Not so relaxed about the filthy rich

The gap between rich and poor is growing at an alarming rate and nowhere is that more starkly represented than this week’s High Pay Centre report.

Chief Executive pay in FTSE 100 companies rose by a staggering 15% between 2012 and 2013 (the latest data available). Meanwhile last week, the Office of National Statistics (ONS) published data showing actual wages falling. Not just falling in relation to the cost of living but a cash fall. This is the first time since records began in 2001 that this has happened.

These alarming pay figures confirm that Labour is absolutely right to focus on the cost of living crisis. The economy is finally growing again after the Tories choked off the recovery. But the actual money in people’s pockets every month is falling. It’s not just falling against inflation, the cash value is also dropping.

The High Pay Centre’s report also shows three decades of a growing gulf between the highest and lowest paid. In the early 1980s a chief exec earned about 20 times more than their lowest paid staff. In 1998 it was about 60 times more. Today it is 160 times more.

The growing gulf in pay is damaging to equality, damaging to communities and damaging to our economy.

We now have a situation where millions of the lowest paid work but live in poverty. They have their subsistence wages topped up by the taxes of middle earners through the benefits system. Often even this help still isn’t enough to lift them out of poverty. And all while the highest earners laugh all the way to a Monaco bank.

This isn’t about blocking aspiration – it is about social justice. Can our CEOs really credibly claim to be 160 times more effective than their lowest paid staff. Or, if you want to make the job for job comparison, eight times more effective than their 1980s counterparts?

In Camden, Labour has put in place a minimum earnings guarantee for the lowest paid. By the end of this term we’ll be paying full time staff at least £20,000 per year. Moreover our chief executive earns less than ten times more than the lowest paid. Camden has a gross budget of £1.3bn and runs hundreds of services for our quarter of a million residents, tens of thousands of businesses and millions of visitors a year. It is a complex, demanding organisation to run.

The private sector could follow suit and if they don’t then an incoming Labour government should act to force them to.

We need to significantly raise the National Minimum Wage – and commit to keep raising it, pegged above inflation. We should legislate to formalise the living wage where the cost of living is higher. This is desperately needed in London and the South East. Too many families have one or two earners who trudge out to work every day, put in long hours and still can’t make ends meet.

But we also need to act on pay at the top too. This growing pay disparity really means that more of the wealth created by a successful company is going in to the pockets of a very small handful of people. If more is paid to the top earners, less is paid to those at the bottom and more and more of the lowest paid workers are pushed into poverty by stagnant, or even falling, wages. We know we’re already topping up these subsistence wages through benefits, but we’re also storing up all sorts of other problems that poverty creates.

Increasing wage disparity is also harming the economy now. We know that the less you earn, the more you’ll spend more when a pay rise or windfall comes along. As opposed to high earners who save or invest in a single asset. Low earners put their money straight back into the economy.

Low pay is, in part, a product of high and escalating pay at the top. The more that a company’s salary bill is concentrated on a few super wealthy executives the less there is for everybody else. We can’t tackle low pay, unless those at the very top accept a little less.

It costs one million pounds to pay 1000 people £1000 more per year. It sounds a lot. Until you consider that average FTSE 100 chief executive pay is now well over four million pounds, and where there’s a chief executive on  that sort of money there will also be a number of other directors on similar packages. If 2013’s 15 per cent pay rise became a ten per cent pay rise then companies could easily afford better remuneration for the lower pay scales.

Camden is leading the way on tackling low pay and curbing high pay. But compared to the private sector employers in the borough, our workforce is a drop in the ocean. The private sector needs to start pulling its weight in tackling low pay by curbing some of its excessively high pay and allowing all employees to more equitably share in the fruits of their labour.

And if the private sector doesn’t start to take their responsibilities more seriously Labour needs to act to force companies to behave more responsibly to all their employees, not just look after those at the very top.

Sarah Hayward is Leader of Camden Council