The New Statesman’s rolling politics blog

RSS

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