By a striking coincidence turkey-fattening season in the City, otherwise known as bonus time, happens to be rolled out at the same time as the rest of the population is being told that the pay freeze, after last year’s big 4.2% drop in real wages, is now expected to last till 2020.
However, for the City’s 1200 ‘code staff’, i.e. those ‘responsible for taking and managing risks’, it’s not all gloom. They’ll be getting on average £1.8m this year, 78 times the average wage. Not bad for those who took and managed risks so skilfully in 2008 that as a result it required a UK bailout of £70bn, tore a hole in the Government budget amounting to 8.5% of GDP or £120bn (the difference between the deficit of 3% beforehand and 11.6% afterwards), and is still being projected to lead to a national debt of £1.4 trillion in 2013-4. Quite an achievement for just over a thousand people, some of the very richest in the country.
Apart from these lucky one-percenters who’ve done such sterling service for the nation, the other 99%, as the Occupy Movement so rightly calls them face a grim prospect, a lost decade as previously in the US. But in the US average wages have stagnated, not for a decade, but for nearly 40 years. It needs to be understood that in the UK on current policies there is no guarantee that the country will return to ‘normal’ annual pay increases even after 2020.
There are 3 reasons why the ultra-rich are insulated from this disastrous scenario for the rest of the nation.
- Uniquely they decide their own rewards. Technically it’s through remuneration committees, but these are self-chosen groups of chums who mutually back-scratch for each other.
- Pay is but a small fraction of their really big rewards. The latter are incentive schemes of every shape and form piled one on top of another, stock options, so-called fringe benefits (anything but fringe), golden handcuffs, vast share hand-outs, and often very large terminal payments even as a reward for failure.
- Remuneration as well as property transactions are increasingly undertaken offshore so that huge sums are vested in tax havens free of payment of tax.
This whole situation of grotesque inequality is potentially explosive, the first signs of which bubbling up are the UK Uncut demonstrations against corporate tax-dodging, the LSX Occupy protests, and the August riots driven partly by hatred of the police but also by revulsion at bankers’ bonuses. Today’s announcement by Vince Cable about giving shareholders a vote on lavish pay awards is not so much a sledgehammer to crack a nut as a nut to crack a sledgehammer.