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What if…we all got paid the same

Economy
Credit: Andy Carter

Everybody’s talking about the harms of extreme economic inequality. Politicians and charities lament the impacts on health and welfare. Global business and political elites focus on the risk to security and, even, economic growth. Media and religious commentators baulk at how just 28 billionaires own as much as the combined wealth of the poorest half of the world.

‘Extreme economic inequality has exploded across the world. Seven out of 10 people live in countries where the gap between rich and poor is greater than it was 30 years ago,’ writes Ben Philips in his recent book, How to Fight Inequality.

Inequality today is extreme and obscene. It’s also complex: with roots in history, capitalism, colonialism, racism, sexism, classism. That complexity ripples through in the means of tackling it.

But there is one piece of relatively low-hanging fruit that is not getting the attention it deserves: wage income equality – what we get paid at work and whether it’s equitable – within companies and organizations.

The common way of measuring this is by looking at how much an average worker earns compared with the average boss. In 1965, an average company CEO in the US would get around 20 times more than the average worker, according to the Economic Policy Institute. By 1989 this had risen to 58 to 1. By 2018, it took the average worker 278 days to earn what the boss received in one day.

While worker wages stagnated from the 1980s, executive pay just kept soaring. Between 1978 and 2018, CEO compensation (including pay and stock options) grew by more than 1,000 per cent and that of high earners by 339 per cent. But average worker wages increased by less than 12 per cent, inflation adjusted.

The pay equality gap is widest in the US, but other countries have followed a similar pattern. The reasons are clear: as the dogma of neoliberalism, deregulation and privatization swept the world, unions were weakened and collective bargaining was crippled. The growth of a high-paid finance sector also had a part to play. According to Statista, in 2018 the countries with the biggest pay gap, after the US, were India (229:1), UK (201:1), South Africa (180:1) and the Netherlands (152:1). China came tenth (127:1).

When we drill down into specific international brands it gets more shocking. Take fashion giant Gap (no joke) rewarding its CEO 3,566 times more than its median employee. Or McDonald’s boss getting 1,939 more; or Arconic (maker of the aluminium cladding used on Grenfell Tower) 934 times more, according to a recent Bloomberg report.

It does not have to be this way. Between the mid-1940s and mid-1970s huge strides were made towards income equality, thanks to socialist government policies and grassroots movements of women, minorities and trade unionists.

In Brazil in the 2000s, due to progressive labour and welfare measures introduced by the Workers’ Party under President Lula, incomes rose five times faster for the poorest Brazilians compared with the richest, faster for women than for men and faster for black than for white people.

Narrowing the equality gap requires movement from both sides: raising low wages and reducing high ones. Advising the UK government in 2011 on fair pay in the public sector, Will Hutton of the Work Foundation made (and later dropped) the recommendation that no boss should be paid more than 20 times the salary of the lowest-paid worker. But some people have a far simpler and more radical solution. Just pay everybody the same. Suma, the food co-op based in Yorkshire, UK, has long had equal pay for all. Mondragon, the massive Spanish co-op, has just two pay grades. Some organizations that started with a graded pay system, like New Internationalist until the mid-1980s, moved to an equal pay structure.

Although it may feel like swimming against the tide, equal pay is realistic and do-able. It’s a matter of choice. The benefits are many: psychological, democratic, institutional and commercial. It cultivates a greater sense of engagement and responsibility among workers – and makes ‘it’s above my pay grade’ a redundant concept. Power is more evenly distributed, especially when combined with shared decision-making.

But the biggest benefit is in terms of values: how we value each other and the work we do.

Serious economic inequality is so destructive because it undermines fundamental principles of equal worth and dignity. Wage equality can help reverse this, creating havens of health and sanity in a deranged world hooked on hierarchical delusions of superiority and inferiority.

New Internationalist issue 531 magazine cover This article is from the May-June 2021 issue of New Internationalist.
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