Tuesday, 27 October 2009

Laws for equality

The case for equality is overwhelming.
So what policy-instuments do we need, to make it happen?
I advocate the following two, as key parts of the process:
• A maximum income differential in percentage terms between boss and lowest-paid employee in each company. And the differential should be narrowed in percentage terms each year. It should never be allowed to grow in absolute terms at all. (Similar laws, though just slightly less radical, are in place right now in (e.g.) Denmark.)
• Wage rises should be on a cash-amount basis, not a percentage basis. In other words, everyone in a given organisation would get the same wage rise, each year, in monetary terms. Over time, this would reduce the percentage difference between high and low earning employees very considerably, and eventually might make it trivial.
The beauty of my proposals (you need both, because the second one only applies if there is an actual wage/salary _rise_, which in a recession there is not necessarily) is that they _encourage_ the higher wage earners (including top bosses) to raise the wages of the poorer workers in their company/organisation. And they actually narrow the rich-poor gap - they diminish relative poverty - in the process. In other words: they attack inequality, and bring equality nearer, in a way that doesn't render the better-off as angry resisters of the process.
My proposals are sly long-term ways of getting equality to happen.

6 Comments:

Anonymous Anonymous said...

i've heard of some daft ideas but this really takes the biscuit! Your idea will lead to some people being worse off in real terms whilst others. Some people work extremely hard to get towards the top of an organisation and make lots of sacrifices to eventually be able to give their families a good standard of life whilst you intend to reward those you do the absolute bare minimum. It's about time you left your green tinted ivory tower and got into the real world!

28 October 2009 at 13:51  
Blogger Rupert said...

Thanks, Anonymous. [Note: please don't be anonymous in future. I won't normally publish anonymous comments, unless they are nice.
;-)
It would be useful if you could explain the logic of your criticism. What exactly in my two proposals here would encourage people who do the absolute bare minimum?
And do you not agree that many people who earn a pittance at present work very hard indeed?

28 October 2009 at 15:36  
Anonymous Anonymous said...

Hi Rupert. I am not the original anonymous. However, I also read this and felt uncomfortable with the proposal.

I buy into your concerns about current levels of inequality, but I believe there is an optimal level of inequality. In other words, we improve society by reducing inequality down to a certain point and then worsen it by trying to make society more equal. At the extreme, a totally equal society would be similar to communism. That has been shown not to work.

The maximum income differential proposal probably has something going for it, although I suspect we would disagree as to the level at which it would be set. I would see it as a means to avoid abuses by management. I don't think it should reduce once it has been set (other than perhaps to phase to the long-term level). Also I think it would need to vary according to the size of the company.

However, I have more serious problems with the second part of your proposal. If everyone in the organisation gets the same pay rise regardless of position then:

- The company can't reward performance or incentivise people. Why should a slacker get the same as someone in the same role who works hard and/or is more productive?

- You can't address supply/demand issues (for example, if your organisation is not attracting good quality applicants for particular positions the obvious thing to do is to raise the salary).

- It will likely hinder restructuring.

- It will mean a firm may not be able to compete fairly. If a new entrant comes into the industry then it can set an appropriate salary scale for its workforce taking into account current market rates. However, the existing firm is locked in.

These are just a few examples.

Giles

28 October 2009 at 21:13  
Blogger Rupert said...

If you think that the amount of inequality that we have in our society is optimal, then we live on different planets. For I find that amount utterly utterly obscene, and downright mad.
For empirical support for my feeling/thought here, btw, DO read Richard Wilkinson.

29 October 2009 at 10:57  
Anonymous Anonymous said...

Apologies if you receive roughly the same comment twice. The browser crashed first time. If you do receive both then please use your editorial discretion only to accept one.

It seems my second paragraph was not clear. I started by saying "I buy into your concerns about current levels of inequality, ...". This means that I am not happy with the current levels of inequality in our society (it is too high).

The remainder of my second paragraph was intended to express the concern that I think your proposals go too far. This is because they continuously reduce real pay differentials (assuming we have some level of inflation). Over the long term they tend towards everyone receiving the same pay. In my view we should strive to reduce it significantly, but not to eliminate it.

(The remainder of the post covered what I see as structural inefficiencies.)

Giles

29 October 2009 at 20:45  
Blogger Rupert said...

Look. The basic point is this. We live in a completely-madly unequal world. ANY progress towards equality has to be good, by reference to and contrast with where we are right now. So: Let's make progress toward equality.
The point about most policies that supposedly help the poor today - e.g. New Labour policies - is that they continue to ACCENTUATE poverty. That's just crazy.

1 November 2009 at 22:19  

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29.
The case for equality is overwhelming.
So what policy-instuments do we need, to make it happen?
I advocate the following two, as key parts of the process:
• A maximum income differential in percentage terms between boss and lowest-paid employee in each company. And the differential should be narrowed in percentage terms each year. It should never be allowed to grow in absolute terms at all. (Similar laws, though just slightly less radical, are in place right now in (e.g.) Denmark.)
• Wage rises should be on a cash-amount basis, not a percentage basis. In other words, everyone in a given organisation would get the same wage rise, each year, in monetary terms. Over time, this would reduce the percentage difference between high and low earning employees very considerably, and eventually might make it trivial.
The beauty of my proposals (you need both, because the second one only applies if there is an actual wage/salary _rise_, which in a recession there is not necessarily) is that they _encourage_ the higher wage earners (including top bosses) to raise the wages of the poorer workers in their company/organisation. And they actually narrow the rich-poor gap - they diminish relative poverty - in the process. In other words: they attack inequality, and bring equality nearer, in a way that doesn't render the better-off as angry resisters of the process.
My proposals are sly long-term ways of getting equality to happen.
30. 31. 32.