Lewisham Greens call for Council pay upper limit

Alluding to The Spirit Level, the Greens have called for a salary cap for senior Council staff in Lewisham, linked to the income of the most poorly paid Council employee.

It's an interesting idea, but one outcome would be to incentivise Council leaders to raise pay for the lowest-paid in the organisation, with potentially wage-inflationary consequences at every level of the organisation. And the 10-to-1 ratio seems to be an arbitrary one, based on the fact that it's a nice round number and sounds fairly generous:

No employee in Lewisham Council should earn more than ten times the salary of the lowest paid employee, demanded Lewisham’s Green Councillor, Darren Johnson. At last night’s full council meeting Darren called on the Council to implement a “fair pay ratio” to limit the gap between the highest and lowest paid.

Lewisham Council’s Chief Executive currently earns £192,387 (1) while a formal question Darren tabled to the council revealed that the lowest paid council employee earns £15,036 (2).
Cllr Johnson commented, “At a time of council cuts the public are rightly questioning why senior officer are paid such high salaries. But the idea of a fair pay ratio goes wider than that. Research shows that pay inequality has a detrimental effect on the whole of society. Countries with a smaller gap between the well and low paid have less crime, fewer health problems and greater social cohesion.”


Ed said...

The underlying principle of fair pay is of course admirable but you have hit the nail on the head, the ratios are arbitrary and therefore unreasonable and unworkable.

Anonymous said...

The Greens helping to make sure that the best talent remains in the private sector.

Too much veg, they can't think straight.

max said...

Well done Darren.
As I already said here
I fully support this, also because of it wage-inflationary effect (come on, who can live on £15k).
And yes, it's a round figure that sounds ok and not more but you have to start somewhere.

Brockley Nick said...

Hi Max

I'm not saying that wage-inflation is necessarily a bad thing - that's a different question. I'm saying that it's a possible (unintended) consequence, that needs to be understood.

I imagine that some people will look at the equation simply as a way of containing top salaries, but it could mean that to sustain their higher pay, senior execs increase wages for the lower paid. Perhaps that's welcome, but with a finite budget, it potentially means fewer staff or less investment of other kinds. Moreover, those people who are slightly better paid than those on the lowest level may also want to maintain a wage differential between them (human nature), this means they will ask for money, as will those above them, and so on. That's quite a common phenomenon in large organisations.

Ultimately, it could mean less money for the things we all want, like street cleaning, libraries, etc.

max said...

Hi Nick,
I see your points, but wouldn't a correctly set lowest/highest earnings smooth the edges with the result that you'd still have high earners happy enough and people down the bottom earning enough to actually live.

Yes, salaries would mean a higher cost of the outcome but are we calling for a sweatshop culture? And where does it end? Isn't it true that across the board salaries have not risen in real terms for years except for management?
We have a shrinking middle class, now rather broke and indebted, and I think that this is a good place to start.

I have nothing against the public sector paying its employers decent wages, even if this means that they are better treated than in the private sector and we'd have to do with marginally less services becasue they're provided by people that's better paid.
If the public sector sets a standard, eventually the private sector will follow, if they don't set a standard then it's exploitation across the board with ever more shrinking middle classes and polarisation of salaries, which means a two tier society and an unsustainable economy.

Now, we're not exactly Brazil, so it's not as dramatic but that's a trend and a linkage between lowest and highest wages in the public sector looks to me like a possible corrective measure.

Brockley Nick said...

@Max - all I'm saying is that if you tinker with any market, there are almost always knock-on effects which may not be what people wanted.

I agree with some of what you say, but you make two assertions that I think are wrong:

1. If the public sector sets a standard, the private sector may follow - no, I think the able people may decamp to the private sector and apply their skills to wringing as much as they can out of the public sector as consultants and sub-contractors.

2. You'd still have high earners happy enough with their capped salary - Possibly, or you may have some disgruntled senior manages (who benchmark themselves against their peers and friends working in the private sector, rather than against the most poorly paid person in the organisation) trying to subvert the original intention of the by increasing wages across the board so that they can take home a pay rise multiple of ten times that amount.

We had an incomes policy in the UK in the 1970s (not a golden era in British economic history). My dad used to be involved in setting people's wages centrally - creating arbitrary floors, ceilings and multiples. Looking back, he regards the whole system as having been massively flawed.

max said...

Hi Nick,

good points on both sides I think.

I agree that some good people in management may want to leave for the private sector, but on the other hand how much are we prepared to pay to retain them, and how much is this under control of public sector policy anyway if private sector wages go up regardless.
Yes some manager may feel disgruntled for not earning as much as equivalent workers do in the private sector but if they earn much more than those below them then it's the rest that's disgruntled.
And I also contend that the nature of the public sector is fundamentally different from the private sector so comparisons are valid only to a point.

I really don't know much about wage policies of the seventies, I take what you say, but is this tinkering with the market or just providing some framework to what is anyway an arbitrary setting of remuneration levels, whether they are set centrally or by local committees.
Every age has its issues though and its correspondent necessity of corrections in a direction or the other, we have now a set of issues that this proposal addresses

max said...

Sorry, the end of the last sentence disappeared in editing.

We have a set of issues that this proposal addresses, it may not be the perfect solution but at least it goes in the right direction, if someone has got a better one then stand up and say it, until then for me it's well done Darren.

Brockley Nick said...

@Max - I'm not sure what issues this addresses? Are we saying that Lewisham Council officials are overpaid? If so, according to what standards or benchmarks?

This policy would require a large pay hike for the lowest paid (which the Council can't afford) or a surprise cut in salary for execs who may have done a very good job.

max said...

The issues I see are people not being paid much throughout the public sector, all wages are stuck except for high earners, this has been the trend for a few years now, and there are repercussions on the economy as a whole. I'm quite sure that there won't be any surprise pay cut for Lewisham execs this Chrismas, but it's a debate that must be had.

max said...

And anyway isn't it the case that at Lewisham Council there's only one person earning more than 10 times the lowest earner?
Would it be so terrible to ask someone earning £192k a year to stop giving himself pay increases until the rest has caught up a bit?

Anonymous said...

Leave my 192K alone.

Anonymous said...

"Research shows that pay inequality has a detrimental effect on the whole of society. Countries with a smaller gap between the well and low paid have less crime, fewer health problems and greater social cohesion.”

Thats pretty spurious research I'd say - there could be a million other factors for low crime, fewer health problems and greater social cohesion than pay differentials.

Come to think of it - I bet they surveyed Japan - where most of the population is considered middle class and a small pay gap. That would be where they get there low crime, healthy living and social cohesion from...

lb said...

"Countries with a smaller gap between the well and low paid have less crime, fewer health problems and greater social cohesion."

I agree, this is a completely meaningless statistic without more context. I also thought Japan (and possibly a few of the more compact Scandinavian economies) would have been the basis for this.

I like much of what the Greens stand for but this kind of flaccidly-constructed grandstanding is exactly why I can't take them seriously.

Hardlianotion said...

Doubt such a policy would have a serious effect on wage inflation. They are constrained by their funding sources.

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