The Highest Earners Need To Be Very Careful About The R-Word
Chris Bowers is worried that an increasing pay gap may lead to a revolution.
24 Nov 2011, 18:22
Revolution?
It was a friend who came from a background of inherited wealth who said to me many years ago ‘If the landed and rich had had their wits about them and acted responsibly, we’d never have had communism and would have prevented pretty much all the revolutions.’
That chimed with something that has always puzzled me. Isn’t it paradoxical that the parties that represent the rich don’t have the most advanced social policies? Surely if you’re rich, you want to enjoy your wealth, and the last thing you want to do is spend lots of money building walls around your house to keep out the dispossessed and fearing someone who envies your riches will throw a brick at your nice car. So why aren’t the Conservatives pushing truly inclusive social policies?
But what’s all this to do with the R-word? Indeed what R-word am I talking about? The word is ‘revolution’, and I fear we are getting dangerously close to the conditions in which social revolution becomes possible.
Dismiss it as melodramatic if you want – I hope you’re right and I’m wrong, but I think there is major cause for concern.
There is no formula for social revolution. If there were, it would be something like: ‘When the richest class of earners earns more than, say, 40 times what the poorest class earns, then you have the conditions in which people have more to gain by illegal acts that challenge the old order than they have by playing by the existing rules.’
This week’s report from the High Pay Commission confirms what many of us have suspected for some time – that the highest earners are not pulling their weight in national efforts to tackle the debt and deficit. My question is whether they are taking us near the marginal point where the least well-off feel they have more to gain by revolting.
The most conspicuous group of high-earners are the bankers, who seem to have gone back to their ‘entitlement’ mentality despite having, in many cases, been bailed out by the taxpayer in the 2008 crisis. But the problem runs throughout much of the management culture in this country, where salaries are based on assessments of how a person feels valued by their company rather than any need for a certain sum of money to do the job.
There must be a sum beyond which no-one needs any more money. I would put that at about £150,000 a year, though I’d accept it up to £200,000. It will obviously depend on commitments such as the number of children one has, whether any dependents have special needs that involve expense, and more contentious factors like whether it’s a basic entitlement to have private medical insurance and to be able to send your children to private school. But for anyone with four kids or fewer, £200,000 should be ample.
So why is our management culture all about getting salaries that go way beyond anyone’s assessment of what people should need? This is where the most influential group in the economy is missing the point about all of us pulling together. It’s not about some communist view of society, but about recognising that belt-tightening among those earning less than £30,000 is a matter of cutting out essentials, whereas belt-tightening among the top earners is about fractionally less to invest in some off-shore trust.
In many ways the situation cries out for legislation, but it goes beyond that. What we need is a change of attitude among the top earners in this country, whether induced by legislation or enlightened self-interest. When the economy is thriving, people may poke fun at the top earners but there’s very little resentment. But when public services are being cut, and energy and supermarket bills are rising alarmingly, the scope for resenting people on salaries over half a million is massive.
This is why George Osborne should be telling his friends in big business to go easy. He can blame Vince Cable if it helps him, but the message should get through that if the most affluent in society aren’t seen to be seriously pulling their weight, the conditions for social revolution will be enhanced. We had rioting in the summer – count that as a warning that needs to be heeded before the cost to the top earners becomes genuinely and uncomfortably high.
Comments (3)
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I agree that beyond a certain point the extra income isn't really "used" in the way that a payrise for people on low and middle income is. But how many people do you think there are earning 200k+ and do you think that nabbing a few percent extra of their income will sort out the deficit? Because I doubt it will. To be in the top 10% of earners one "only" has to earn about 40k. The top 1% get about 150k. There just aren't enough rich people to pay for the public sector.
Also, remember that one of the most progressive tax policies EVER was the reduction of the top rate of income tax to 40%. Virtually overnight the government eared much more of its income from the wealthy than it had before.
These issues are a lot more subtle than you seem to give credit for. However I would argue that the "right" also fails to argue its case well.
24/11/2011 20:19"to be able to send your children to private school. But for anyone with four kids or fewer, £200,000 should be ample"
Actually, at private school the four kids' school fees alone will take over 100k - which, with the taxman now grabbing most of a high-earner's income, will account for all of that 200k straight away, before you address little details like feeding, clothing and transporting them, not to mention their parents.
What actually hurts us, though, is complacent government sitting back and casually tossing hundreds of millions of pounds out as if it doesn't matter, while borrowing us into oblivion as our currency inflates us to the poor house. "QE" should be a criminal offence, not government policy, and Mr King should have been fired a long time ago for letting inflation get so far beyond the official target he stopped pretending to care about. It isn't the fact Richard Branson is a billionaire with his own island that hurts us, though: it's government policy which borders on suicidal - perhaps literally, if those violent protests escalate in the way they have in other countries recently!
For me, Cameron's three line suicide note disposed of any lingering faith I might have had in this "democracy". I'm sure Eton taught him enough history to know what has happened to other leaders making that mistake...
24/11/2011 22:59Blithering idiocy from James
who clearly does not :
1. realise a Coalition is just that and you cannot just have what policies you want but have to make compromises.
2. understand the size of the cuts needed. Any fool can cut: wages, OAP pensions, winter fuel allowance, the Armed Forces and Foreign Aid and still be borrowing £ billions..
3. understand the impact on the economy of making say 200,000 people redundant overnight and the resulting social unrest.
Frankly I despair. All these people talk about cutting spending overnight but cheerfully disregard the social and political consequences.
The political consequences of course are so simple that I have to explain them:
Tories propose swingeing cuts, LDs say no, Government bill fails, LDs dissolve Coalition, Tories no longer in Government.
It's so difficult to understand which explains why The Conservatives took 13 years in Opposition to learn that you have to be elected before you can govern .. and to do that you need to appeal to voters.
25/11/2011 13:07