High Pay Commission: Ignorance abounds

From their new report:

Top pay in the financial sector alone
accounts for 30% of the top 0.1% of the
income distribution scale and this pay
has attracted the most public attention.

Well, yes, it would, wouldn\’t it? When the country\’s playing host to the very tippy toppy part of a mobile, highly competitive and global industry, namely wholesale international financial transactions, you\’d expect to be playing host to the very tippy toppy and tippy toppy paid people in that global market.

You\’d have to be some sort of dullard to think that you wouldn\’t be really.

And I simply cannot believe that they\’ve not noted the most obvious point about top incomes. They\’re rising around the world. In country inequality is rising around the world (as global inequality is falling). This isn\’t a UK specific outcome.

As such, you might think to ponder on whether there are global causes of it. You know, like globalisation perhaps?

I leave it as an exercise for the reader to think up what the High Pay Commission apparently can\’t manage: some global reason why top pay is soaring.

After all, I\’ve pointed it out around here often enough.

11 comments on “High Pay Commission: Ignorance abounds

  1. What is “highly competitive” about highly paid people getting disproportionately more highly paid compared to other highly paid people?

    Doesn’t sound like much of any competition’s going on to me. Quite the opposite. In fact someone once told me banking is the only truly socialist industry in the world – because the employees get to screw both the customers and owners.

  2. How much is Deborah Hargreaves, in her role as Chair of the High Pay Commission, being paid? I don’t suppose she’s doing it for charity.

    So why doesn’t their website tell us? What are they afraid of?

  3. ‘60% of the public agrees, or strongly agrees, that ordinary people do not get their share of the UK’s wealth.’

    Then 60% of people should get off their arses and work harder.

    “Fairness clearly matters to people and there is consensus among the public about who deserves what in a world where pay at the top has grown rapidly while the average wage has stagnated.”

    Another area where consensus means nothing. I don’t give a toss if people think I earn too much, it is none of their bleeding business as I don’t work for the state.

    “Businesses and Government has failed to tackle the dramatic growth in pay at the top of the income distribution amid growing public disillusionment and a hardening in attitudes towards business.”

    And? It has nothing to do with government, it is solely a matter between the owners of a company and their employees.

    “Pay is about just rewards, social cohesion and a functioning labour market, and it is the view
    of the High Pay Commission that the exponential pay increases at the top of the labour market are ultimately a form of market
    failure.”

    Pay, in the private sector, is about a company paying people in relation to the value they add and people trying to maximise their pay through increasing their value (or, if they’re lucky, external factors increasing their value, e.g. skills shortages).

    If certain people have a problem with what those at the top get paid, that is their problem and we should not be introducing pay regulations to help the envious feel better about themselves.

    “Social and cultural changes, the rise of individualism and the decline in trade union influence has also contributed to the
    escalation in top pay.”

    If we paid them more, do you think they could produce a report without elementary grammatical errors?

  4. “Pay, in the private sector, is about a company paying people in relation to the value they add and people trying to maximise their pay through increasing their value (or, if they’re lucky, external factors increasing their value, e.g. skills shortages). ”

    There is also quite a large element of rent collection as opposed to remuneration for labour involved. And I thought we dispensed with the labour theory of value some time ago? The value of goods produced by labour merely puts a ceiling over what can be paid for labour over the longer term. The issue we have with high/low pay is deciding with people doing 25 different jobs in a company, the interaction of all of which is required to produce any value at all, what proportion of that value each function should get (and tangentially which proportion goes to the capital owners of the business). So we supposedly determine this by market mechanisms – hiring the cheapest employees who will do the best work. But does anyone actually live far enough from the real world to believe this really works at management level? Or in certain professions (notoriously in the finance industry) where who you know, where you studied, who your father is, and various other non productivity- and aptitude-related aspects of your character contribute rather more to your income than the work you do?

    When unions did this so that most of a company’s employees were costing more than the value they added, it destroyed the company. When one or two top guys do it, even to an obscene extent, it still isn’t enough to destroy the company because there aren’t that many of them. But it’s still rent when the field of candidates is artificially narrowed and the expensive preferred over the cheap.

