Why nobody wants to admit they're part of the 1 per cent

A culture of secrecy over executive pay is holding back attempts to tackle inequality.

Last week another public figure, the Archbishop of York, Dr John Sentamu, had his two penn'orth on top executive pay, decrying the excesses of the financial sector as unfair and bad for society. But for all the air time given to the issue of levels of pay, discussing how much we are paid remains a social taboo - a subject best avoided in polite circles.

It raises the question - how do we address the thorny issues of high levels of pay amongst elite groups in society and income inequality, if we do not know how high earners themselves think about their pay and its effect on society? Changing behaviour is always tough, but in this case will be particularly difficult without a better understanding of how high earners see the world and their place in it.

To shed more light on this, the High Pay Commission, an independent inquiry into top pay in the private sector, commissioned Ipsos MORI to talk to a group of top earners - people in the top 1 per cent of the UK's income distribution.

The research shows that the taboo around discussing your pay inhibits rational debate on the subject and distorts the way top earners see their salaries.

First, hardly anyone who took part in the study considered themselves to be rich. High earners feel closer to the "squeezed middle" than the "super rich". They considered that their costs of living were too high for them to be more than "comfortably off". For them, "rich" means Bill Gates rich - having too much to be realistically able to spend.

Transparency around pay is not a cultural norm in the UK. There is a culture of secrecy over pay for many high earners. Some have little basis for comparison, aside from occasional conversations with headhunters. And the more senior they get, the more difficult it is to discuss pay.

They are not immune to the current media commentary on pay and discussions of bankers' bonuses. Compared to a similar sample of high earners in 2008, these high earners are more thoughtful about the way society values them and less likely to claim that they deserve their pay purely through their own hard work and skills.

So, satisfaction with pay is based on a sense of entitlement - if that is what the industry pays, that is what I should be getting. They do not justify their high pay by claiming that they work harder than everyone else or have more specialist skills. Some told us that they bring value to their companies which exceed their salary cost. But at the same time, they acknowledge that an individual's contribution to corporate success is hard to quantify and so pay does not always reflect individual performance.

Instead, the people who are paid most are those who are best at pay negotiations and "selling" themselves effectively.

Overall, they recognise that there is income inequality and they are to a great extent fortunate to earn what they do. They feel some industries simply pay high and there is a hefty dose of luck involved.

Here lies the tricky issue. High earners believe high pay is an institutional, global and systemic phenomenon. They also mention a number of social benefits coming from having high earners in our midst - for example, they believe in the trickle-down effect of high salaries to the rest of society.

There may be potential to communicate with high earners about changing the way society values different incomes, but they do not have faith that any local interventions around equalising pay would work.

Those in the City felt that asking the City in particular to behave differently is unlikely to work - as it only answers to its own rules.

So where does this leave public policy on the issue?

In a world where high earners do not talk about their pay and underestimate how close to the top they are, something is needed to get high earners out of their "bubble" - to take high pay out of the shadows and make it clear how different the top 1 per cent are from the other 99 per cent.

Ministers have urged companies to publish salaries voluntarily. It seems unlikely that many companies will accept the invitation. But however it is achieved, greater transparency about salaries might help high earners themselves understand the challenges of income inequality - and get on board with an agenda to reduce it.

Sarah Castell is Head of Qualitative Methods at Ipsos MORI

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North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?

Is fracking the answer to the UK's energy future? Or a serious risk to the environment?

Shale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park.

The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry?

What is fracking?

Fracking, or “hydraulic fracturing”, is the extraction of shale gas from deep underground. A mixture of water, sand and chemicals is pumped into the earth at such high pressure that it literally fractures the rocks and releases the gas trapped inside.

Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland

Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues.

So do these claims stands up? Let’s take each in turn...

Will it create jobs? Yes, but mostly in the short-term.

Industry experts imply that job creation in the UK could reflect that seen in the US, while the medium-sized production company Cuadrilla claims that shale gas production would create 1,700 jobs in Lancashire alone.

But claims about employment may be exaggerated. A US study overseen by Penn State University showed that only one in seven of the jobs projected in an industry forecast actually materialised. In the UK, a Friends of the Earth report contends that the majority of jobs to be created by fracking in Lancashire would only be short-term – with under 200 surviving the initial construction burst.

