Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.
‘A top executive is currently paid 145 times the average wage. By 2020 the differential will be 214 times’ on current trends. This is just one of the shameful facts to be found in the independent High Pay Commission’s interim report, More for Less: what has happened to pay at the top and does it matter? (p7). Its analysis shows how, between 1997 and 2007/8, the income of the top 0.1 per cent raced away from that of the wider population with an increase of 64.2 per cent. In comparison, the income of a person in the 50th percentile (half way up the income distribution) increased by only 7.2 percent.
Although those at the bottom did better than under the previous Tory administration, largely thanks to Labour’s more redistributive measures, the bonanza at the top explains why inequality was still higher when Labour lost power. This is one reason why high pay matters: it is a major driver of pre-welfare state levels of inequality. But unequal pay matters in its own right too. As the report explains, what someones is paid ‘is loaded with perceptions about fairness, value, worth, status and much more.’ (p16) Fair pay, the report argues, thus matters to companies, the economy and society. ‘Excessive rewards are undermining relationships with employees and shareholders; they are encouraging harmful risk taking and creating an economic elite which wields enormous power but appears to have lost touch with how the rest of us live.’ (p8). This in turn damages social cohesion and, I would argue, common citizenship.
The report is worth reading, in particular, for its dissection of the self-serving arguments used by those at the top to justify their rewards. While attempts to link pay to performance have certainly contributed to run-away awards, especially for executives, the report cites research which questions whether pay does indeed reflect performance in many cases. It likewise challenges the idea that high pay acts as a compensation for unduly high risk in such positions. It pours the cold water of evidence too over claims that high pay is needed to prevent international poaching of executives. Moreover, executive pay in the UK is significantly higher than in the rest of Europe. And although it is lower than in the US the gap is narrowing fast.
Attempts to rein in top earnings hitherto have largely been aimed at strengthening corporate governance mechanisms. Their weakness is exposed by ‘the fact that boards, remuneration committees and shareholders have failed to tackle the huge growth in pay packages’ (p9). The report concludes not only that ‘current regulation will not be effective in restraining top pay’ but also that it ‘has even been shown to be a contributory factor pushing it up’ (p9). As the Chair, Deborah Hargreaves, concludes in her Foreword, ‘existing attempts to rein in top pay have not worked’ (p5).
So what is the answer? The Commission will be making recommendations in its final report. It flags up that these will address three main areas: transparency through more publically available information about pay; accountability through strengthened corporate governance; and fairness.
Transparency is, of course, important. However, isn’t there also a danger here? The report points to how the ‘growing use of comparator groups has contributed to an “arms race” in pay’ (p14). And in an article in the Independent on Sunday, Hargreaves observes that ‘many executives use the pay round as a way of keeping score against rivals. It is often not about the aggregate amount on offer, but about how that compares with others’ rewards’. Might not more public information about pay simply fuel the ‘arms race’ further? Certainly, in order to avoid such an outcome corporate governance mechanisms would have to be strengthened significantly and those charged with regulating top pay would need to reflect wider public concern about unfair rewards.
On the question of fairness, the Commission ‘will seek to understand further what is fair pay in a modern corporate environment and consider what reforms could engage greater fairness in relation to pay’. A key message running through the report is that ‘the exponential increase in pay at the top of the labour market is a form of market failure.’ (p17) It points to how legislation on, for instance, equal pay and the minimum wage has ‘been brought in to correct or manage the market.’ (p35). I hope the Commission will now consider parallel legislation to address the market failure of high pay.
One mechanism for doing so would be some form of maximum wage. This would not necessarily be a single figure to mirror the minimum wage. But it could establish a maximum pay differential such as David Cameron himself suggested in relation to public sector pay. In suggesting an appropriate differential the Commission might look to those that pertain in more equal societies. And, it could usefully instigate research and democratic deliberation to ascertain what the general public would regard as a fair differential. This would serve both to provide a publically acceptable benchmark and to involve the public in the next stage of the Commission’s important work.
Ruth Lister is a Labour peer and emeritus professor at Loughborough University.
Louis Mendee explains the real human costs of climate change for the global south.
From climate change to automation to demographic shifts, Mathew Lawrence explains the challenges our economy will face in the coming decade.
Fifty years after the Abortion Act, women are still dying from being denied basic services, write activists from Feminist Fightback
We need to tackle the patronising ideology that lets Tory think-tanks sneer at social tenants, writes Emma Dent Coad
Acid Corbynism allows people to imagine a future beyond the paltry offerings of capitalism, writes Keir Milburn
'We wanted to use a shared love of the beautiful game to stand in solidarity with those living under occupation', writes Kate Hadley.
