We Need a Maximum Wage

10/02/2015 09:39 GMT | Updated 11/04/2015 10:59 BST

The last Labour Government introduced what was voted as the best policy of the last 30 years by the Political Studies Association: the National Minimum Wage.

Now it's time for us to be as bold on tackling the staggering income inequality that exists in the UK, by introducing a maximum wage to end the disparity between the top and the bottom.

The facts and figures tell it all. In 2013 the average FTSE 100 CEO received total remuneration worth 143 times that of the average employee in their firms.

To illustrate how extreme this gap has become, just look at how much top earners received on January 6th 2015, or "Fat Cat Tuesday." On this day, the bosses of Britain's biggest companies had already made more money in 2015 than most workers in the country will earn in the entire year.

All of this is happening against a backdrop of austerity, zero-hours contracts and food banks. In 2013 official figures showed average wages excluding bonus payments grew by just 0.6% - the slowest pace of growth since records began in 2001.

There's no evidence such extravagant pay at the top improves a company's performance. Over the last couple of years we have seen CEO pay go up by 73%, while the FTSE hardly moved - it is still no higher than it was a decade ago. It is impossible to argue that these companies are twice as well run as they were a decade ago, or the bosses twice as important as the workers.

The truth is growth in executive pay, bonuses, and incentive payments has vastly outpaced performance as measured by every indicator in common use.

Even if we do accept the need for performance related salaries, as apologists for the pay gap often argue, why do we not expect generals and senior civil servants, let alone nurses or teachers, to be paid millions of pounds a year to perform well?

The reality is executive pay has become a kind of racket, with a small club of non-executives voting themselves huge rises and ignoring their shareholders.

Most importantly, this practice is bad for our society. History shows that we fare worse when there are such unfair disparities in our society, reinforcing the perception of a self-serving elite running the country.

The IMF has said countries with more income inequality see their economy more frequently plunged into deeper recessions, while economic growth lasts much longer in more equal societies.

Ending pay disparity isn't unprecedented. During WWII, US President Franklin Delano Roosevelt issued an executive order limiting corporate salaries to no more than $25,000 per year after taxes. FDR believed that if men were putting their lives on the line for just $60 per month, the rich should be required to make a sacrifice too.

We should look at something similar in the UK. My proposal is to limit a CEO's pay to 100 times the average salary in their company, something which could be achieved through legislation.

This would still allow top execs to be rewarded, and here's the best part: If the CEO's wanted a pay increase, then they would have to throw their weight behind a campaign to boost the wages of low paid workers.

There are already forward looking companies that voluntarily cap executive pay. John Lewis have capped the ratio at 75 times the lowest paid, while TSB have a similar limit of 65. Huge global companies such as Shell have also cut their CEOs' pay.

If they can do it, it is hard to understand why others cannot do the same. What's more, this measure could actually help businesses, making them responsible by discouraging risk taking behaviour in the search for gargantuan bonuses.

Unsurprisingly, the Government done little to reverse income inequality. Rather than trying to end this scandal, George Osborne labelled the EU's move to cap bankers' bonuses as illegal, showing whose side they're on.

Meanwhile the idea of "trickle down" economics, the panacea of the Tories since Thatcher, has been proven nonsense by the cost of living crisis afflicting our country. Any economic model that does not properly address inequality will eventually face a crisis harming long-term economic growth and welfare, and the longer we continue on our current path, the worse it will become.

Reports say up to 80% of the public support government action to end income inequality. That's why I have put a petition on 38 Degrees to make sure their voices are heard, and today I will call on the Government to back me in supporting a maximum wage.

Support the petition here