Peter Hain's humble request that city firms give their bonuses to charity is too laughable for words. The elaborate pose of powerlessness of the modern politican makes him an embarrassment to his profession, which is, after all, about power. If he and his party dislike the obscene inequality the economy is generating, they should legislate to prevent it. Simple really. That is why we live in a democracy.
With £8.8bn. heading the way of the super-rich in bonuses alone, the messages from Hain's colleagues about pay restraint ring rather hollow. According to the Guardian, average pay deals have risen to 3.5% in recent months. Research by pay specialists Industrial Relations Services (IRS) shows a 0.5% rise in the three months to January compared to the previous quarter while a study of more than one hundred wage settlements reveals that half were worth between 3% and 3.9%.
If you feel inclined to condemn these pay rises, remember that, since the retail price index is currently at 4.2%, these people are actually taking a pay cut. And also remember the deceptive nature of averages. While some people may be getting a little bit more, although not enough to keep pace with price rises, some fat cats are making a very great deal more. The sharing out of the value of the work of people in this country is becoming more inequitable year after year. No wonder we all feel poorer: it is because more of the value of our work is being extracted by the super-rich.
But what about inflation? The familiar wail of the mainstream economics commentator. The reality is that inflation is a fear for the rich since it erodes the value of assets. So long as you have index-linked pay a gently rising rate of inflation can be very comforting if you don't own a lot. The reason we are all struggling to pay off mortgages compared with our parents' generation is that the rampant inflation of those times simply eroded their debts for them.
In his New Year message, TUC General Secretary Brendan Barber called for a national debate about top pay after revealing that for every £100 earned by a top company director in 2000 they now earn £205, while ordinary employees have only seen a £6 increase in every £100 they earned six years ago (after allowing for inflation). Top pay is increasing 17 times faster than average pay. And if City bonuses had been shared among everyone at work in the UK, we could all have enjoyed a Christmas bonus of more than £350.
The situation is mirrored in the USA, where the average hourly wage for the top 10 percent of jobs has increased by 45 percent since 1990, far outpacing jobs in the middle and lower end (see the graph). The median hourly wage has increased 16 percent over that same period of time. (Data from: http://www.workforceexplorer.com/ )
In 1980 the average CEO of a large firm in the United States was estimated to have made 42 times as much as non-supervisory workers. By 1995, the ratio of inequality between the shop floor and the executive suite had increased to a multiple of 160. In 2000, they were estimated to have been paid 458 times as much as ordinary workers. And the gap continues to widen aftrer a downward trend during the recent bear market. (Data from AFL-CIO)
These vast differentials in pay awards cannot possible be justified on the basis of productivity. And as recent research shows that those with the most money are also the most polluting (an obvious finding, really) allowing the rich to become even more rich is a threat to the planet. Since such inequality is also socially divisive why not just prevent it? We could enforce a differential between the best and worst paid person in any organisation or firm of, say, three or five times. Any additional money earned could be taxed at a rate of 100%. Making these sorts of decision for the benefit of society is what politicians do to earn their comfortable salaries, after all.