Priti Patel's shady deals are business as usual. Enough is enough, writes Eleanor Penny
Boris Johnson is a local disaster and a national embarrassment. He must go, writes James Clouting
The global elite have been stealing from society on an unprecedented scale, writes Tom Walker
Richard Murphy says that the appropriate political will and understanding of tax can put an end to offshore avoidance and evasion
Labour Party laws are being used to quash dissent
Richard Kuper writes that Labour's authorities are more concerned with suppressing pro-Palestine activism than with actually tackling antisemitism
Catalan independence is not just ‘nationalism’ – it’s a rebellion against nationalism
Ignasi Bernat and David Whyte argue that Catalonia's independence movement is driven by solidarity – and resistance to far-right Spanish nationalists
Tabloids do not represent the working class
The tabloid press claims to be an authentic voice of the working class - but it's run by and for the elites, writes Matt Thompson
As London City Airport turns 30, let’s imagine a world without it
London City Airport has faced resistance for its entire lifetime, writes Ali Tamlit – and some day soon we will win
The first world war sowed the seeds of the Russian revolution
An excerpt from 'October', China Mieville's book revisiting the story of the Russian Revolution
Academies run ‘on the basis of fear’
Wakefield City Academies Trust (WCAT) was described in a damning report as an organisation run 'on the basis of fear'. Jon Trickett MP examines an education system in crisis.
‘There is no turning back to a time when there wasn’t migration to Britain’
David Renton reviews the Migration Museum's latest exhibition
#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny
Meet the digital feminists
We're building new online tools to create a new feminist community and tackle sexism wherever we find it, writes Franziska Grobke
The Marikana women’s fight for justice, five years on
Marienna Pope-Weidemann meets Sikhala Sonke, a grassroots social justice group led by the women of Marikana
Forget ‘Columbus Day’ – this is the Day of Indigenous Resistance
By Leyli Horna, Marcela Terán and Sebastián Ordonez for Wretched of the Earth
Uber and the corporate capture of e-petitions
Steve Andrews looks at a profit-making petition platform's questionable relationship with the cab company
You might be a centrist if…
What does 'centrist' mean? Tom Walker identifies the key markers to help you spot centrism in the wild
Black Journalism Fund Open Editorial Meeting in Leeds
Friday 13th October, 5pm to 7pm, meeting inside the Laidlaw Library, Leeds University
This leadership contest can transform Scottish Labour
Martyn Cook argues that with a new left-wing leader the Scottish Labour Party can make a comeback
Review: No Is Not Enough
Samir Dathi reviews No Is Not Enough: Defeating the New Shock Politics, by Naomi Klein
Building Corbyn’s Labour from the ground up: How ‘the left’ won in Hackney South
Heather Mendick has gone from phone-banker at Corbyn for Leader to Hackney Momentum organiser to secretary of her local party. Here, she shares her top tips on transforming Labour from the bottom up
Five things to know about the independence movement in Catalonia
James O'Nions looks at the underlying dynamics of the Catalan independence movement
‘This building will be a library!’ From referendum to general strike in Catalonia
Ignasi Bernat and David Whyte report from the Catalan general strike, as the movements prepare to build a new republic
Chlorine chickens are just the start: Liam Fox’s Brexit trade free-for-all
A hard-right free marketer is now in charge of our trade policy. We urgently need to develop an alternative vision, writes Nick Dearden
There is no ‘cult of Corbyn’ – this is a movement preparing for power
The pundits still don’t understand that Labour’s new energy is about ‘we’ not ‘me’, writes Hilary Wainwright
Debt relief for the hurricane-hit islands is the least we should do
As the devastation from recent hurricanes in the Caribbean becomes clearer, the calls for debt relief for affected countries grow stronger, writes Tim Jones
‘Your credit score is not sufficient to enter this location’: the risks of the ‘smart city’
Jathan Sadowski explains techno-political trends of exclusion and enforcement in our cities, and how to overcome this new type of digital oppression
Why I’m standing with pregnant women and resisting NHS passport checks
Dr Joanna Dobbin says the government is making migrant women afraid to seek healthcare, increasing their chances of complications or even death
‘Committees in Defence of the Referendum’: update from Catalonia
Ignasi Bernat and David Whyte on developments as the Catalan people resist the Spanish state's crackdown on their independence referendum
The rights and safety of LGBTQ+ people are not guaranteed – we must continue to fight for them
Kennedy Walker looks at the growth in hate attacks at a time when the Tory government is being propped up by homophobes