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Contribution to Unions 21 debate on fair pay
TUC Congress, Manchester
Karen Rowlingson
University of Birmingham
Email:k.rowlingson@bham.ac.uk
This contribution to the debate is based on two sources:
Data from NatCen's 2009 British Social Attitudes survey (BSAS)[1] on public attitudes to pay
Arguments and evidence presented in an article on ‘The Deserving Rich: Inequality, Morality and Social Policy’ to be published by the Journal of Social Policy in 2011 but available online now at this address: https://journals.cambridge.org/download.php?file=%2FJSP%2FS0047279410000668a.pdf&code=749729050129c1056cb278dbfe6e39fd
Please note that the data from the 2009 BSAS cannot be made public until the report on the survey is published (due December 2010) so this contribution provides some broad findings. Further details will be available from 2011 onwards.
I want to make three key points to this debate, as follows:
1. The government is currently considering introducing an earnings ratio of 20:1 in public sector organisations but research on public attitudes shows that people think that the ratio between high and low earnings should be about 6:1. The public therefore accepts some degree of wage inequality, though nowhere near the extent that actually exists and nowhere near the ratio the government is considering.
2. According to attitude surveys, people think that the three top criteria for paying people more than others should be: how well people do their job; how much responsibility they have; and how hard they work. So there is strong public support for paying people more if they work harder than others. Hard work is seen as a positive social good and therefore deserves a positive reward. However, there are problems with putting this concept into practice as follows:
How can we define and measure ‘hard work’? Is it the nature of the work or the amount of time spent doing it or the degree of ‘effort’ put in? What if one person has to put in twice as much effort/time as another to get the same result? Is it therefore the output/productivity or the input/effort that we should be rewarding? How can we measure an individual’s productivity if they are part of a team which all contribute to the output?
If we look at the input of (hours worked by) different occupations we see that people in management and senior professional occupations work longer hours than most other occupations but long hours are also common in the skilled trades occupations and among factory workers. The difference in wages between these occupations does not fairly reflect the hours worked.
There is also an issue about the intensification of the hours worked. Someone on a production line has to maintain a constant level of work while on that line. Managers and senior professionals, however, will have more flexibility to take breaks and vary the pace of their work. Such workers may have a long-hours culture but there is not necessarily any evidence that this leads to higher productivity.
There is currently very little link between top pay and company performance. For example, we might have expected pay at the top to have declined recently given widespread profit warnings and plunging share prices, but in February 2009 non-executive directors in the FTSE 100 companies won an average 6.3 per cent pay rise in the previous year.
As well as rewarding hard work, productivity and so on, arguments with in this field also touch on the principle of rewarding ‘important’ or ‘skilled’ work. But what counts as an ‘important’ or ‘skilled’ job? Caring for older people, people with disabilities or children is very important and includes significant responsibilities, and yet these are among the lowest-paid occupations. And, indeed, many people provide this caring work for no pay at all. A recent report from New Economics Foundation (2010) used social return on investment analysis to measure the value of different occupations and produced a very different scale than that apparent in salary levels.
In a similar vein, rewards may be given to compensate for the degree of unpleasantness or danger/riskin a job. Evidence suggests that the most physically dangerous jobs are manual jobs, particularly in the Construction industry. And while managers and senior professionals may complain of executive stress, those people doing health and social care work actually suffer most occupational stress (Health and Safety Executive, 2009). It is also well-established that it is people lowest down any occupational hierarchy who suffer the most negative stress. Managers and senior professionals also sometimes claim that their jobs are risky, but the inclusion of ‘golden parachute’ clauses into contracts usually takes much of the risk out of the picture.
The other side of the coin from an unpleasant or difficult/dangerous job is the extent to which a job is enjoyable, challenging, stimulating and fun. Jobs with a high degree of autonomy and flexibility as well as some creative challenge, linked to personal interest, fit with in this category and should perhaps be paid less than other jobs due to the intrinsic rewards which may compensate for lower extrinsic rewards. It is highly likely that many professional jobs provide a higher degree of intrinsic reward than other forms of work.
3. If we ask workers whether or not they think their own pay is fair or not, just under half say that their own level of pay is fair. More than two in five think that their level of pay is less than fair and only one in twenty think their level of pay is more than fair. Even among those on high earnings, very few think they are paid more than is fair. In terms of achieving fair pay, it will be very difficult to reduce or limit the pay of people at the top. These people do not appreciate how well paid they are in the overall earnings distribution because they, like all of us, compare themselves to their peers and begin to live a lifestyle based on their earnings. There is likely to be a high level of powerful resistance to any proposals to introduce ‘fair pay’ at the top and as far as fair pay at the bottom goes, the government and employers will argue that, in these times of economic restraint, there is not enough money to pay a living wage let alone a decent or fair wage at the bottom.
[1] The British Social Attitudes survey is carried out by the National Centre for Social Research (NatCen), Britain's largest independent social research organisation. The survey is funded by a range of charitable and government sources. Further information about NatCen and the British Social Attitudes survey can be found at www.natcen.ac.uk.
