Money’s too tight to mention

The UK’s ‘starkly unequal labour market’ will get much worse as the coronavirus pandemic continues unless more is done to redistribute wealth and redress the imbalance for those at the wrong end of the pay scale. This is according to a report from think tanks Autonomy and the High Pay Centre which suggests applying a wage cap to the highest earners and using the savings to improve salaries for the rest of the workforce.
The report’s authors say that as the ‘UK economy buckles and growth crawls to a halt, the government – and business leaders – need to consider mechanisms by which existing cash in the labour market can be more equally distributed, so as to save livelihoods and industries’.
The report finds that a minimum wage of £10.50 could be introduced if wages were capped at £187,000. A maximum wage of £100,000 could increase the annual median wage of middle and low income earners by £3,535.
Appetite for a £187,000 cap would seem likely to be limited among the 0.6% of earners who would be affected, and remuneration committees seem unlikely to lead the charge. Whilst we have seen salary cuts during the Covid-19 pandemic, variable pay (the really valuable bit) has been largely untouched. And it’s clear that such cuts are intended to be temporary.
Nonetheless the Autonomy and HPC analysis opens up fundamental questions about how we should be thinking about executive pay, rather than the usual yawn-inducing approach of attempting to put ESG Theme of the Week into LTIP targets in the vain hope this will make any difference to corporate behaviour. As we’ve said ourselves recently, this is no time to play it safe on pay reform.

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