City fat cats taking us to the cleaners

Hospital cleaners give greater value to society than city fat cats, new research has found.

The New Economics Foundation (NEF) discovered that elite city bankers, those in receipt of £1 million-plus bonuses, destroy £7 of value for every £1 they create, while hospital cleaners create more than £10 in value for every £1 they receive in pay. Advertising executives appear to provide even less value to society, destroying £11 per pound created, with tax accountants the worst – they destroy £47 for each pound they create.

The report calls for the establishment of a High Pay Commission – including the introduction of maximum pay differentials – the launching of a green industrial policy to replace the middle income jobs (or ‘missing middle’) of manufacturing, and the building into prices of social and environmental value, i.e. “making good things cheap and bad things expensive”.

NEF also propose the adoption of a transaction tax to reduce high risk and unsustainable trading, the feasiblility of which Left Foot Forward outlined earlier today.

Download a copy of “A Bit Rich: Calculating the real value to society of different professions”

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9 Responses to “City fat cats taking us to the cleaners”

  1. nef

    RT @leftfootfwd City fat cats taking us to the cleaners:

  2. boosterfire

    Nice to be returning to this blog again, it has been a while since. Well this post that I have been waiting for so long. I need this information to finish my college assignment, as it is a similar topic to this post. Thanks you, great share.

  3. David Ritter

    RT @leftfootfwd: City fat cats taking us to the cleaners:

  4. Richard Blogger

    This report shows why I rarely talk to social scientists: they cannot use one word when ten could be used instead. OK, so after wading through lots of guff I get to the real meat of the methodology. (Appendix 1 and 2, p29 and p30). I trained as a scientist, so I know how important it is to get the methodology right. Once I got to read the methodology I realised the other reason why I rarely talk to social scientists: it was mostly nonsense.

    Let me first say that I really dislike bankers and what they have done over the last three decades, but come on guys, you have taken a one-off financial crisis as the only negative aspect to bankers. That is, for their contribution to the country the paper gives (summary on p15): their contribution to economic activity, their tax contributions and the jobs provided in the wholesale finance sector. These are contributions that occur every year (the contributions will be different, but they are recurrent), there is nothing exceptional about them. For the negative contribution the paper gives the cost of the financial crisis (loss of GDP and impact on public finances)! The crisis was an exceptional occurrence! It happened once, it is not a usual occurrence. In any area of science this “blip” would be removed as a non-typical value, because it adds no information toward the general trends.

    If I accept their analysis then I should also accept that in 2007, since there was no financial crisis, there was no negative aspects to bankers! So according to the paper, in 2007 bankers were good, in 2010 bankers are bad. Sheesh. Social scientists.

    I like to give bankers a good kicking, but this is not how to do it. This reports reads like the conclusion was decided at the beginning and the figures made to fit.

  5. Rev2Nexus

    RT @leftfootfwd: City fat cats taking us to the cleaners:

  6. Andrew Roche

    City fat cats taking us to the cleaners

  7. Charles Barry

    Whilst I am sympathetic to left-wing politics and its causes (why else would I be on this website?), I really thought this was a shoddy piece of work that played to far-left stereotypes. (For instance, the report asks “why don’t we here more riches-to-rags stories” as a compelling piece of evidence that social mobility doesn’t exist in this country”.

    1) One of their dismissed 10 myths was that the private sector wasn’t more efficient than the public sector. There is loads of work to support this supposed ‘myth’. But they then argue that if public sectors were paid more, they would be more efficient (implying there is a problem with efficiency in the public sector). But it is not the level of pay that makes people in the private sector more efficient. It is the fact that the bad workers get fired, and this means productive ones get hired. This increases profits, meaning better paid workers (ie more productive ones who can justify the higher salary).

    2) The report says the City’s financial services aren’t important. But UK Financial services account for 10% of total GDP, 15% if you include associated legal accounting and consultancy work. Only by selective GDP stats could you even begin to construct a case against the importance of the City.

    3) The entire work follows a fallacy that because Bankers get paid a lot of money, this makes them evil, nasty people doomed to ruin the country. Whilst income inequality is an important problem for us to be concerned with, it is by raising the bottom up and not bringing the top down that we will achieve this. But banker’s bonuses did not cause the financial crisis, in fact, your average middle-of-the-road banker had as much to do with this as you or I. The people responsible for the risky strategies that blew up in the Banks’ faces were the Top 50, maybe Top 100. It is not an issue about remuneration for financial services employees, it is an issue about proper corporate governance.

    4) The entire methodology of the centrepiece of the report, the Social Return on Investment was sprurious. It contains highly subjective judgements about what industries were worth more, which seems to have played to the report author’s prejudices. I quote “Our model assumes that the financial crisis and recession would not have happened were it not for highly paid City bankers and traders engaging in extremely risky, opaque and complex transactions”, which is a laughable caricature.
    “The calculations for the advertising executive centred on the notion of overconsumption – that we consume more than we need and that this has damaging environmental and social impacts.” Well, I could equally argue that Advert Execs help consumers be informed about the best products and help the economy overall allocate resources to production in the most efficient manner.
    “We have taken the baseline measure for the value created by the hospital cleaner as the prevention of the spread of hospital-acquired infections (HAIs).” Again, a crass simplification of the value a hospital worker puts into the economy.
    The tax accountant methodology is entirely from the direction of working out how much tax each accountant costs the taxman. No attempt is made to calculate how much tax a tax accountant earns for the taxman, nor the reduced administration his simplified and more efficient returns provide.

    Overall, this is something that wouldn’t pass muster for a GCSE coursework project. The logic here should be to improve training and education, to allow self-improvement for the poorest in society, and not to advance some “pay-us-more-because-we-say-so” and “bash-those-evil-high-paid-workers” agenda.

  8. Sean

    This is shoddy and pathetic. “Our model assumes that the financial crisis and recession would not have happened were it not for highly paid City bankers and traders engaging in extremely risky, opaque and complex transactions.” This alone is so riddled with factually incorrect assumptions to be useless and it indicates that the methodology is weak as to be considered counterproductive.

    I cannot believe you would swallow this cr*p particularly how they stated “£7 of social value” instead of a straight “£7”.

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