The Guardian view on Corbyn and pay: close that gap
As the saying goes, he had one job. When Jeremy Corbyn appeared on the TV and radio on Tuesday morning, he was supposed to focus on his upcoming speech on immigration in the wake of Britain leaving the EU. That was the subject on which his aides had briefed journalists, and which newspapers and social media were already talking about. Except when the Labour leader did come face to face with the formidable John Humphrys, he blurted out not one, not two, but three big stories. First, there was the expected admission (through what sounded like gritted teeth) that Labour was willing to restrict freedom of movement for people. Then the declaration that Mr Corbyn would be happy to stand on a picket line with the striking staff of Southern Rail. Finally, there was a call for “some kind of high earnings cap”.
Each of these statements raises its own issues. Perhaps the largest of all is why – in what is clearly a momentous week for the NHS – the Labour leader felt it necessary to deviate from that subject. Still, it was the talk of a maximum wage that caught most attention and which compelled party aides to keep on fleshing out the proposal. By the end of the day, it was no longer an earnings cap, but a commitment for pay ratios, so that no firm bidding for a government contract would be allowed to pay its chief executive more than 20 times more than the lowest-paid employee. Such a policy would cause huge ructions, not least with the multinationals that take so much business from Whitehall. At Serco, for instance, chief executive Rupert Soames last year took home a total pay package of £2.2m. Still, the Conservatives were billing it “Jeremy Corbyn’s Day of Chaos”.
Certainly Mr Corbyn could have picked a better time and more effective means to toss out such an idea. Nevertheless, pay for those running FTSE companies is too high. Put another way: “The market for top people isn’t working; it needs to be sorted out.” No revolutionary socialist said that, but the former Conservative prime minister David Cameron. It just so happens that neither he nor Vince Cable nor Theresa May – all avowed critics of fat-cat pay – have sorted it out. By last Wednesday lunchtime, the heads of Britain’s biggest businesses had earned more than the average worker will make in all of 2017. There is a “material disconnect” between executive pay and corporate performance at Britain’s 350 largest companies, according to a study commissioned by the CFA global association of investment professionals.
Faced with a malfunctioning market, Britain’s politicians have waited for the market to sort itself out. Mr Corbyn is at least showing greater realism. An arbitrary maximum pay level is not sensible, but neither are arbitrary pay packages – even if they have been signed off by a remuneration committee stuffed with the chief executive’s chums. Pay ratios are already in place at organisations such as John Lewis, while a study commissioned by Mr Cameron suggested one for public sector bosses.
The minimum wage was once branded by the Conservatives as a job-destroyer. It wasn’t. The living wage took decades to attain the acceptance it enjoys today. There’s no reason pay ratios can’t do the same. But it will take time, well-ordered evidence and political strategy. Having got the ball rolling, Mr Corbyn should run with it.
Source: The Guardian