High pay commission forecasts top earners’ slice of national income will rise from current 5% to 14% by 2030 Data blog: are the rich really getting richer?
Wage disparity between the UK’s top earners and the rest of the working population will soon return to the levels of the Victorian era unless action is taken to curb executive pay, a new report by the high pay commission claims.
At the same time a new ICM poll shows that 72% of the public think high pay makes Britain a grossly unequal place to live, while 73% say they have no faith in government or business to tackle excessive pay.
The high pay commission was set up last November to scrutinise the rising pay of those at the top of the public and private sectors. Its research suggests that if current trends continue, the top 0.1% of UK earners will see their pay rise from 5% to an estimated 14% of national income by 2030, a level not previously seen in the UK since the start of the 20th century. At present, top earners in this group take as big a slice of national income as they did in the 1940s, the report says.
Deborah Hargreaves , chair of the high pay commission and a former business editor at Guardian News & Media, said that the report provided evidence that the pay gap between the corporate elite and the general public was widening beyond control. “Set against the tough spending measures and mixed company performance, we have to ask ourselves whether we are paying more and getting less,” she said.
In 2010, the average annual salary of FTSE 100 chief executives was more than £3,747,000, 145 times greater than the national median full-time wage of £25,800. Executive pay dipped slightly during the recession, but the report predicts that by 2020 the ratio will have spiralled up to 214:1.
Nicola Smith, chief economist with the TUC, said that the report raised concerns about the wider workings of the economy: “Average pay growth was slowing before the recession, wages took a real hit during the recession and we’re now seeing very slow wage growth coupled with high consumer inflation. There are real issues of fairness at a point when workers are facing the greatest squeeze in living standards for decades.”
Separate figures released by the Institute for Fiscal Studies last week confirmed that income among the top 1-2% of earners grew much faster than for the majority of workers during the Labour government years, a factor the report blames for an increase in social inequality since 1997.
The ICM poll shows that, from a range of options, the majority of the public (57%) wants top pay linked clearly to company performance, while half (50%) want shareholders to have a direct say on senior pay and bonus packages.
Robert Talbut, chief investment officer of Royal London Asset Management and a member of the high pay commission, said that the ICM poll showed a clear public interest in tackling excessive pay.
“Increasingly there is a clear business interest in doing so too, in part because companies depend on public support but also because the ever more complicated pay packages designed to incentivise performance for top executives – which have contributed to a ballooning in pay at the top – do not appear to have worked,” Talbut said. “The clear link between executive pay and company performance appears tenuous at best.”
The Institute for Public Policy Research (IPPR), a left-leaning thinktank, said that recent research showed the public was ready for politicians to tackle income inequality.
Nick Pearce, director of the IPPR, said a YouGov poll revealed that two-thirds of people believe the pay gap in their workplace is too wide.
“It is vital that the government use this public support to act and start to narrow unjustified inequalities in pay and reward,” he said.
In an interview with the Guardian last month, John Cridland, the new director-general of the employers’ organisation the CBI, admitted it was an issue that needed to be addressed. “Business has to show high levels of remuneration are payment for results,” he said. “It’s not payment separate from the achievement of senior executives.”
The high pay commission was formed last year and is due to make its final report in November. Pay Executive pay and bonuses Family finances Economics Work & careers Economic policy Poverty Graham Snowdon guardian.co.uk © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds
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