on an
unprecedented scale. Shipping activities were both a
catalyst for globalisation and at the same time its
beneficiary. A particularly important event for
development of shipping was creation of the global
labour market, thanks to which seafarers working so
far only on ships belonging to the national carriers
and registered under the national flag could start
looking for jobs on ships without any restrictions
(Clayton, 2017; Patchiappane & Rengamani, 2018;
Tusson, 2018; Wu & Morris, 2006). Nevertheless,
organisations and institutions conducting research on
the labour market at sea began to forecast shortages of
labour supply in the first decades of the 21st century.
The inability to estimate the real number of
professionally active (working at sea) seafarers causes
huge discrepancies in forecasts of individual centres.
According to the BIMCO / ISF, the gap of demand
and supply of seafarers in 2015 reached almost 33
thousand people (including 16.5 thousand officers),
but by 2020 the shortage of officers will have reached
92 thousand people, which means the supply gap of
11.7%. In 2025, the shortage of officers will increase to
147.5 thousand people (gap: 18.3%). With respect to
ratings, the estimated surplus is 119 thousand people
((BIMCO & ISF, 2015).
Oxford Economics estimates that the number of
officers will increase from 790,000 in 2015, up to
almost 1.1 million in 2026, an almost 40% increase in
labour supply in this group of seafarers. Smaller
increases are forecast for ratings: an increase from
754,000 in 2015 to 865 000 in 2026, an increase of just
under 15% (Oxford Economics, 2016). When
comparing the size of labour resources at sea
calculated by Oxford Economics with the estimated
demand for officers and ratings by BIMCO, the
market imbalance with respect to officers will be a
market deficit of 147.5 thousand seamen. In the case
of ratings, there will be a market surplus of 49
thousand people (BIMCO & ISF, 2015; Oxford
Economics, 2016).
Japan Maritime Center claims that the gap
between demand and supply of work at sea (without
distinguishing officers and rating) will increase from
less than 5,000 in 2015 up to 14 thousand in 2020
(Japan Maritime Center, 2013).
According to Drewry, manpower deficiencies in
the sea labour market relate only to officers. Ratings
are available and there is a surplus of their supply
over the demand. The situation is different for
officers, whose lack on the market is more visible
(20,900 in 2015). Due to changes in the size of the fleet
(quantitative and qualitative) and organisation of ship
operation, the deficit of officers will be soon reduced
(up to 15,000 in 2019 and 7,700 in 2020) (Drewry
Research, 2015).
Japan International Transport Institute reports that
by 2020, the number of officers will increase by 7.2%
compared to 2010 (in absolute numbers an increase of
32,153 people), the number of ratings by 7.2% (46,881
people) (Japan International Transport Institute & The
Nippon Foundation, 2010). Referring to the data
forecast by the BIMCO – the lack of seafarers in total
on the market (officers and rating) will be more than
13,000 (8.5% compared to the forecast supply)
(BIMCO & ISF, 2015; Japan International Transport
Institute & The Nippon Foundation, 2010).
In the face of such large discrepancies in
assessment of the current market and forecasts for the
future, the following question arises - which of the
presented estimates are the closest to the real changes
taking place in the global maritime labour market? Is
it possible to assess the actual changes on this market
since only the demand side can be estimated based on
the real data? Thanks to the structure of the labour
market at sea, the operation of which is regulated by
the market mechanisms - the answers to the above
questions can be provided by an analysis and
assessment of the degree of differentiation of income
obtained by seafarers of different nations holding the
same positions.
3 RESEARCH METHODOLOGY
The income inequality indicator expresses a degree of
diversification of the income level, among others, of
people in a given population (Jędrzejczak &
Pekasiewicz, 2018; World Bank Institute, 2005).
217
Among the measures of income inequality, the
following are distinguished as the most important: the
Gini coefficient of inequality (Ceriani & Verme, 2012),
the Zenga index of inequality (Zenga, 2007), the Theil
indexes (Theil, 1967), Atkinson's inequality measures
(Atkinson, 1970) (see more: (Greselin & Zitikis, 2018;
Lerman & Yitzhaki, 1984). In order to study inequality
in salaries of seafarers of different nationalities, the
Gini coefficient was used as it is the most popular
measure. Graphically, the value of the coefficient is
expressed by the ratio of the area contained between
the equality line and the Lorenz curve, to the area of
the triangle under the diagonal (Włodarczyk, 2013).
