Tuesday, 15 March 2011

Just what is fair pay?

The report of Will Hutton's Fair Pay Review was published today (download from HM Treasury website). To call it a 'damp squib' would be to oversell it. The long touted 20:1 ratio between high and low earners in public sector organisations was abandoned as "illogical". Instead the main proposal is that pay differentials are published and 10% of the earnings of top public sector chiefs be subject to performance-related targets.

Nevertheless the whole debate about pay does raise some interesting questions, about how much people earn, what is fair and how we can judge it.

The Prime Minister and Local Government Minister Eric Pickles have highlighted public sector chiefs, especially in local councils, earning more than the Prime Minister. Peter Wilby writing for Public Finance describes their "campaign against public sector pay" as "pernicious, small-minded and innumerate" pointing out that cuts in council bosses' pay would go nowhere in ameliorating the funding cuts.

Wilby also point out that a council chief executive on c.£200,000 per year compares well with the equivalent in the private sector. Indeed the PCS union highlights executive pay in the outsourcing companies that have taken advantage of privatisation:

Capita: Chief executive, Paul Pindar - £1,618,218
G4S: Chief executive, Nicholas Buckles - £1,656,251
Hewlett Packard: Chief executive, Mark Hurd - $23,863,744 (£14,842,760 at exchange rate on 14 March 2011)
Serco: Chief executive, Christopher Hyman - £1,578,662

These bosses were the subject of an excellent Dispatches programme on Channel 4 last night.

It's also worth pointing out that private sector bosses have one outcome to hit: profit. Public sector bosses have a whole range of outcomes against which their performance is measured with financial management just one among many. For NHS bosses there will be a range of health outcomes, community engagement, and equalities targets - to mention just a few.

But the questions about elite of high earners in the public sector distract from the very real problems of low pay in the sector. For example the average civil servant earns £22,850 per year, and there are thousands on little more than the national minimum wage.

The questions of comparison are also more stark. It's easy to justify a £200,000 council chiefs salary in comparison with a corporate chief exceuitive managing a similar budget on seven times as much pay. However in what way is that same council chief executive worth 19 cleaners on the national minimum wage (and many are) or 8 police officers or 10 nurses? Is a GP worth 3.5 nurses? Is a FTSE 100 CEO worth 16 GPs?

The reality is in a capitalist society there is no link between earnings and social value (even if we could define such a concept). We therefore should make two things necessary: 1) that no one is paid a wage that excludes them from the rest of society; and 2) that we have a redistributive tax system that compensates for the market failure in wages.

Of course this excludes discussion of the millions not in work (pensioners, the unemployed, students, the ill or disabled, children). Just consider, Jobseeker's Allowance pays £3,403.40 this year and the basic state pension £5,077.80.

Will Hutton has failed to address the limited remit he was given, but the wider issues his study raises must be the subject of ongoing campaigning against poverty pay and poverty benefits.

1 comment:

tonyb said...

Even more damaging than the amount of take of CEO's is the damage they do in the pursuit of the shareholder value that boosts their bonus payments etc. If these people do anything it is to exert political pressure to get rid of anything that stops a quick profit and push their subordinate managers to wreak havoc with the standards of living of the firm's workers and so on and so on. £65.45 per week is what these individuals are worth.