It is difficult to be objective about the reward we receive for our work. It really is a challenge for employer or employee to balance fairness, affordability, consistency and transparency in a way that is accepted by all. A fair day’s work for a day’s pay may have spiritual, economic and social credibility, but it’s usually the start of an evaluation, not a clinching consensus.
Two factors have led me to ponder on all this in the past few weeks. First, I have been involved in trying to resolve the impasse in this year’s pay award for local government staff.
I accept fully this has all been extremely difficult for staff and their trade unions as they stare at a below-inflation solution, whatever statistics are used. Forty years ago, I struggled, as a student of economics, with the conundrum of whether pay increases fuel inflation or vice versa. I know that the issues are too complicated on which to base glib conclusions.
Second, there has been simultaneous publicity about bonuses for City workers, based on provisional figures from the Office for National Statistics, no less. Apparently bonuses are likely to exceed £14bn this year, and director’s performance pay will reach £26bn. I have seen one estimate that all this equates to £5,000 each for the lowest 20% of earners among British workers as a whole.
The justification for the status quo is that entrepreneurs and wealth-creators need major incentives to succeed. Therefore, extra rewards are fine if they are paid out of profits. Public sector pay must always be restrained as it is financed by national and local taxes, or so the argument goes.
All pay increases have to be paid by someone, through prices or taxes. The growth in central London home prices at the top end and the demand for luxury goods suggests that the material benefits of all this are profound.
There should be no stomach for a return to centrally-determined pay restraint. However, there does need to be sense and proportion in the arguments deployed.
Sustained economic growth is important for us all, but so are good-quality public services, largely provided by relatively-low paid staff. Resolving these issues is not easy, but please let us keep a sense of proportion. n
John Ransford is deputy chief executive of the Local Government Association
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