The Gini index is popular, because of the ease of
interpretation, among others. It illustrates the average
absolute difference between incomes of randomly
selected entities in relation to the average income.
Thanks to the normalised size - the value of the Gini
coefficient allows making comparisons over time,
comparisons between units in a given population, and
comparisons between countries. The value of the
index ranges between 0 and 1, where 0 means no
differences between the compared units, and the
higher the value, the more important is diversity (Lee,
Lee, & Lee, 2017; Lerman & Yitzhaki, 1984).
Methods of assessing the level of income
inequality using the Gini index was used to check a
degree of inequality between wages paid in the same
positions - seafarers from different nations. The point
of reference was a degree of inequality of average
incomes in the countries, from which seafarers came.
To estimate this - distribution of income inequalities
of nations, whose representatives created the supply
side on the maritime labour market to the greatest
extent, was examined. The GDP per capita of selected
countries was used for this purpose.
The data used for calculations are secondary data
from two sources: UNCTAD resources (GDP per
capita) and from "Manning 2015. Annual Report",
published by Drewry Maritime Research (seafarers'
wages). Income inequality indicators were calculated
using the Gretl program - an open source econometric
package (GNU GPL v3).
4 RESEARCH RESULTS
The number of observed nationalities, which were
taken into account while estimating inequality of
salaries of seafarers in the same positions, was 10.
They came from: China, Croatia, India, Latvia,
Philippines, Poland, Romania, Russia, Ukraine, and
the United Kingdom. The choice of these nations was
dictated by participation of seafarers from these
countries in the supply of work at sea in total.
Table 1. GDP per capita (2015) in the countries with the
largest number of seafarers in the world's resources of
seafarers.
_______________________________________________
Country GDP per capita Country GDP per capita
___________ ___________
US dollars US dollars
_______________________________________________
China 8 069 Poland 12 566
Croatia 11 579 Romania 8 958
India 1 613 Russia 9 329
Latvia 13 666 Ukraine 2 124
Philippines 2 878 UK 43 929
_______________________________________________
Source: UNCTAD.
According to Drewry more than half (53.5%) of all
the seamen come from 10 above-mentioned countries
(Drewry Research, 2015). In the first step, the level of
diversification of the GDP per capita (Table 1) was
assessed between these countries.
For 10 observations (GDP per capita in 2015 for 10
selected countries, based on the UNCTAD data), the
Gini coefficient from the sample was 0.454. This
means that the average absolute difference between
the GDP per capita of a randomly selected pair of
countries considered is over 45% of the average
income (Figure 1). The high Gini index means wide
variation in the level of economic development of
individual countries.
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
v1
Krzywa Lorenza
Figure 1. Lorenz curve reflecting a degree of diversification
of GDP per capita between countries - the largest suppliers of
ships’ crews.
The second stage of the study consisted in
estimating the Gini index in relation to wages of
seafarers of various nations employed in the same
position, based on the data contained from the
"Manning 2015 Drewry Report" (pp. 42-71). Monthly
wages include: basic wage, vacation and guaranteed
overtime in US dollars. The enormous diversity of
ships on which seafarers are employed and,
consequently, a large number of differentiated
payrolls required grouping all offshore jobs into large
collections, so that wages could be compared. Due to
the type of a ship, ships for transporting dry cargo
(Dry cargo) and ships for transporting liquid cargo
(Tankers) were separated. To take into account the
fact that the amount of remuneration in the same
positions differs, among other things, due to the size
of a ship, the degree of its specialization, the value of
transported cargo - remuneration for each position
(group of positions with a similar level of
218
competencies required) was presented not as the
specified amount, but as the amount between the
minimum and maximum levels of remuneration for a
given type of a ship (Dry cargo/ Tanker) and the
nationality of a person holding the position.
Based on the data aggregated in such a way, Gini
coefficients were calculated (using the Gretl program)
for individual positions and groups of positions
(Table 2).
