With gaping differences in pay persisting, is it time discuss the more radical idea of a maximum wage? HPC Deputy Director Luke Hildyard writes for the ‘i’ newspaper
The minimum wage was recently voted the most successful government policy of the past 30 years. Could a maximum wage prove equally popular? The time has come for the idea to be seriously debated.
The average pay of a FTSE 100 CEO has rocketed from around £1 million a year in the late 1990s – about 60 times the average UK worker – to closer to £5 million today, more than 170 times.
The High Pay Centre’s new report suggests that we should not employ a rigid cap to tackle such excess, but instead raises the idea of a maximum pay ratio. The highest paid employee of an organization would not be allowed to earn more than a fixed multiple of the amount earned by lowest paid.
Some forward-looking organisations already operate a similar policy. At John Lewis, the ratio is capped at 75:1. At TSB the gap between the Chief Executive and frontline staff is limited to 65:1. The idea also has strong support from the public – polling suggests that around 80% are in favour.
Fundamentalist libertarians might howl with protest, but are they really suggesting that executive pay packages hundreds of times the size of ordinary workers earnings are good for society or the sign of a functioning market?
Minor tinkering with corporate governance reform has failed to bring executive pay to more sensible or proportionate levels. We now need to contemplate more radical measures.
(this article originally appeared in the ‘i’ newspaper)