‘The average real wage of workers has hardly moved from the 2008 level whilst bosses never had it so good.’
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
Inequalities in the distribution of income are fuelling economic stagnation, social divisions and a drift to the far-right. The government must secure equitable distribution of income..
The UK has a few super-rich people whilst a large proportion languishes in poverty. The average real wage of workers has hardly moved from the 2008 level whilst bosses never had it so good.
A deputy governor of the Bank of England associates high wages for inflation. Governments routinely tell workers that wage rises are inflationary, but remain silent on fat-cattery at the top.
The median FTSE 100 CEO median pay for 2024/25 was £4.58m, a rise of 6.8% since 2023/24. 13 of the FTSE 100 CEOs collected more than £10m. The pay packages of UK-based CEOs are growing faster than those of their US rivals, often for mediocre performance.
The median FTSE100 CEO pay is 122 times the median earnings of a full-time worker. In some companies, this ratio is even worse. At aerospace giant Melrose, the CEO collected £45.4m; 1,112 times more than the average employee. The ratio is 375 times at Tesco, 355 times at Pearson, 330 times at Compass, 261 times at Marks & Spencer, 218 times at British Associated Foods, 200 times at Next and 195 times at Sainsbury’s.
Remuneration Committees, consisting of hand-picked non-executive directors favoured by executive directors, rarely obstruct pay rises for their patrons. Shareholder votes make no difference as they are advisory and non-binding. Employees generate wealth but have no representation at the board level, and have no vote on executive pay.
At the other end of the spectrum, the median annual wage of a full-time employee is £30,816. In April 2025, the headline National Living Wage was set at £12.21 per hour, below the real Living Wage rate of £12.60 per hour across the UK and £13.85 per hour in London.
Some 4.5m jobs in the UK pay less than the real Living Wage. Some 1.17m workers are on zero-hour contracts. Sectors such as accommodation and food, transport, arts, health and social work have a high proportion of zero-hour workers. Work doesn’t pay enough. Some 34% of the people claiming Universal Credit are in employment.
In 2023/24, 2.8m people lived in household which had used a food bank. In a research study, 65% of participants, including 76% of those of working age, identified that the root causes of their food insecurity were jobs offering uncertain hours and insufficient pay.
Low incomes deprive people nourishing food, good housing, education, healthcare, pension, and ultimately life. On average men from deprived areas have 9.7 year lower life expectancy than those living in the least deprived areas. The gap for women is 8 years. Men from most deprived areas had a healthy life expectancy of around 53 years, compared to 71 years for those in the least deprived areas. For women it is 52 years in the most deprived areas and 71 years in the least deprived
areas.
Inequalities blight lives, destroy childhoods, prevent the less well-off from living a fulfilling life and consign people to premature death. Their plight is due to the visible hand of political and economic power arising from inequitable distribution of income and wealth.
The rich are able to buy political parties, fund legislators, create think-tanks, engage in lobbying, get access to policymakers and shape public policies. They control media and the means of production and they keep getting richer. This has resulted in concentration of wealth and more economic power.
The top 50 richest families hold more wealth than the poorest half of the population. The richest 1% have more wealth than 70% of the population combined. The top fifth own two-thirds of wealth
and receive 36% of the UK’s income. The bottom fifth own 0.5% of wealth and receive 9% of the UK’s income.
Over 16m people living in poverty, increasing demand for social security benefits and public services. No major party wants to facilitate equitable distribution of income and wealth.
By joining a trade union, workers can enhance their market power and negotiate with employers but in 2024 only around 6.4m workers (22% of total) were trade union members, compared to 13.2m in 1979 (53% of total). Seven Acts of parliament enacted by the Conservative government between 1982 and 1992 weakened the ability of trade unions to defend workers.
The Labour government of 1997 to 2010 did not reverse any of the laws. The Employment Rights Bill currently going through parliament improves workplace rights to sick pay and parental leave, as well as better union rights to access workplaces. However, it does not restore sectoral collective bargaining and leaves workers in a weak position.
There is no mechanism in the Bill by which sectoral collective bargaining can be introduced by law in any sector. In addition to employment law, governments have many other policy options.
Here are some examples.
We have had the spectre of water companies handing mega pay packets to directors whilst neglecting investment and health of the company. In designing and fixing executive remuneration packages, a company must demonstrate that it has given due regard to the interests of its employees and consumers, and its investment and capital needs.
In common with most European countries, the government can move away from shareholder-centric model of corporate governance to a stakeholder model. This would involve putting worker-elected directors on the boards of large companies, thereby enabling them to have a say in how the wealth generated with their blood, brains, brawn, sweat and tears is to be shared.
All wealth generation is a co-operative effort. No CEO works 1,112 times harder than workers. Some may argue that CEOs deserve higher pay, but how high should be a democratic decision. Therefore, workers should have a binding vote on executive remuneration. So, if a CEO wants higher remuneration s/he would also need to pay attention to employee welfare too as without that execs won’t get higher remuneration.
The cult of bonus payments must be discouraged. Bonuses, if any, should only be paid for carefully specified and extraordinary performance, and subjected to 90% shareholders and employee approval. Any bonus scheme available to executive must also be available to workers.
Governments are the biggest spenders in any economy and must use that power to secure equitable distribution of income. Central and local government authorities should apply a ‘fit and proper’ person test to all suppliers seeking public contracts of £5 million or more.
As part of the test, bidders/suppliers should be required to disclose the total number of employees and distribution of income. Those with more equitable distribution of income should be favoured.
Every year 100s of employers are named and shamed for failure to pay the statutory minimum wage. Between 2016 and 2023, over 3m workers were denied the minimum wage. The roll of dishonour includes companies such as Argos, EasyJet, Estee Lauder, Greggs, Lloyds Pharmacy, Marks & Spencer, Mitchells & Butler, Wm Morrison, Moss Bros, Pizza Hut, Rank Group, WH Smith, Superdrug and Tesco.
Company directors must be required to state in their annual report, that no employee has received remuneration which is less than the National Minimum Wage or the Living Wage. In the event of wilful or persistent failure to pay the legally mandated rate of pay, a minimum fine equivalent to the remuneration of the entire board should be levied and at least 50% of that should be paid by the directors personally.
Serial offenders must be prosecuted. Company law must be changed to give stakeholders (shareholders, employees) the right to fix an upper limit to executive remuneration package.
Governments must end tax reliefs that fuel inequitable distribution of income. This should be done by levying an inequality tax. Currently, the entire cost of executive remuneration is a tax deductible expense. This should be changed by placing an upper limit on the amount of executive remuneration (salary, benefits, pension contributions, bonuses) that a company can deduct from its taxable profits.
Taking the example of £45.4m paid by Melrose to its CEO, if the upper limit was £1m (or some other amount) then Melrose would report an additional profit of £44.4m and the company would pay corporate tax on it at the prevailing rate. This mechanism does not limit what companies can pay to their executives, but penalises them for fuelling inequalities which are a form of social pollution and harm society.
Companies can avoid the additional tax by embracing a more equitable distribution of income. The above suggestions are not a panacea for securing equitable distribution of income and ending contradictions of capitalism, but will enable millions to live a dignified and fulfilling life.
This will improve purchasing power of the bottom 50% of the population and help the economy to grow.
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