07 August 2009

Can We Justify £9m Salaries?

As Chris Dillow argues, we (and especially the media) tend to overestimate 'average' salaries.

It seems some on the right, have a problem with basic maths - the differences between mean, median and mode averages.

Clearly the median wage (where 50% earn less and 50% more) is the clear indicator when it comes to salary.

Currently the median wage for an individual is around £24,000 a year and for for a two adult household it is around £40,000 a year.

Yet this doesn't stop the Daily Mail and others continually referring to 'middle earners' on £50,000 a year. Yet two thirds of households get less than this.

When talk of salaries in the high hundred of thousands or millions occur, it becomes difficult to even imagine these sums, let alone justify them.

Yet, those on the right know they have to. There is the 'Paul McCartney' justification (probably now updated to the 'Beckham' or 'Ronaldo' of today), that a friend of mine told me was used in the 1970s.

This is where it is hard for those of us on the left to deny that 'the creative industries' are open to anyone - i.e. most footballers and pop stars come from working class backgrounds. And also, it is impossible for us to deny the direct link between their earnings and the sheer number of paying devotees.

It is also hard to deny the earnings of inventors and leading entrepreneurs their millions. Indeed, the inventions of some are so valuable to society, virtually any sum is justifiable.

I don't quibble with any of this. However, what I do quibble with is mere managers earnings these vast sums, especially when their track record is suspect. Why do directors and executives on boards require these vast sums when they are PRECISELY the people responsible for the mess we are in?

The right have diverted attention away from the private sector by concentrating on public sector largesse and BBC and MP salaries. Of course these are too high, but they are usually chicken feed compared to the millions that the private sector bosses are creaming off us poor workers.

Chris suggests more workers on the board and owning shares, as the answer to the problem - stakeholder capitalism to the rescue. I couldn't agree more. This would probably do more for democracy than almost anything else.

Inequality is also bad for business. Think of tennis players as an example. Why has Britain produced so few top class players? The answer is that the coaching and facilities are generally only available to those who can afford it. Tennis in the UK is riddled with class. This is much less so in other countries such as Germany and Sweden, hence their relative success compared to us.

Denying a huge section of the population opportunities will inevitably limit our productivity and we cannot continue to pay bank bosses whether private or public sector the huge sums they currently get. They do not earn it, nobody earns that much, let alone deserves it. If we are to be a moral society at the poorst end, the rich have to set an example. I won't hold my breath.

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