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The Labour market determines pay based on power not fairness

UNEQUAL PAY SCALESWhat is an employee worth? Whatever the market pays is the conventional answer. But the market is not based on merit or justice, it’s based on power relations. Those who have the power will exert it to get more and more, while those who have little or no power will get squeezed and pushed down even further.

Against that background the fact that a thousand companies (out of 4.9m in Britain), including 18 FTSE-100 companies, have now committed to pay the living wage or above is seen as seen as a triumph. The chief executive of Ogilvy and Mather, the global communications company, chanted: “We will wear our badge with pride”.

Really? The living wage is all of £7.65 an hour, £8.80 in London, and not paying it before now should be a badge of shame. Nor with this minimum hike in wages will the ratio between top and bottom incomes in big companies like Ogilvy and Mather alter much: it will still be at least 185:1. The distribution of wages is still desperately unfair.Just how unfair it is is shown by how that ratio has changed in the last half century. Today chief executives of the FTSE-100 companies take home on average total remuneration of £4.5 millions, or £86,540 a week. An employee in those firms getting the living wage would take home £283 a week. The ratio therefore between the chief executive and his living wage employee is 306:1! Half a century ago it was 40:1.

The near 8-fold increase in that ratio has nothing to do with a more brilliant performance by the chief executive, since capitalism has performed notably less well in the last forty years compared with the preceding forty. It has all to do with the dramatic growth in corporate power, matched tragically by the big decline in collective bargaining and the suppression of trade union activities.

Nor are the excesses confined to the corporate world. In soccer, at the top end of the Premier League, players are now earning in the region of £180,000 a week, or over £9 million a year, and that is before sponsorship and image rights are included. Even the most average of players in the league take home more than £1 million a year, as do the coaches. How does that compare in merit or justice with 21% of all UK workers being paid below the living wage, including 85% of bar waiting staff, 43% of part-time workers, 72% of 18-21 year olds, and 27% of women (compared with 16% of men)? Yet all these latter jobs are important – otherwise the workers wouldn’t have been taken on at all – but that doesn’t stop them being paid 643 times less than top footballers. That cannot be justified on any conceivable rationale. Before inequality explodes with riots in the streets, we need a public debate on what the limits of greed at the top and misery at the bottom should be.


  1. jeffrey davies says:

    but even then the working people will still have to claim some benefits isnt it shamefull when all these companies who come here use slave labour take their monies offshore then dont pay tax on their proffits shamefull isnt it in this day and age jeff3

  2. P Spence says:

    Or as Marx more succinctly said: where rights are equal, power decides.

  3. David Pavett says:

    It is easy to agree that our current levelsof income inequality are grotesque. The more difficult bit is to say how income differences should be determined. Michael Meacher provides no clues as to his views on this.

    Any system in which income is determined by market forces will produce income inequality. Virtually everyone accepts that some level of income differential is necessary. What level of differential is fair? Is this even a meaningfull question? If it is then on what basis is an answer to be found? I think that it should be clear that posing the question as being about “what the limits of greed at the top and misery at the bottom should be” is a non-starter.

    I suggest that the issue should be posed in terms of (1) the distorting effects on market determination of income due to increasing concentration of economic power and (2) the structure of work itself.

    Could it be that factor (1) comes into play when companies become so large the the skill of running them becomes the skill of market domination by product recognition, fashion and other factors extrinsic to market operation? This would allow for quasi-market competition for top jobs which has little or even nothing to di with value generated and therefore has no real market restraints. Among other things this leads me to think that the time is overdue for a revolutionary transformation of advertising and the industry based on it.

    Factor (2) should be of far more interest to people on the left than it has proved to be so far. While work is divided into shit jobs and interesting ones there will always be be a strong tendency towards differentiaton between shit wages and more interesting ones. The long term solution must be the transformation of work so that insofar as shit stuff can’t be done by machines everyone does a bit of it. Why shouldn’t Executives clean their own offices? It would be said that they are not paid all that money to do such stuff. Indeed so. Conversley menial work could be made more interesting with added responsibilities. Why should road sweepers, for example, not also be trained to note and report on the state of pavements and roads and other aspects of public infrastructure? It seems to me that the the restructuring of work is a vast topic crying out for attention from socialists but which has so far hardly been noticed.

    1. Robert says:

      You only need to look at the labour councils in Wales who are stating they will now use zero hour contracts for the whole work force.

      If labour council refuse why the hell should companies.

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