  5. JamesV (#4) complained about employment being influenced by “where you studied, who your father is, and various other non productivity- and aptitude-related aspects”

    But those factors could be part of your aptitude for a job.

    No, I don’t just mean that some schools and universities are better than others.

    I mean that a major part of many of these high-level jobs is gaining clients’ trust. If those clients are more likely to trust someone who is “one of us” (or even “one of them”), then someone who is “one of them” will have a head start – not just in getting the job, but in doing it as well.

    Also if it is important that a team works well together, it may be that choosing people from the same background is (within limits) more important to performance on the job than other measures of competence.

    Sure, there’s a lot of ‘ifs’ there, but it is possible that using factors such as that is entirely rational and efficient.

  6. Also for many jobs it is more important to avoid hiring someone useless than it is to hire the very best.

    The potential gain from hiring the best rather than a competent 2nd best is usually far less than the damage that a fool can do (especially with employment law making it more difficult to get rid of someone merely for general idiocy).

    So if you trust a chap, and he tells you that his son is reasonably competent and can be trusted not to be a complete muppet, it can be a rational, efficient choice to just hire the son rather than spend time and money trying to find someone better and risking ending up with a fool.

    P.S. – this isn’t personal. Unlike Cleggy I didn’t get any help from my father in getting a job (he was in completely the wrong industry), and my school isn’t anywhere near good enough to get me in anywhere.

  7. “..who your father is, and various other non productivity- and aptitude-related aspects of your character ..”
    Every company I’ve worked for has carried out the same policy. Mid and top level managers will ask around to see if you’ve a friend or relative you’d recommend for a job before advertising publicly. Obviously, the higher up you go, the smaller the number of people get asked, but it happens.

  8. As a part owner of a consultancy / contracting company, I know exactly the value a given person adds to the bottom line and I can reward them accordingly. All I’m interested in is getting people I can get to work for clients who will do a good job and not harm the company’s reputation.

    We pay our employees finders fees if they put us on to a prospective employee whom we subsequently employ. It has yielded a few people because professionals and artisans often stay in touch with people they studied with.

  9. So you are all describing recruitment systems that are not open and competitive and in which you are prepared to pay above market rates for acceptable work rather than market rates for great work. And somehow that is supposed to illustrate how remuneration in other closed, uncompetitive worlds like finance which pay above market rates for mediocre employees is actually at market-determined rates for good employees with no component of “rent” for merely being who you are and where you are?

  10. “So you are all describing recruitment systems that are not open and competitive and in which you are prepared to pay above market rates for acceptable work rather than market rates for great work.”

    I can’t see where you draw that conclusion from. In the job market I work in I have to use every recruitment tool available and I never switch off. If I’m talking to someone in a social setting and it comes out that they have the sort of skills we need then I’ll sell the company to them and give them a card.

    We advertise for people as well as targetting people. Usually the response to the adverts is a bunch of completely unsuitable chancers who seem to think that saying “I have a strong work ethic” trumps the requirements for a degree or relevant experience.

    We rarely are in the position of having more suitable candidates than positions, we compete with other companies to secure good employees. I’m competing to employ a young girl with the right qualifications who has been out of uni under 5 years with a total package offer equivalent to about 120000 quid. I contacted her yesterday to offer her a bit more because I really need to employ her.

    We pay above average rates because we value retaining staff. The rates in the Australian mining industry are very high because the supply does not match the demand so the rates are very much market determined. If we didn’t compete on pay and conditions we’d become vulnerable to others poaching our staff (our pay and conditions mean we tend to do the poaching). We have to revue each persons pay at least twice a year and adjust where necessary.

  11. @DocBud,

    You realise you are effectively saying that you do indeed offer above-market rates in order to get pretty much anyone who can do the job?

    I like the sound of your package. I don’t suppose you have any use for a functionally bilingual (plus bits of others) technical writer with a biology PhD? I have a strong work ethic. Well, I probably would have for £120k.

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