[LucyB]

Heard this on the radio last week. The suggestion was that the maximum pay in a company (or sector I suppose) shouldn't be higher than 10x the average wage in that company.

After much debate with friends, I was left thinking that this could be a really good idea. The beauty is that in order for those at the top to have a pay rise, the average wage would also have to go up.

I wasn't sure how this would work in reality, though. To have a max 10x higher than average, would you end up with appalling pay at the bottom end?

It does seem to take some of the better ideals of 'equality' while retaining some healthy capitalist competition.

We figured pop stars/ artists would be excluded as they are paid whatever someone is prepared to pay for their work. Footballers, however, are on a salary so would be included.

Would you go for this system?

[andy popp]

Broadly yes. Differentials between top and average salaries in the private sector in the Anglo-Saxon world have increased massively over the last two or three decades and grossly out of proportion to other relevant indicators of economic growth. I'm far from convinced this has made our societies happier, fairer, or, crucially, more competitive.

The whole idea of a functional international labour market for CEOs regulating salaries is largely bollocks.

[Duma]

I like this idea. Do you remember where you heard it? Would be interested if it's on iplayer or similar.

[Jim]

sounds like a good idea, not sure on the practicalities of it tho, if brought in as a law will probably cause companies to divide up into workers and senior managers as separate companies or some shit like that.
Footballers are an intresting one. I can't stands watching the game and think some of the wages are ridiculous and when ever you hear on the news about a club going under I can't help thinking "good", obviously its the poorer clubs that tend to go under which isn't good but it just seems so in sustainable. Salary caps should definitely be brought in

[andy popp]

Here's one source of data on the growing divide:

http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060621/

I've recommended it before but anyone interested in issues around inequality should read The Spirit Level: Why More Equal Societies Almost Always do Better by Wilkinson and Pickett. More info at: http://www.equalitytrust.org.uk/

[rich d]

I heard this too, was on radio 4, can't remember the name of the show but it's a comic who gets the audience to propose new laws and then they vote on them. Sorry if that doesn't help you find it.
I think it's a fantastic idea, last year the organisation I worked for floated on the stock market. The executive board gave themselves 120percent pay rises just before the float, three weeks later they put a pay freeze on all staff due to economic conditions. Thinking that the free market works on a supply and demand basis is flawed. It's a closed shop cartel. I don't work for that organisation any more, as I didn't want to contribute to their further  profitability.

[nik at work]

Sounds like Mark Thomas' new thing, can't remember what it's called and haven't heard it but that would be my guess. I imagine it will be on iPlayer. I may have a look for it myself...

[lagerstarfish]

Scale matters if the average salary is taken to be the mean salary of everybody

In a small company with 1 boss and 20 underlings, Le Grand Fromage could earn 18 times the average of the rest of them and still be earning 10 times the mean

In a huge company with 1000 employees, Le Grand Fromage could only earn 10.01 times the average of the rest of them to be earning 10 times the mean

probably

[andy popp]

You need to recalibrate, we're talking multiples of hundreds.

Large wage differentials are probably much harder to sustain in a small company were more face-to-face, less anonymous interaction takes place between boss and worker.

[LucyB]

It was the Mark Thomas thing on R4 on Thursday evening. Highly amusing but food for thought as always.

[Sloper]

A totally rubbish idea, but appealing to some none the less.

Cleaner on £6k would limit ceo to £60k or receptionist £13k ceo £130k, entirely counter productive. 

I wonder what the ratio is in local government, something like x30?

We have a problem with an excluded underclass and limiting the pay of the tpp .1% will make no difference to this, let's deal with the real problem rather than distrct ourselves with froth.

[a dense loner]

oh my god! a dark day! i was going to say almost exactly what sloper said. oh my god!

[Joepicalli]

I like this idea. Do you remember where you heard it? Would be interested if it's on iplayer or similar.

The radio 4 Mark Thomas show. It might be called The Mark Thomas' Manifesto.

[nik at work]

Cleaner on £6k would limit ceo to £60k or receptionist £13k ceo £130k, entirely counter productive. 

Only if it were a firm of cleaners/receptionists where everybody apart from CEO was on £6/13k*. It's ten times the AVERAGE salary slopes.
Sounds on the surface like a reasonable idea, I don't know if the chosen multiplier is the correct one without a lot more thought but the principle seems sound.

*Assuming the companies in question had sufficient numbers of employees to prevent the CEO's salary significantly skewing the average salary calculation as highlighted in Lagers post.

[Joepicalli]

A totally rubbish idea, but appealing to some none the less.

