Inequality soaring with bloated executive pay

July 24, 2014

NOTE: Images in this archived article have been removed.

As income inequality in Britain continues to rise, research conducted by a British think-tank found that executive salaries are 162 times higher than those of the average worker in the U.K.

While low income workers have seen a 1% pay rise that is nowhere near in line with national inflation, the U.K.’s top-earning executives are enjoying a much more profitable 15% pay rise.

The new report published by the High Pay Centre (HPC) has urged for “radical action” to be taken by the government to address the widening inequality pay gap. The HPC specifically calls on government to demand companies place caps on executive salaries at a set ratio of the salaries earned by their lowest paid employees.

Execs in U.S. Paid Over 1,000 Times More

A U.K. pay gap 162 times higher at one end is distressing – but the number pales, in fact, compared to levels of pay inequality in other countries such as the United States, Mexico and China.

A report released earlier this year by the U.S. think tank Demos revealed that fast food company CEOs in the U.S. make up to 1,000 times more than the typical, low wage worker.

The report specifically cited David Novak, the CEO of YUM!, which owns KFC and Taco Bell, who took home $22 million in 2013 after exercising stock options. By contrast, the average full-time KFC or Taco Bell worker took home $19,000 a year.

Catherine Ruetschlin, author of the report, spoke of how the people at the top of company hierarchies are the only ones reaping the rewards of economic growth. “It’s true in many industries but fast food is the primary example: The gains from economic growth are being entirely awarded to people at the top of the income scale,” Ms Ruetschlin told the Huffington Post.

Analyzing data from the Bureau of Labor Statistics, Ruetschlin found that over the last 13 years, the CEO-to-worker pay ratio averaged 512-to-1. The greatest year of salary disparity in the U.S. fast food industry was 2012, when the ratio exceeded 1,200-to-1.

Amid growing inequality in America, regulators are urging corporations to provide annual public reporting on the discrepancy between CEO and average worker salaries. The Securities and Exchange Commission voted last September for this form of corporate public annual reporting.

But unsurprisingly, company CEOs and business lobby groups have repeatedly stated the new rule would be “burdensome,” and have condemned the proposed legislation warning that the information “only feeds into populist attempts to embarrass top executives.”’

Raging Inequality in China

Before leaving office in 2013, China’s then premier Wen Jiabao delivered his final assessment on the condition of Chinese society by stating that the nation’s development was “unbalanced.”

According to an Inequality in Focus report by The World Bank, China’s levels of income inequality are on par with inequality in Latin American countries such as Peru, Mexico and Nicaragua. According to data from the Gini Index – measuring the extent to which a country’s distribution of income among households or individuals deviates from a perfectly equal distribution – China is now among the least equal 25 percent of countries worldwide.

Having surpassed many nations including the U.S. in income inequality, the gap between China’s rich and poor is now one of the highest globally. Over the three-decade period beginning in the 1980s, soon after China’s economic reforms commenced, the country’s income disparity nearly doubled by 2010.

And in China, income disparity is becoming a sensitive issue. A huge strike took place in China is April over unpaid social welfare benefits. In one of the largest labor actions in contemporary Chinese history, tens of thousands of migrant workers at a Nike supplier went on strike over social security benefits and higher compensation.

Dramatic Action Needed in U.K., Which Has Failed to Deliver on Promises

But despite the gross levels of pay inequality in other countries, groups like High Pay Centre say inequality in the UK can no longer be ignored.

In the 2010 election campaign, both Liberal Democrats and Conservatives placed heavy emphasis on the importance of fairness and equality. Early statements by Prime Minister David Cameron – “we are all in this together," and “those with broader shoulders should bear a greater load” – suggested that inequality would be a leading priority for the Coalition Government.

Yet despite bold promises to "get Britain fairer," inequality here is on the rise to such a degree that growing numbers of child deaths have been a direct result. At the same time, worker rebellions are increasing.

Mark Daniels runs his own gardening business in Cheshire in northwest England. He endeavors to pay his workers £12 an hour – approximately £5.50 more than the minimum wage of £6.31 – despite only earning £15 an hour himself.

“The way I see it, if your workers are content and justifiably compensated, your business is much more successful,” Daniels told Occupy.com. “I make £3 an hour every hour my employees work for me. It’s good for them and it’s good for me. Being greedy and draining every last penny out of workers just so the boss can enjoy a more privileged lifestyle doesn’t do anyone any good, least of all society."

“With added responsibilities, bosses should get paid more – but why 162 times more?" he added. "That kind of pay gap is going to lead to one thing only: retribution.”

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Gabrielle Pickard-Whitehead

Gabrielle Pickard-Whitehead is a freelance journalist and copywriter based in the Peak District, UK. Gabrielle’s biggest writing passion is reporting on issues that act as a positive catalyst for change.


Tags: economic inequality, social unrest