As John Rentoul and Sunder Katwala note, we’re inundated with party leaders who emote about the gap between rich and poor while having little to say about policies to address it.
Here’s a small suggestion: require organisations to publish, as part of their annual accounts, the ratio between the highest- and lowest-paid of their workforce.
This in itself wouldn’t force any changes in pay, but it would at least give us information about which employers produce the biggest inequalities. What’s more, those that like ‘nudge’ thinking may see this as something that could motivate change, if the media compile league tables and campaigners put moral pressure on employers to narrow their own pay gaps in light of social norms.
Perhaps as a second stage, once we’ve had some data to look at, government could offer tax breaks to those that have lower ratios. But let’s walk before we run.
And the lack of coercion may help such a policy’s political appeal: people may be concerned about massive pay inequalities but that doesn’t necessarily mean they want government-imposed salary caps. This policy would be a clear statement that the gap matters and that a rising tide really should lift all boats without any suggestion that the Chancellor should become every firm’s payroll manager. It’s not against success; it just want to encourage that success to be more widely shared. (If you like the kind of soundbites that only think-tank wonks can digest, you could call it ‘progressive aspirationalism’.)
It would also demonstrate that the biggest pay gaps by far are in the private and not the public sector.
There are plenty of practical questions about this policy, some of which have clearer answers than others. For instance:
Should all employers have to do it? I think smaller ones should be exempt from having to jump through the hoops. Individually, they have little social impact; collectively, there are so many of them that we’d be snowed under with numbers; and smaller organisations tend to have smaller gaps between top and bottom pay anyway.
Should bonuses be included? Yes, otherwise it’d be a way to play the system. Should benefits in kind be included? Likewise, yes.
Should the pay of external contractors be included? Yes, as many larger organisations outsource lower-paid functions like catering, cleaning and security, which artificially reduces their own direct payroll ratios.
How should we treat part-timers, people getting overtime pay, and people doing unpaid overtime?
Should we just look at the very best- and very worst-paid individuals or take, say, the top and bottom 5%?
Would it be worth breaking the ratio down into bottom-to-middle and middle-to-top as well?
Just thought I’d throw that out there…