The rich ger richer

"So we're left with differences between the rich and poor - as Lady Thatcher said on the link above the left would like the poor to be poorer as long as the rich are less rich"

According to a recent IFS report

"Going forward we know with a rather depressing degree of certainty that average incomes are likely to have fallen in 2010-11 and are likely to fall further in 2011-12. Real earnings are falling, ......those on high incomes will be hit by the 50p tax rate and other tax changes. It looks as though we will all share in this fall in living standards."

My take - there is a real possibility that (in the short term, at least) inequality will reduce whilst the poor get poorer in real terms. Time to see if Lady T was right?

I think paying higher wages is not going to help at all. In fact it will be highly counterproductive. Raising wages is just going to make the UK less competitive in a world where there in a huge excess of productive capacity.

As global productive capacity shrinks to fit consumption, higher unemployment will likely result. Wage growth needs to be capped to allow us to compete with cheaper emerging economies.

The solution for the UK is to try to reduce the average cost of living, not to raise wages. Unforunately that requires a radical shake-up, rather than another round of pointless tinkering with the post WWII nation state.
Can you imagine any political party deliberately causing a major element of the cost of living such as house prices/rentals to fall? No political party would risk alienating the baby boomers whose wealth is based on property.

So it seems instead that we'll get structurally higher unemployment and a lower average standard of living, albeit still far better than most of the emerging economies we now compete with.

Excellent posts ttosca

Xenia, when there is high competition for work it is harder for employees to negotiate a living wage or an increase. However it is still right and important to pay employees a fair wage. Therefore this requires legislation or unions to enable a better balance. Your second paragraph is complete piffle, by the way.

When workers are hard to find wages go up. When lots of people are out of work and fighting for jobs wages are not likely to go up. It's just how markets work. Neither political party seems keen to cap wages or return us to the 99% very top tax rate we briefly had in the late 70s as it doesn't work. The other alternative would be nationalise but owning some of the banks hasn't led to lower pay there and nationalised industries don't work too well.

So we're left with differences between the rich and poor - as Lady Thatcher said on the link above the left would like the poor to be poorer as long as the rich are less rich. The right want market freedoms and in consequence the poor will in absolute terms which are the only ones that matter (unless you have a chip on your shoulder about relative poverty/earnings) have more.

British bosses' pay rose by 45% last year. But don't ask the Institute of Directors for a rise

Brendan Barber of the TUC went before the bosses' organisation to plead for Britain's squeezed workers. It didn't go down well

A few squeaks of modernisation are emanating from the crusty old Institute of Directors. The pinstriped fraternity has shifted its annual shindig from the venerable Royal Albert Hall to the O2 arena in Greenwich. An unsettling blast of Lady Gaga welcomed one speaker onto the stage. And veteran director general Miles Templeman is shortly to step down.

Certain old allegiances, though, never change. Britain's top trade unionist, Brendan Barber, took to the stage on Wednesday, gazed out at the massed ranks of sceptical faces, folded arms and charcoal suits, and remarked: "At the TUC, this is what we call a difficult away fixture."

He got a brief laugh, but that was the only sign of warmth. The TUC man played his role as the pantomime dame, telling Britain's top employers everything they didn't want to hear. Amid dour economic conditions and brittle corporate profitability, it takes a tough character, even perhaps a contrarian, to call for across-the-board pay rises. But Barber is that man.

"Pay your workers more," said Barber, to stony silence. "Sounds ridiculous, but hear me out."

He suggested that household debt, forecast to reach £2tn by 2015, could become "an albatross" around the neck of Britain's economic future. "Unless workers can see their pay packets grow, we won't be able to build sustainable economic demand."

He added: "Now is surely the time for a real change in direction, to build a fairer, stronger economy, to nurture demand based on wages, not debt."

Barber threw in quotes from Ben Bernanke and former IMF chief economist Raghuram Rajan to support his case. But Britain's employers aren't buying it.

As the graph shows, once you exclude the ups and downs of bankers' bonuses, earnings are flatlining. Average annual pay growth in the economy dropped from 2.3% in January to 2% in February ? well below the rate of inflation, which is 4%. The Institute for Fiscal Studies forecasts a 2.2% fall in median incomes between 2009 and 2011. Living standards are in a vice-like squeeze.

But the old arguments between unions and employers are as entrenched as ever. Barber, under questioning, defended his movement's enfants terribles, including bellicose RMT provocateur Bob Crow. And the view from the floor at the Institute of Directors to Barber's call for higher wages bordered on scornful.

"The world is full of dreamers," said one delegate, Sohail Amer, chairman of a hi-tech lighting manufacturer, McGeoch Technology. "But there's a difference between dreaming of something and actually going out and doing, achieving something."