On the basis of the obtained indicators, it can be
concluded that differences in seafarers' wages,
depending on the nation, are not as big as in the case
of the GDP per capita differences.
Table 2. Degree of seafarers' wages differentiation based on
the Gini index.
_______________________________________________
Rank Wage Gini coefficient Level of
responsibility
_____________
Dry cargo Tankers
_______________________________________________
Master min 0.072 0.083 management
max 0.112 0.090
Chief Engineer min 0.082 0.083 management
max 0.091 0.077
Chief Officer/ min 0.056 0.097 management
2nd Engineer max 0.080 0.087
2nd Officer/ min 0.162 0.116 operational
3rd Engineer max 0.133 0.127
3rd Officer/ min 0.125 0.102 operational
4th Engineer max 0.114 0.125
Electrician min 0.118 0.104 operational
max 0.114 0.091
Bosun/ Fitter/ min 0.243 0.231 support
Pumpman max 0.229 0.203
Chief Cook min 0.261 0.303 support
max 0.252 0.226
AB/ Motorman/ min 0.252 0.244 support
2nd Cook max 0.217 0.215
OS/ Wiper/ min 0.266 0.245 support
Messman max 0.236 0.214
_______________________________________________
Source: own elaboration based on “Manning 2015 Drewry
Report” data, calculated by Gretl.
On the basis of the obtained indicators, it can be
concluded that differences in seafarers' wages,
depending on the nation, are not as big as in the case
of the GDP per capita differences. This means that the
global maritime labour market is an attractive
workplace for seafarers, especially from economically
weaker countries.
Analysing the highest value index (0.303 - for
Chief Cooks earning lower rates on tankers), it means
that the average absolute difference between the
wages of a randomly selected pair of Chief Cooks
accounts for about 30% of the average wage in this
position and is less than for differences in the GDP per
capita.
All the obtained indicators that were analysed can
be divided into three groups: indicators with values
below 0.1: referring to four highest officer positions -
from the management level (Figure 2). Another group
of indicators in the range (0.1; 0.2) refers to positions
of junior officers, which means the crew of the
operational level of competence. The last group of
indicators with a value above 0.2 applies to positions
on the support level (Figure 3).
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1
v5
Krzywa Lorenza
Figure 2. Lorenz curve reflecting a degree of diversification
of senior officers’ wages (Chief Officers/ 2
nd
Engineers).
Source: own elaboration based on Drewry, calculated by
Gretl
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1
v15
Krzywa Lorenza
Figure 3. Lorenz curve reflecting a degree of diversification
of ratings’ wages (Chief Cooks).
Source: own elaboration based on Drewry, calculated by
Gretl
Lack of restrictions to access the labour market at
sea, which to some extent limits employment
opportunities in the case of work on land, causes that
market imbalance is eliminated by the amount of
earnings. It is obviously a reflection of competences
and skills, but its amount also depends on employees'
pay expectations. These, in turn, are a reflection of the
average standard of living in the country of
employment.
Analysing the value of the obtained indicators it
can be noticed that their value decreases with an
increase of competence and the scope of
responsibility, regardless of the type of a ship or the
level of earnings (higher/ lower) on a given position.
This means that differences in wages depending on
the nation are decreasing, which in turn means that it
is difficult to employ crew members with high and
highest competences. In the case of the highest
positions, so-called top four, variation in earnings
depending on the nation is practically non-existent.
219
5 CONCLUSIONS
The obtained results indicate an oversupply of
ratings, whose earnings are at the minimum level set
by the ITF. Officers in junior positions and senior
officers - differences in earnings depending on the
nation are reflected in differences in the GDP per
capita (younger), while in relation to seniors officers -
variation due to nation is insignificant, which means
that employers are forced to pay more than salary
expectations specific to a given nation. It also follows
that in the case of senior officers there is a surplus of
demand over labour supply on the labour market.
Observing changes between inequalities in the income
of seafarers in the same positions, the category
“different nations” is a tool that can be used to create
the personnel policy (building loyalty links between
the employee and the employer), as well as to set
directions for development of educational services in
maritime education and training institutions (on
various levels of education).
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