Jeremy Corbyn’s recent announcement of a wage cap for companies given government contracts is a step toward making pay in the United Kingdom fairer, more equal and more progressive. But this policy alone is not enough to overcome the gross inequalities that Thatcherite neo-liberalism and recent Tory-led austerity has produced. To begin to produce a truly progressive wage culture, further policies are needed. A first would be a similar cap on bonuses, especially for companies working for the Government or part-owned by the public. Similarly, the introduction of a ‘Robin Hood’ tax on banks and the financial sector would see billions of pounds added to the public purse each year, allowing the government to better run vital services and pay its employees. Finally, a set of policies to address the gender and race pay gap would lead to a much fairer economy at all levels of society.
In January 2017, Corbyn announced he would place a 20-to-1 wage ratio for companies who are given Government contracts, saying “A 20:1 ratio means someone earning the living wage, just over £16,000 a year, would permit an executive to be earning nearly £350,000. It cannot be right that if companies are getting public money that can be creamed off by a few at the top”. Extended to all companies, this policy could see executive pay come down to almost acceptable levels, or, preferably, bring up the wages of those at the bottom of society and raise the average wage in the UK which currently sits at £28,200. A figure made embarrassing by “Fat Cat Wednesday”, the day on which many top executives and CEOs have earned this amount, which is generally 3 or 4 days in to year. This pay ratio, around 129-to-1 at many top companies, is entirely unacceptable. With people increasingly relying on food banks, part-time work, and second jobs, allowing those at the top to exploit their hard work and garner huge profits shows a stunning divide in British society, one which Corbyn’s policy would begin to shrink.
One issue this policy would not address, and is a continuing point of debate and anger, is the issue of large bonuses given to CEO and executives, especially those of companies that are partially owned by the public. In 2015, British banks gave out around £5 Billion in bonuses despite a fall in stock prices and cutting thousands of jobs. In the same year, both Lloyds and the Royal Bank of Scotland, both of which are taxpayer backed, gave executives multi-million pound bonuses in payments and shares while the public who own them saw very little remuneration in this time. A similar policy to that of imposing a wage ratio could also see improvements to public services and the bank balances of regular employees at these corporations. By ensuring a percentage of executive bonuses must be paid as tax of reinvested into the company in the form of wages rises or better bonuses for regular employees, the work of all in the success of a company would be better recognised and compensated. Without those working the coalface, the profits skimmed by fat cats would not exist and as such the least the government should be doing is recognising this and pushing employers to do the same.
In a similar vein, a ‘Robin Hood’ tax on financial transactions would impose a tiny levy on banks while earning billions for public expenditure. This income could be used to help national and worldwide recovery from the 2008 financial crash and recent austerity policies without further cuts or spending reductions. The group heavily pushing for this tax to be put in place both in the UK and globally correctly argue that the financial sector is responsible to help clean up the mess it made, big enough to pay for it, and under-taxed to the point where this tax is essentially necessary. They suggest that the tax, which at 0.05% would earn the UK at least £8 Billion a year, could be used to halve child poverty, stop housing benefit cuts and save 350 at-risk libraries and still leave almost £2 Billion to spend. Around the world, the money raised could be used on primary education, recovery from natural disasters in the global south, and toward fighting climate change. Introducing this tax would take one of the least progressive and most unequal sectors of the economy and reinvest a portion of its profits into overcoming social and environmental ills.
One major issue facing a truly progressive pay system is the gender and race wage gap. While fixing this issue is hugely complex, there are some simple solutions to kick-start the movement toward narrowing this gap. One major way to help close this gap is to increase paternity leave, helping to split the burden of childcare between men and women. Current UK law allows for 52 weeks of maternity leave and 1 to 2 weeks of paternity leave placing the burden of care predominantly on mothers. The issue of unpaid labour has been focussed on by many feminist economists but is still predominantly ignored by governments. One policy that has been put in place toward fixing this problem surprisingly came from David Cameron who, from 2018, has made it so companies with over 250 employees will be placed on a league table based on their internal gender pay gap. Naming and shaming companies who fail on this front should start the easy transition toward equal pay for equal work.
With a relatively simple set of policies, Labour can begin to lead the charge toward a pay system that benefits everyone, not just the top of society.