Jonny Rogers investigates how the CEOs of the UK’s largest companies are receiving higher wages while unemployment soars amidst the pandemic.
Photo by Ben Rosett
While countless businesses have been forced to close and hundreds of thousands of people have been made redundant due to the pandemic, the UK’s top CEOs have earned more than the annual wages of average UK worker every 34 hours.
According to the High Pay Centre think-tank, the bosses of companies listed on the FTSE 100 index (which lists the 100 largest companies on the London Stock Exchange, as measured by market capitalisation) used to earn 20 times the country’s median wages in 1980. Within 20 years, this would increase to 50. But this year, the top CEOs will earn around 120 times the wages of the average worker.
Although the High Pay Centre acknowledges that their data is too limited to fully account for the impact of coronavirus on pay gaps in the UK, it is nevertheless likely that the pandemic will only aggravate economic division. However, even changing the wages of the top CEOs will do little to solve the current unemployment crisis.
FTSE 100 Index
It has been suggested that the growing wage gap is the result of the increasing role of the finance industry, the outsourcing of low-paid work and the decline of trade union membership. Luke Hildyard, director of the High Pay Centre, hopes that his research will incite further conversation about wages and employment in the UK:
"These figures will raise concern about the governance of big businesses and whether major employers are distributing pay in a way that rewards the contribution of different workers fairly."
However, some have argued that these statistics fail to consider the importance of chief executives. Daniel Pryor of the Adam Smith Institute argues that the management of large companies will make a significant difference to “anyone with a private pension, and shareholders”, which hence justifies why large firms offer large wages to attract the best talent.
Nevertheless, many believe that this scale of difference cannot be justified; for those receiving the minimum wage of £8.72 per hour, it would take 212 years to earn the annual average salary of these CEOs, even assuming a fixed-term contract.
Unemployment and Inequality in the Pandemic
The hospitality firm Whitbread PLC, whose CEOs already earn 143 times the median employee’s wages, cut 1500 jobs last year due to the impact of the virus on tourism and travel. Similarly, British Airways announced that they would make 10,000 cuts. Kate Nicholls from UK Hospitality predicts that over 660,000 people will lose their jobs by the end of March, 2021; as many as 80% of businesses in the UK might not be able to survive until April.
On the other hand, a number of companies have benefited from being classified as ‘essential’ shops, with many supermarkets and retailers opening new stores and creating thousands of new jobs. The pandemic has, unsurprisingly, triggered a boom in both in-store and online food shopping over Christmas: a £11 billion boom, to be precise. However, this record-breaking Christmas period might only serve to reaffirm wage inequalities; the boss of B&M Bargains, which received £1.4 billion from Christmas sales, was recently granted a £30 million pay-out due to the company’s recent growth.
Whilst at least 36 FTSE firms announced that they would reduce executive wages in the first half of 2020, most of these cuts were only short-term. About 9.6 million people have benefited from the furlough scheme at one time or another, but this has steadily declined over time due to its long-term unsustainability.
Anticipating public criticism, fund managers and proxy advisers for FTSE firms are allegedly expected to oppose big bonuses and dividends for firms which have laid off large numbers of staff, as well as those which have benefited from taxpayer support. However, it remains to be seen what the future holds for employment in the UK, or indeed the world at large.
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