Amer bluntly blamed "dinosaur unions" for the loss of Britain's coal and motor industry. And, for good measure, he took a pop at education: "I have to employ graduates who can't even read or write English."

The prospect of pay rises got similarly short shrift from Andrew Rodda, whose Cornish dairy, AE Rodda, is famous for its clotted cream. He pays "slightly above" the minimum wage but reckons staff can be unduly spendthrift. "We're all told you must go on holiday all the time and do all these other things," he complained. "There's more to be gained from teaching employees how to manage their money more effectively than giving them more money to mismanage."

And Philip Higgins, managing director of an engineering recruitment firm, Rullion, reckoned it made little sense to raise wages in the middle of a period of austerity: "In a climate where costs are being tightly controlled and in many cases reduced, raising salary levels seems a simplistic viewpoint."

So pay rises? Not likely, despite evidence that many workers are struggling to make ends meet. A report from London mayor Boris Johnson's economic unit last week concluded that one in six employees in London are earning below the £8.30-an-hour "living wage" needed to make ends meet in the capital ? a figure which has been described by the mayor, hardly a leftie, as "morally right".

The IoD's director general reckons Britain's employers are too often characterised as heartless mill owners. Templeman said: "The idea that companies are exploiting their employees, or exploiting their customers, is no longer true ? if it ever was."

Maybe. But let's remember that boardroom pay at Britain's top 350 companies jumped 45% last year, as a revival in bonuses heralded a return to the good times. The High Pay Commission will produce figures tomorrow suggesting that the proportion of pay going to Britain's highest earners is reaching a level unseen since Victorian days, tilting us dangerously towards a "trickle up" economy.

Britain's directors are foolish to dismiss these concerns. During the good times, every multinational boss loves to waffle that talented staff are a company's most valuable asset. Loyalty works both ways ? companies will ultimately benefit if they stand by their people in the depths of a downturn, too.

www.guardian.co.uk/business/2011/may/15/pay-rises-brendan-barber-comment?CMP=twt_gu

The only reason we are not in the same boat is because of George Osborne.

The only reason we're not in the same boat as most of the rest of europe, which has experienced > 2% growth, is because of George Osborne.

Thanks to his anti-Keynesian policies, the economy has flatlined.

How do you know the super rich don't give to charity??????? Up to them what they do with their money, same as people on benefits, no one tells them what to spend their money on

Idiot.

fingernails-

ttosca Only a finite amount of money? What nonsense. Wealth can be created, and is - but only by entrepreneurs.

No. Re-read what I actually wrote. At any one given time, there is a finite amount of money. Of course workers can create wealth. If this were not possible, we would still all be living in huts.

My point is that it matters very much how much the CEO and top employees are paid, because it affects the salary of everybody else in the company. A company has a limited amount of revenue to pay wages. In other words, wages are budgeted for. If the top ten employees pay themselves insane amounts of money, then they are taking out more money from the pot, and this means the lower paid workers are paid even less.

Ultimately, we're reaching a pre Henry Ford situation here, where employers are breaking a fundamental rule to keep the wheels of the Capitalist turning: pay your employees enough wages to buy your products (in his case, cars).

If you don't pay the lowest paid enough money to get on in life and buy consumer goods, the economy will grind to a halt, because you wont have enough people who can afford to buy your products. Median wages have been stagnant or falling for decades, while the cost of living has increased. We kept the economy going through credit, but this is no longer available. So either we start paying people decent money, or we continue to flatline the economy.

Its been a good, interesting debate. 'night all.

LFN, Im afraid the whole of the EU has experienced stronger growth than the UK.

Most of the EU countries have had stronger growth than the UK.

Its very disappointing, but predictable. Furthermore, when the deficit grows and our economy does not, the debt becomes less and less affordable.

Our national financial situation, sadly, cannot be compared with France and Germany. They do not have 12% annual deficits.

"The rest of the EU"??

You mean those countries like Greece, Portugal and Ireland with humongous structural deficits?

The only reason we are not in the same boat is because of George Osborne. Yes, it will be painful in the short-term - but the pain will be well worth it. I think that after we reach fiscal surplus, the government should pass a law, saying that any future Chancellor will have to call a referendum annually if he or she wants to borrow money. You can't trust the Labour party with budget responsibility - so just take the debt levers out of their hands, and put them into the hands of the public.

I think you misunderstand the reasons people get fired in companies. Generally it is strategic or a response to changing technology/markets or financial situation, although attempts may be made to retain a few high performers. Firing on an individual basis where the individual is not a good fit for the job is rarer.

Within a business, fully leveraging the capacity of the workforce leads to superior performance.

Similarly, within a country, leveraging your entire workforce leads to superior results. 'get everyone doing something useful'.

Unfortunately, this government is determinedly pursuing the opposite, and the result can be seen in our flat no-growth over the last 6 months, while Germany, France and the rest of the EU stride ahead.

