The rich ger richer

[newwave]

It is reported today that the richest section of our society has seen their wealth increase by 20% since the Tories came to power whilst the average wage has lost value.

Anyone suprised by this. Same old Tories

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.

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

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.

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.

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.

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

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.

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.

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.

"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'm sorry, but the idea that the developed world should compete with emerging countries like China and India for wages and workers rights is laughable.

Such a situation would take us back to kids working in workhouses.

No, there is plenty of wealth to go around. The rich have never been richer, and in fact, are getting richer ever year. There are plenty of things we can do to ensure that people who work can afford a living. Clamping down on tax avoidance is something that can bring in tens of billions every year. Capping renumeration at the top will ensure that companies can afford to pay their workers a working wage. A 'living wage' should be put in place so that no person, if they work hard to make an honest living, struggles to pay their bills and heating.

A race to the bottom is not a solution but a quickest possible way to return to Victorian working conditions. People will not tolerate this. If you think there is unrest in Greece, just wait until the majority of the public in the UK can't afford to pay for the basic cost of living.

The myths the realities...

'Big money is needed to get the best chief executives'

That assumes most are brought in, when 59 per cent of CEOs in the FTSE 100 were already at the company for five or more years.

'Being a CEO is risky, so they need to be compensated'

Hardly. Only six CEOs left FTSE 100 companies in 2009, a turnover rate of 6 per cent, which is less than half the national average.

'Big pay packets are linked to business success'

What about the bumper pay for bankers that caused the crisis? Over the past 10 years, CEO pay has quadrupled while share prices have fallen.

'Big bonuses mean better results'

Not necessarily. Research suggests performance-related pay works 50 per cent of the time ? and bonus culture didn't stop bankers leading us all to crisis.

'Without big pay packets, executives will be lured abroad'

Only one FTSE 100 company has had its chief executive officer poached by a rival in the past five years ? and that was by a rival British firm.

'Our high pay is in line with other leading countries'

It is significantly higher than the rest of Europe ? it is less than in the US, but its CEO pay is 170 per cent higher than the rest of the world.

'Highly paid people at the top boost a company's success'

Having a pay gulf between staff at the top and bottom of a company can damage personal and corporate relations. Just look at how popular bankers are now.

'Top earnings have always risen faster than average wages'

Until 30 years ago, the gap had been decreasing. From 1949 to 1979, the proportion earned by the top 0.1 per cent decreased from 3.5 per cent to 1.3 per cent.

'Top earnings rise at the same percentage rate as average pay'

No. The earnings taken by the top 0.1 per cent increased by 64.2 per cent in the past decade, while average pay went up by just 7.2 per cent.

'Attempts to regulate CEO pay would be bad for the economy'

When you pay disproportionately high rewards in one sector ? such as finance ? it is harder to attract good graduates into other vital areas of work.

www.independent.co.uk/news/business/news/exclusive-salaries-for-top-executives-are-rocketing-out-of-control-2284397.html

If you look at Labour's record over their 3 terms - things aren't quite as bad in terms of inequality as it first looks. Yes, the richest top 10% pulled away (the top 1% especially). But if you take the other 90% then incomes did close up - as poverty decreased.

As other have suggested the very highest incomes are difficult for national governments to control in a global economy. Actually ttosca's c & p illustrates this by outlining the problems, without offering sufficiently actionable solutions.

It will be interesting to see the impact of the 50% tax (and other tax increases) on the top 1% of income tax payers.

High income tax just means you move away or convert income to caapital where you can and spend more money on tax advisers and the Government receives less of a tax take. It also stops people moving businesses here. It damages the poor.

I guess we will found out if 50% tax is the tipping point. Apparently we should have some idea by Jan 2012.

Also, it looks like the High Pay Commission's Report (that ttosca was quoting) is an interim one. The recommendations come out later. Maybe I'm being cynical - but I'm not holding my breath!

High income tax just means you move away or convert income to caapital where you can and spend more money on tax advisers and the Government receives less of a tax take. It also stops people moving businesses here. It damages the poor.

That would explain Sweden, and, in fact, most of europe, where taxes are higher than the UK and where there is far less poverty and far less wealth inequality.

ttosca - in recent years Sweden has been reducing it's top rate of tax in order to halt it's 'brain - drain' (to London mainly). So has Denmark....

There have been well educated, intelligent Scandinavians working in the City for years.

I bet they breathed a sigh of relief when we introduced our 50% tax rate.

And the Top UK tax rate is the fourth highest in Europe. Highest is Sweden with 56% (down from 60% a few years ago).

The UK's top tax rate is higher than most other European countries (including France and Germany).

Nominal tax rate has very little to do with what the rich actually pay. In that respect, the UK somewhat of a tax haven, especially for business which actually has a nominal corporate tax rate which is amongst the lowest in europe, and where UK businesses seem to be able to evade tax through off-shore tax havens, and shady deals with the Revenue & Customs (viz. Vodafone).

The idea that high tax rates harm the poorest is complete nonsense. Corporate taxes and taxes on the wealthiest have been decreasing for decades. We haven't seen the poor prosper under these conditions. On the contrary, wealth inequality is greater than ever, wages have stagnated, and there are as many poor (if not more) than there have been in decades.

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

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."

I doubt Rodda applies those sentiments to himself and if he is paying "slightly above the minimum wage" I doubt his staff can afford may luxuries including holidays.

What a scumbag.

Now I'm confused - are you saying high tax rates are good for equality (as in Sweden) or irrelevant?? You can't have it both ways.

The UK might have a reasonably low corporation tax rate, but total corporation tax collected is high compared to other countries, and contributes the highest share of overall tax of any country. Tis - a very successful tax for the UK.

Can I just point out that not all top rate tax layers are trying to avoid their tax. Many, including my husband, are glad to pay back into a system that has served them well. To do anything other than that would be greed IMO.

ttosca speaks a lot of sense on this and many other threads.

jack-

High progressive taxes are good for equality if they are actually collected and spent providing services to the public.

Nominal taxes only show part of the picture. Corporations and rich individuals do their best to avoid them, so there should be both a crackdown on tax evasion and taxes should be collected in a way which is harder to avoid. For example, one idea is the Land Tax:

www.guardian.co.uk/business/2011/may/02/land-value-tax-oecd-comment

In any case, europe has run progressive high-tax regimes for decades and has relatively less poverty and far less wealth inequality than low-tax (or low tax-collecting) countries like the US and UK.