The Rich Are Getting Richer... But Does It Really Matter?

17/05/2011 13:07 | Updated 22 May 2015

Ever get the feeling your money doesn't go as far as it used to? While average pay stagnates, the cost of everything from food to petrol to household bills seems to spiral higher every month, making the bit left over ever smaller. Of course, not everyone has this problem. Some people are positively swimming in dosh – just ask the independent High Pay Commission. Yesterday it released a report warning that the pay gap between the UK's highest earners and the rest of the working population will soon return to levels not seen since the Victorian era. If current trends continue, it says, the top 0.1 per cent of UK earners will see their pay increase from 5 percent of national income to an estimated 14 percent by 2030.

This is a level not seen in the UK since the beginning of the 20th century. Have a guess at the average annual salary of FTSE 100 chief executives last year and I bet you're not even close. It was £3,747,000, which works out at 145 times greater than the national average full-time wage of £25,800.

Although executive pay levels fell slightly during the recession, the commission predicts that by 2020, the ratio of top chief exec to average Joe pay will have spiralled to 214 to 1. Does this matter? I think so. When a teacher earns less in a year than a banker earns in a week and the people who clean Buckingham Palace have to fight mop and bucket to get a meagre pay rise (current wage: £6.45 per hour; current royal allowance for palace upkeep: £15m per year), there is something seriously screwy with our values.

Plus I just don't buy the argument about how in a competitive market those at the top must be rewarded for their extraordinary talent and expertise. Does that mean that people who didn't choose (or have the opportunity) to go into the highest-status professions, including those who work for the same companies as said big-wigs, don't deserve a wage commensurate with their own talent and expertise?

Besides, experience has shown that higher pay at the top doesn't necessarily mean better performance. Even where this much-vaunted talent and expertise is missing, even where, in fact, company performance is poor or company behaviour actively undermines economic growth ("sub-prime" mortgages = not such a good idea after all), the top bods still make sure they come out with full pockets. As Deborah Hargreaves, chair of the High Pay Commission, points out: "Set against the tough spending measures and mixed company performance, we have to ask ourselves whether we are paying more and getting less."

The Labour government was famously "intensely relaxed" about people getting filthy rich - and on their watch lots of people did. New figures from the Institute for Fiscal Studies show that income among the top one to two percent of earners grew much faster under Labour than for the majority of workers, contributing to an increase in social inequality.

Various think tanks and other bodies want the government to introduce tighter controls on executive pay, including linking top pay to company performance and giving shareholders more say on pay and bonus packages. I don't hold out much hope that the current crop of ministers will do any of this – after all, most of them inhabit a universe where shopping at Waitrose, having private healthcare and being able to pay for education are the norm. Maybe the headlines about our return to "Dickensian Britain" will give them pause for thought, or maybe not.


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