7: Fair pay, play fair

In order to contain inflationary pressures in the economy and to facilitate the process of pay-round bargaining to that end, each year Government has been determining a percentage target increase for earnings in the public sector for the following year. The increase is intended to take into account the rate of inflation and what can be afforded from the overall improved efficiency and productivity of the previous year. The current figure is around 1.5 per cent.

The norm is ostensibly aimed at achieving an equitable solution to the problem caused in various sectors of the economy when the pay increases of some groups in society have substantially exceeded those of others. How fair is it in practice? Not much it would seem as when we purchase commodities or pay bills, the transfer from income is in real, and not percentage, money. But, of course, the 1.5 per cent of an annual salary of £50,000 provides five times as much as that of a salary of £10,000.

Would it not be fairer if all increases were more closely linked both to the reality of personal spending and to the incomes of relatively disadvantaged groups in the population, such as the lowly-paid and pensioners. After all, most of us wish to demonstrate that we are members of a compassionate society well-disposed towards the values of the wellfare state in terms of their acknowledgement society’s responsibility for reducing the deprivation of those in need even if there is no consensus on how that need is best met. For these reasons, in the main, we wish to see that these groups are catered for in a generous way and that their financial circumstances are improved through the medium of tax changes.

How about using a better, or at the least complementary measure than the pound sterling to which all incomes and expenditure can be related – in the same way that the ECU is a standard to which the currencies of all European Union Member States are linked. One measure that could be proposed would be the weekly single person pension, currently £56 – call it the WPE (Weekly Pension Equivalent) – that is the minimum sum that the Government considers adequate to cover all the needs that have to be paid for out of money of a single woman over the age of 65 for a week.

Such a measure would have the further advantage of highlighting and enabling comparisons to be made between the earning and spending power of rich and poor households. At the same time, it could engender support for public policies aimed at narrowing the gap between these households.

On this basis, a bottle of first class champagne currently costs 0.7 WPE; the 1.5 per cent pay increase on the £10,000 salary is 2.7 WPE but on the £50,000 salary is 13.4 WPE; an anniversary treat for two in grand tier seats at Covent Garden to hear Pavarotti costs 7.2 WPE; a luxury 7-night treat to Barbados by Concorde costs 35 – 88 WPE; and the extra cost of a sports car (capable of exceeding the speed limit by a factor of three) over and above that of a common family car is 350 WPE, that is about 7 years’ worth of the current pension.

Salutary, isn’t it to gain this added perspective on the disingenuous way in which the lowly-paid are treated and how society’s concerns for the disadvantaged are translated into the accessible banknotes in their wallets rather than in ours?

Originally published in Re-inventing Society: A Bumper Book of Best Ideas, Schemes & Speculations (eds. Nicholas Albery et al.) 1994. (Measuring wealth and spending in weekly pension equivalents to expose income disparities.)

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