I wouldn't disagree with that.

Again, the difference is that the worst performers in successful companies aren't tolerated by anyone. They get fired. Lack of contribution is simply not tolerated.

Unfortunately, as a society, we can't get rid of the benefit scroungers, or the hundreds of thousands of economically draining and socially dangerous immigrants Labour imported.

The two situations aren't comparable. When people are selected by ability, flat structures make sense. Where they aren't, they don't.

They are more equal in terms of power. One advantage of this is that the capacity of the workforce can be more fully leveraged, as each employee's knowledge and views is more equal therefore more equally valued.

When each employee feels valued, the workforce has a higher level of motivation. There are many other positive effects, all of which contribute to superior performance.

Flat business structures make sense but the only way they are more "equal" is in having fewer middle managers - but not necessarily in terms of pay.

Bill Gates used to get "paid" (in share value) many thousands more than the ordinary Microsoft employees.

Also, businesses can fire deadwood - and successful ones do. Getting rid of poor performers is something that the public sector needs to do, on a mammoth scale, and with great urgency. Unfortunately, the unions and their Labour party minions feel it necessary to protect mediocrity and to fight productivity increases in every way they possibly can.

Its quite embarassing to watch Thatcher these days, its such an old video but it shows how much we have progressed since then. (I am pleased to see a woman PM, but embarassed she got it so wrong).

It is true that more unequal societies are poorer on a wide range of measures - health, educational achievement and standards, trust in each other, community spirit, etc etc. All are poorer in more unequal societies.

I have seen this applied in business too - those with a flatter structure can achieve better performance.

ttosca Only a finite amount of money? What nonsense. Wealth can be created, and is - but only by entrepreneurs.

I generally find that the left have never recovered since the right won the war against Communism in the late 80s and early 90s. They still bear the scars from having the ultimate expression of their ideas so soundly thrashed by Thatcher and Reagan.

May be he needs better advisers (!). If he sold shares he would pay capital gains tax on those. the first £10m in your life is taxed at 10% not 50%. Even if he'd used up his £10m he would still be paying just 28%.

Thankfully year by year capitalism is proving its worth as country after country moves over to our system. We are slowly getting there but there remains much work to be done.

Ttosca
not sure about the trickle down not working, because some people in our society have not fallen on hard times they ARE still having new windows, conservatories, extensions, kitchens etc, they are still employing local work force who are on a knife edge.
My cleaner is over run with work and is saying no to people every week.
If everyone was in the shit at the same time we would totally grind to a halt.

I have no issue with people making huge amounts of money as long as they pay their taxes. One of the directors of DH's company has just sold £2million of shares, alot of money but he gave £1million to the government in tax, why the fuck shouldn't he enjoy his £1million without any guilt at all when he has handed so much to the government?

Xenia It makes me a bit sad to watch these old videos of Maggie. If only Cameron had an ounce of her conviction!

Cameron doesn't have her 'conviction' because the Tory parties have since become known as the 'Nasty party' since Thatcher was in power. Knowing that showing his true colours would assign him to the opposition for another 12 years or so, he chooses to try to put a friendly face on his nasty sociopathic policies.

If the rich have got richer then the poor should be jumping up and down with huge smiles as they will benefit. We will have the funds to keep paying for them to live without working and the like.

Well, no they won't. Unequal societies are generally unhappy societies and score poorly on a number of quality of life indicators.

You can't escape the fact that at any one given time, there is a finite amount of money going around. If you make tax less progressive, more money will be taken from the rich. If you don't have strong employer protections, the rich may get richer, but the poorer will suffer job insecurity and lower wages. If you privatize essential public services, the rich providers may get rich from exploiting needed services where demand is inelastic and there is poor or no competition, but the poor will suffer from higher prices.

The 'trickle-down' theory is nonsense, and has been shown to be nonsense over and over again. The rich don't spend their wealth the way the poor do. They hoard it and invest it in non-productive financial tools. The poor and middle-class, on the other hand, will spend all or most of their income on essential living costs.

Nobody has an appetite for destructive Thatcherite policies anymore, Xenia, except for a few Tory sociopaths. You're fooling no one.

Women often do things pretty well. Neither party is radical. Both Labour and the Tories wanted and want fairly similar cuts. Not much to choose between them but the current lot will do for now.

Xenia It makes me a bit sad to watch these old videos of Maggie. If only Cameron had an ounce of her conviction!

Thanks for the link
www.youtube.com/watch?v=okHGCz6xxiw

She is right of course.

If the rich have got richer then the poor should be jumping up and down with huge smiles as they will benefit. We will have the funds to keep paying for them to live without working and the like.

The proposed £26k total family benefits cap is a great policy too and they must stick to it.