Both Polly and Mount are wrong

Now he stands wide-eyed with shock at the consequences, with eloquent pen to capture what he sees. The facts are neatly arrayed: chief executives’ pay in FTSE 100 companies rose from 45 times to 120 times more than the pay of average employees. Money didn’t trickle down, it was sucked upwards; the share of national pay going to the lowest earners fell steeply over the last three decades, half the population getting just eight per cent of a doubling in national income. Even after the crash, the pay packages of FTSE 100 directors soared up unabashed, rising 49 per cent in 2011 alone.

‘We did not expect this and most of us are at a loss to understand exactly what has happened,’ Mount writes. If globalisation destroyed the jobs and pay of erstwhile well-paid industrial workers, why is that same globalisation used to explain the inflation of top executives’ pay, instead of levelling them down too?, he asks.

Err, because globalisation increases in country inequality?

By exposing everyone to more competition: and those very few who win the global competition are raking in the winnings of having beaten global competition, not just national.

half the population getting just eight per cent of a doubling in national income.
On the falling pay of the bottom half of earners

Pay rising not as fast, pay rising unequally, is not the same as pay falling.

9 thoughts on “Both Polly and Mount are wrong”

  1. But not as egregiously wrong as she is, at that point wholly unassisted by anybody with some real world experience:

    What would he say, for example, to research showing that a one-off windfall tax of 20 per cent on the accretion of hyper-wealth in the top few per cent would be enough to wipe out the debt problem?

    Hopefully, “a massive drop in the value of assets is not ging to wipe out ‘the debt problem’, especially when we still have a structural deficit.”

  2. But Tim, those with the soaring wages are not beating global competition, they are those excluding both local and global competitions for their rent-seeking behaviour.

    A good example from a friend of mine working in a professional services company. The management say pay can’t go up, and say “all yer jobs might go to India, will do faster if we pay more”. One brave soul pipes up “so why not hire the CEOs and other senior management in India as well – that’d save even more money than outsourcing the legwork. Much sheepish shuffling of feet about how oversight functions have to remain onshore ensues.

    It is possible to have rotten things inside an otherwise good system. Being a good little liberal capitalist (and defending said system against the inane and ignorant attacks from the left) does not mean we have to deny there is still mass rent-seeking going on, and those at the top are largely those who have worked out how to seek rent successfully.

  3. It’s actually the ones with the stagnant wages who are beating off global competition – they are staying in jobs and income by accepting much lower income than would be available were global competition excluded.

    Soaraway wages in any sector are therefore indicative of the successful exclusion (by whatever means) of global competition to supply the labour you supply.

  4. I’m not sure that Mount is wrong.
    If we accept that there’s a good share of luck in success… And that the selection process for CEOs is a bit of a lucky dip…
    Then of course the inflation of CEO pay is ridiculous.

  5. Can we just begin by confiscating fat cats’ villas in Tuscany?

    P.S. CEOs have got so rich by pillaging the shareholders. Simples.

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