Some Major Topical Political Issues in UK

"Obscene" Levels of Pay and Bonuses

(Originally written 12th February 2011)

What Are Obscene Levels of Pay and Bonuses?

It has been said, and I tend to agree, that obscenity is in the eye of the beholder, so I feel it necessary to give my definition (not as a matter for discussion, but just so the subject of this discussion is clear). To me something is obscene if it offends my sense of natural justice. In this context that means I am discussing levels of income which are unjustifiably high to a major extent, and are harmful to society as a whole as a result of that.

That, of course, still leaves the question of what level of income counts as being obscenely high on that definition. I understand that the average annual household income in UK at present is somewhere in the range £20,000 to £30,000 (I don't know the precise figure, and for this purpose it is not important). While I would not be prepared to pick on a specific figure and say anything below it is acceptable and anything above unacceptable, I would certainly say that incomes of £500,000 per year and above are obscene when average incomes are so much lower. I simply do not believe that anyone's contribution to society is anything like that great, no matter what they do or how good they are at doing it.

Who Receives These Excessively High Levels of Income?

The people who receive these incomes mostly come into one of four categories (I may have missed one or two others):
  • Entertainers, such as footballers, singers, people who appear frequently on television, etc.
  • Senior executives of large organisations
  • Employees of banks whose job is to gamble with other people's money
  • Major shareholders in large corporations

Why Should We Do Anything About Them?

It is a fact that countries with higher levels of inequality of wealth and income have more social problems than those with more equal levels. This shows consistently in terms of greater levels of dissatisfaction with life (even among the wealthy), greater levels of crime, more problems with drug addicition, poorer levels of health, more anti-social behaviour, more broken families, etc. That does not mean that I am advocating complete equality of wealth and income. That would not only be next to impossible to achieve, but would also be the cause of a different set of problems.

What is highly desirable is that the gap between the highest and lowest incomes is not too large. It needs to be large enough to ensure that those who can and are willing to contribute most to society receive what is generally accepted to be a fair reward, but no more than that. This concept is, clearly, rather vague, but that is unavoidable. Precision in such things is never going to be possible, but acceptance of the principle in determining the law and government policies is essential - and totally lacking in the present government (and its recent predecessors).

Is Income Tax the Answer?

A more progressive system of income tax would certainly make a valuable contribution to solving this problem, as well as increasing government income and so helping to reduce the budget deficit, as I have suggested on another page. However, there are limits to how far this could be taken as a means of reducing disposable income, especially as the highest rates would apply only to marginal, not total, income. I think, therefore, that we need to look elsewhere for the real solution, although the income tax approach should certainly be used and would be much easier and quicker to introduce.

Legal Controls on Rates of Pay

Direct legal control of rates of pay sounds on the surface to be draconian and unacceptable in a democratic society, and I would be the first to condemn any suggestion of actual rates of pay of employees of private companies being determined by government. However, we already have a legally specified minimum rate of pay which is now generally accepted as desirable, although there is room for argument about precisely what that level should be. What I am suggesting (and I believe it has been used with marked success in one or two other countries) is that the maximum rate of pay in any organisation should not be permitted to exceed a defined multiple of the lowest. Just what that multiple should be is open to discussion, and I have seen figures in the range from seven to twenty times quoted. Thus if the lowest paid employee in an organisation was paid at a rate of £6 per hour and the defined legal multiple were twenty times, then the chief executive of that organisation would be limited to a maximum of £120 per hour.

Precautions would be needed to prevent avoidance of the rules, such as the definition of groups of companies along similar lines to that used for tax purposes, but this would not be a major difficulty.

Comments welcome and may be incorporated below. Anything abusive will be ignored. Other comments may be edited for spelling, grammar or punctuation but otherwise will be published unaltered or not at all. That does not mean I will only publish comments which agree with me, but I will omit any that are simply repetitive or don't make sense.

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