Environmentalists, in contrast, point to evidence that green energy creates more jobs than similar-sized fossil fuel investments.  And it’s not just climate campaigners who don’t buy the employment promise. Trade union members also have their doubts. Ian Gallagher, Secretary of Blackburn and District Trade Unions Council, told Friends of the Earth that: “Investment in the areas identified by the Million Climate Jobs Campaign [...] is a far more certain way of addressing both climate change and economic growth than drilling for shale gas.”

Will it deliver cleaner energy? Not as completely as renewables would.

America’s “shale revolution” has been credited with reversing the country’s reliance on dirty coal and helping them lead the world in carbon-emissions reduction. Thanks to the relatively low carbon dioxide content of natural gas (emitting half the amount of coal to generate the same amount of electricity), fracking helped the US reduce its annual emissions of carbon dioxide by 556 million metric tons between 2007 and 2014. Banning it, advocates argue, would “immediately increase the use of coal”.

Yet a new report from the Royal Society for the Protection of Birds (previously known for its opposition to wind farm applications), has laid out a number of ways that the UK government can meet its target of 80 per cent emissions reduction by 2050 without necessarily introducing fracking and without harming the natural world. Renewable, home-produced, energy, they argue, could in theory cover the UK’s energy needs three times over. They’ve even included some handy maps:


Map of UK land available for renewable technologies. Source: RSPB’s 2050 Energy Vision.

Will it deliver secure energy? Yes, up to a point.

For energy to be “sustainable” it also has to be secure; it has to be available on demand and not threatened by international upheaval. Gas-fired “peaking” plants can be used to even-out input into the electricity grid when the sun doesn’t shine or the wind is not so blowy. The government thus claims that natural gas is an essential part of the UK’s future “energy mix”, which, if produced domestically through fracking, will also free us from reliance on imports tarnished by volatile Russian politics.

But, time is running out. Recent analysis by Carbon Brief suggests that we only have five years left of current CO2 emission levels before we blow the carbon budget and risk breaching the climate’s crucial 1.5°C tipping point. Whichever energy choices we make now need to starting brining down the carbon over-spend immediately.

Will it help stablise the wider economy? Yes, but not forever.

With so many “Yes, buts...” in the above list, you might wonder why the government is still pressing so hard for fracking’s expansion? Part of the answer may lie in their vested interest in supporting the wider industry.

Tax revenues from UK oil and gas generate a large portion of the government’s income. In 2013-14, the revenue from license fees, petroleum revenue tax, corporation tax and the supplementary charge accounted for nearly £5bn of UK exchequer receipts. The Treasury cannot afford to lose these, as evidenced in the last budget when George Osborne further subsidied North Sea oil operations through increased tax breaks.

The more that the Conservatives support the industry, the more they can tax it. In 2012 DECC said it wanted to “guarantee... every last economic drop of oil and gas is produced for the benefit of the UK”. This sentiment was repeated yesterday by energy minister Andrea Leadsom, when she welcomed the North Yorkshire decision and described fracking as a “fantastic opportunity”.

Dependence on finite domestic fuel reserves, however, is not a long-term economic solution. Not least because they will either run out or force us to exceed international emissions treaties: “Pensions already have enough stranded assets as they are,” says Danielle Pafford from 350.org.

Is it worth it? Most European countries have decided it’s not.

There is currently no commercial shale-gas drilling in Europe. Sustained protests against the industry in Romania, combined with poor exploration results, have already caused energy giant Chevron to pull out of the country. Total has also abandonned explorations in Denmark, Poland is being referred to the European Court of Justice for failing to adequately assess fracking’s impact, and, in Germany, brewers have launched special bottle-caps with the slogan “Nein! Zu Fracking” to warn against the threat to their water supply.

Back in the UK, the government's latest survey of public attitudes to fracking found that 44 per cent neither supported nor opposed the practice, but also that opinion is gradually shifting out of favour. If the government doesn't come up with arguments that hold water soon, it seems likely that the UK's fracking future could still be blasted apart.

India Bourke is the New Statesman's editorial assistant.