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U.K. Labour Party leader Jeremy Corbyn provoked intense debate last month when he proposed a maximum wage cap – then backed down on his initial statement and suggested a package of changes to taxation and other financial mechanisms to ensure a fairer system of income distribution in Britain.
“I would like there to be some kind of high earnings cap, quite honestly,” he told BBC Radio 4. “We have the worst levels of income disparity of most of the OECD [Organization for Economic Co-operation and Development] countries and it is getting worse. And corporate taxation is a part of it. If we want to live in a more egalitarian society, and fund our public services, we cannot go on creating worse levels of inequality.”
Corbyn, who earns around £138,000 a year, stressed that the cap would go higher than that. “I think the salaries paid to some footballers are simply ridiculous, some salaries to very high earning top executives are utterly ridiculous. Why would someone need to earn more than £50 million a year?”
However, later that same day, in a keynote speech on Brexit, Corbyn scrapped the idea of a legal limit on earnings. He suggested instead a range of measures that would include preventing bosses from earning more than 20 times the wage of their lowest earners, increasing income tax for the top 5 percent of earners, and cutting taxes for firms that put caps on executive pay.
"There are many options,” Corbyn said. “But what we cannot accept is a society in which a few earn in two and a bit days, what a nurse, a shop worker, a teacher do in a year. This is not about limiting aspiration or penalizing success, it’s about recognizing that success is a collective effort and rewards must be shared. We cannot have the CEO paying less tax than the cleaner and pretending they are worth thousands times more than the lowest paid staff.”
While closing Britain's yawning wage gap is a goal that many endorse, how to go about doing it remains a widely contested subject.
“There is understandable outrage at the enormous growth in top pay packages at a time when wages for most have been pretty flat,” Stefan Stern, director of the High Pay Centre, told Occupy.com. “Requiring companies to publish their pay ratios – from top to middle as well as from top to bottom – would shine more light on the pay gaps and force companies to explain those gaps to their investors and wider society.”
Stern is doubtful, however, about the effectiveness of a straightforward maximum wage policy. “Picking a pay cap, a specific number, is very hard to do. Should private businesses really be prevented by law from paying what they want to pay somebody? That does not seem a practical suggestion. We won't reform excessive pay with one simple measure, but we do need to change the conversation and shift the direction of travel.”
The left-wing U.K. Green Party agrees with Corbyn’s second lot of proposals in principle, but believes the figures suggested do not represent a strong enough set of policies.
“It is good to hear Jeremy Corbyn proposing action on pay inequality,” Jonathan Bartley, co-leader of the party, told Occupy.com. “[But] for starters Labour could reverse their support for an effective tax cut to the top 15 percent that the Tories are ploughing ahead with by raising the 40p threshold. They could also support a higher top rate of tax – with a 60 percent rate likely to raise around £2 billion. We also need to introduce pay ratios so the maximum wage in any organisation is no more than ten times the minimum wage it pays. That way we tackle both low pay and excessive salaries at the same time.”
Emily, who works as a healthcare assistant, said she fully favors a wage cap. “I strongly support a pay ratio so that the highest paid person in an organization can't earn more than X times more than the lowest paid person for the same number of hours,” she told Occupy.com. “It's not a maximum wage per se – it's just ensuring that if those at the top are going to pay themselves enormous salaries then they aren't underpaying their employees.”
Another person, who called himself Mal and said he is unemployed, commented: “While I can see the populist appeal of the [wage cap] demand, in practice the people it would apply to are the sort of people who make sure they can avoid paying taxes. If they don't take the money in wages it'll take some other form such as expenses, share options, pension payments or simply hidden off-shore.”
With the Conservative government currently in power, anything like a wage cap remains speculation. But the fact that the dialogue has started on a national scale represents progress in some form. Make no mistake: The U.K. is in an earnings crisis as those at the bottom – and even those who consider themselves the “lower middle" – are floundering while wages remain stagnant, jobs sparse and prices continue to rise. Corbyn's words are simply putting the executives on notice.
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