Unless pay gaps are reduced, we’ll end up with Victorian levels of inequality

Unless the trend towards greater inequality is halted, we may end up back at the levels of disparity “evident in Victorian England”, the High Pay Commission says.

Unless the trend towards greater inequality is halted, we may end up back at the levels of disparity “evident in Victorian England”, the High Pay Commission revealed in the publication of its final report this morning.

The report, “Cheques With Balances: why tackling high pay is in the national interest” (pdf), highlights the growing divide between not just the top 1% and the rest but the top 0.1% and the 99.9%.

As Figure 1 below illustrates, on current trends, the top one thousandth of the population will, by 2035, take home 14% of the national income – levels last seen in Victorian England.

Figure 1:

To try to correct this, the commission calls for all publicly listed companies to produce a fair pay report, saying the publication of a pay ratio “would allow closer scrutiny of the pay gap in companies”.

The report also calls for the establishment of a permanent body to monitor high pay, which would monitor pay trends; police pay codes; ensure transparency, accountability and fairness; and report annually to the government and public on high pay.

Among the most striking figures in the report are the increases in pay for top executives over the past 30 years, as shown in Table 2 below – even more unacceptable when compared to other professions, where pay has risen nowhere near as much.

As Deborah Hayes, chair of the commission, says:

“The public is rapidly running out of patience with a system that allows those at the top to enrich themselves while everyone else struggles to make ends meet. This has been thrown into stark relief by the economic crisis, but has been building for the past 30 years.

“In 1980 top bosses were well rewarded, but they had not pulled so far away from the rest of society. Since then some of them have enjoyed an increase of over 4,000% to what are now multi-million pound packages.

“Those in respectable middle class jobs such as secondary school teachers and policemen have seen their income rise by a much more modest amount with average wages increasing from £6,474 to just £25,900 over the same period. There have been huge changes in all of these jobs, yet so much wealth has been channelled to those at the very top.

“This is a trend that has led to such a huge rise in inequality over the period that Britain now has a gap between rich and poor that rivals that in some developing nations.”

Table 2:

That gap is most starkly illustrated in Figure 3, which shows how much more a FTSE 100 CEO earns than a policeman, teacher, senior civil servant, top-rank soldier, cleaner or nurse…

Figure 3:

This state of affairs simply cannot go on; as Mary Riddell writes in today’s Telegraph, democracy iteslf is at stake “unless the huge and growing pay gulf between the very rich and ordinary workers can be narrowed”:

“Politicians, terrified of conceding that they risk losing control, are unlikely to admit that, in one respect, Karl Marx was right.

“Capitalism has been shown to contain the seeds of its destruction. As the Croesus class cash in and the markets dine off democracy, no one dares point out that, from Tottenham to Tennessee, the world may be staring at the end of politics.

“In Greek legend, King Croesus was placed on a pyre to be burnt alive. His pleas for salvation were answered by divine forces who ordained a storm so fierce that the fire was extinguished, sparing him to become a wise, if much less rich, adviser.

“This time round, with the flames licking at democracy’s roots, there may be no such happy ending.”

See also:

What does responsibility actually mean to those at the top?Zoe Gannon, June 14th 2011

Will the government drop bankers’ pay legislation?Zoe Gannon, November 16th 2010

Public unaware of just how much those at the very top are paidZoe Gannon, November 9th 2010

Ed Miliband: greater income equality should be an “explicit goal”Will Straw, July 8th 2010

GLA leads the way on pay ratiosMalcolm Clark, June 17th 2010

David Miliband backs High Pay CommissionWill Straw, June 15th 2010

Time for a High Pay Commission?Gina Byrne, March 17th 2010

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