David Cameron’s ‘maximum wage’ could affect around 200 people (possibly)

David Cameron’s ‘maximum wage’ could affect around 200 people (possibly)

A few weeks ago I argued on BBC1’s Big Questions for a ‘maximum wage’ – a link between the lowest paid workers and the highest paid, to tackle inequality. The idea has been proposed by the New Economics Foundation.

Writing in today’s Guardian David Cameron seems to be advocating it for the public sector:

"We are already committed to pay transparency and accountability, but I think it is time to go further. The government plays an important role in helping to shape society, so if we win the election we will set up a fair pay review to investigate pay inequality in the public sector.

"Some of our most successful private sector companies operate a pay multiple, meaning that the highest paid person doesn't earn more than a certain multiple of the lowest paid. We will ask the review to consider how to introduce a pay multiple so that no public sector worker can earn over 20 times more than the lowest paid person in their organisation. There are many complex questions that the review will need to address, but I am confident it will not only help tackle unfair pay policies, it will improve cohesion and morale in the public sector too."

The catch comes when you crunch the numbers.

Even taking the lowest possible base of the minimum wage the lowest paid worker would be on £5.93 an hour, and the highest paid would be earning £118.60 an hour. On a conservatively estimated 35 hour working week, that would be a pay range of £10,972.60 to £215,582 per annum (bigger if one takes a longer working week).

In the public sector 201 people were remunerated above this level in 2009 according to the Taxpayer’s Alliance Rich List.

This includes 27 people from the banks taken into public ownership, and it is not clear if they would be included as 'public sector' by Cameron's definition. The figures cited above also include salary, bonuses, incentive plans, benefits-in-kind and (where made clear in the accounts) pension contributions. If these are not included in the criteria for assessing earnings there will be even fewer effected. Fewer still if the lowest paid person in a public sector organisation is on anything above minimum wage.

Nor is this a great change in policy. The Conservatives have already said that public sector workers should not be paid more than the Prime Minister who earns £197,689 including MP's salary of £64766, without special approval.

It would no doubt do something to address recent public rage about public sector pay and (if applied to banks in public ownership and bonuses) the bankers. But it doesn’t look as if it would do a great deal to tackle inequality. 6.1 million people are employed in the public sector in the UK. .00003 per cent of these will be affected on a generous estimate.

As Cameron suggests, there are many complex questions that the review would need to address. One question however it won’t apparently tackle, is why one set of principles are acceptable and ethical for the public sector, and not for the private sector?

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