Cleaner on £6k would limit ceo to £60k or receptionist £13k ceo £130k, entirely counter productive. 

I wonder what the ratio is in local government, something like x30?

We have a problem with an excluded underclass and limiting the pay of the tpp .1% will make no difference to this, let's deal with the real problem rather than distrct ourselves with froth.

And your problem is? 130k, even 60 k is a significant amount. Also if the boss wants 65k then the cleaner gets 6.5k. That's the point of the 10x multiplier.

[Plattsy]

I like the idea however I think bonuses would also have to be included (or banned) else companies would simply increase the size of the bonuses accordingly.

[Percy B]

To be honest I have real difficulties with the concept that having your earnings capped at 'only' £130K is anything other than disgusting. I think that hard work should be rewarded with higher income, but when has anybody within a company really worked 10 times harder than somebody else?

A totally rubbish idea, but appealing to some none the less.

Cleaner on £6k would limit ceo to £60k or receptionist £13k ceo £130k, entirely counter productive. 

Whats wrong with earning £60K or £130K? It wouldn't by counter productive to most of us, seeing as its way more than most of us earn anyway.

I think maybe I just have issues with greed

[nik at work]

Oh come on Percy do you really expect us to believe that you run your extensive range of cycling exotica on anything less than a 20x multiplier of your underlings

[Sloper]

It's not about effort it's about learning, skills, experience, responsibility and so on.

It's also about risk, if you've made a large capital investment, borrowed money to set up and manage, run and grow a business then you deserve the rewards.

Capitalism may be imperfect but have a look at the alternatives and consider the quality of life of the people at the bottom in capitalist countries and socialist countries.

Our problem is we have an excluded underclass and we have lost the unskilled manaul jobs which used to provide a living wage and underpin working class communities; dealing with this problem should be the priority not dealing with how much Richard Branson makes.

[fatdoc]

oh my god..

I've just agreed with Dense and Sloper in one post.
 

[a dense loner]

I think that hard work should be rewarded with higher income, but when has anybody within a company really worked 10 times harder than somebody else?
What has working harder got to do with anything? Cleaner who's working hard physically has absolutely no mental pressures of what the boss is under. I have issues with greed too but there's not a lot you can do about it. i want a bigger house, better car and better holidays than someone who serves me at b+q, but i don't expect to have better anything than a company boss. these are for instances, before someone tries ripping them to shreds. this also introduces the element people that are lazy at work. i want more money than these since i'm actually doing more quantifiable work. of course its all about the "i want" but then again it always is.

[a dense loner]

sloper pls stop posting, this is really embarrassing for me
dark days fatdoc. can't stop the rot

[Ru]

It's not about effort it's about learning, skills, experience, responsibility and so on.

It's also about risk, if you've made a large capital investment, borrowed money to set up and manage, run and grow a business then you deserve the rewards.

Unless I've misunderstood, this is wrong. If you have invested in the company you own shares - and you can take a dividend and the value of your equity goes up if the company is successful. On top of that you can take a wage that would be capped. It's the wage for doing a given job that's capped, not your entire earning potential.

[Sloper]

Of course as a shareholder you draw dividends, as an equity partner in a partnership you reap the rewards as well, but let's say that you invest and risk everything that you own in a venture and it pays off, does it really matter whether you take the reward via a share dividend or direct remuneration (other than your tax liability)?

Indeed were the pay structured on a 10x multiplier the shareholding director could say, "I'm taking a paycut so everyone's taking a pay cut", this will mean a greater profit and higher dividend so in effect the director doesn't lose out but everyone else does.

Be careful what you wish for.

I can recall Geoff Hoon arguing that 'there needed to be a public debate about lawyer's fees'; of course what he meant was the fees needed to be capped, reduced and so on.

The consequence of which as you well know is that many are now no longer conducting publically funded work in many areas of practice and geographical areas, thus leading to a two tier legal system where the rich have options and can avoid liability where the poor cannot.

What's the proper rate for the job, well that's for the market to decide.  I heard that air traffic controllers on spain can be on, when overtime and bonuses are taken into account 800,000 Euro.  Now I'm not saying ATC should be on minimum wage but JFC 800k   I wonder what they'd be on if there was a free market operating (the UK average is about £70k)?

[Jaspersharpe]

If it wasn't the total income from the business (salary, bonus, dividend, BIK) that was taken into account then the system wouldn't work anyway. The people at the top would just take a poxy salary and the rest in dividends, Bentleys or bottles of Cristal. Sounds like a completely unworkable plan to me anyway.

EDIT - Sloper's said basically the same thing while I typed this.