Pay and income gaps continue to widen – where’s the opposition?

by Philip Ferguson

Back in February we ran an article looking at how the income gap in New Zealand was growing.  One of the statistics it mentioned was the 14% growth in CEO pay from June 2009 – June 2010, compared to only 2% wage growth.  Real wages actually fell.  (See https://rdln.wordpress.com/2012/02/08/low-pay-longer-hours-and-less-social-mobility/.)  Figures released earlier this week indicate the same trend.  The average base salary for 3,674 executives – a wider group than CEOs – rose 9.9% over 2011.  The increase for the executives was $28,311 on average – this is more than the total pay of full-time workers on the minimum wage!

In the case of CEOs (chief executive officers) the gap is more striking.  Over the course of 2011 CEOs in New Zealand were paid 22.5 times as much as their employees, compared to being paid 21.9 times as much in 2010.  For CEOs of some companies, however, the gap is much bigger.  For instance, the CEO of Telecom received 51.6 times as much pay in 2011 as the average Telecom employee, Restaurant Brands’ CEO was paid 51.9 times as much as the average worker in that firm and the CEO of the Warehouse Group was paid just over 60 times as much as his employees.  The biggest gap was at Sky City, where CEO Nigel Morrison was paid 67.5 times more than the average pay of firm employees.

The pay of the CEOs for twenty-six NZX50 companies whose pay and salary figures are publicly available went up by $50,000 a year – that’s substantially more than the average annual industrial wage!  The average pay of this group of CEOs is now $1.44 million – they earn each week what a full-time worker on the minimum wage earns in a year.

The gap has continued to grow regardless of who is in government, Labour or National.  For instance, in the period 1997-2002 average CEO pay grew from 11.8 times the wage of workers nationally to 15.2 times in real terms – ie, taking into account inflation and what you can buy with your pay.

Notice how the rate at which the super-rich got even richer went up under Labour, 1999-2008; it then fell slightly because of the global economic downturn

The growing gap between the pay of CEOs and other executives on the one hand and their employees who create the wealth of their companies is matched by growing incomes gaps across New Zealand society.  The latest Household Incomes in New Zealand report, just released by the Ministry of Social Development shows that median household incomes actually fell by 3% in real terms from June 2010 to July 2011, while the incomes of the wealthy continued to rise.  The MSD report also shows that the percentage of children living in poverty has risen from 15% in 2007 to 21%.

At the other end of the spectrum, last year’s National Business Review‘s annual Rich List showed that the 150 richest New Zealanders had increased their wealth by 18%.  The personal wealth of these individuals rose from $32.8 billion to $45.2 billion.  (This year’s Rich List showed that the wealth of the super-rich had risen by a further 27% to  $57.7 billion, however it’s complicated by the fact that the NBR has included foreign investors with some sort of residency and then lists their total wealth, but much of this is not in NZ.  If you take just the New Zealand capitalists, their wealth actually declined slightly to $44.3 billion.)  In any case, NZ capitalists’ wealth is not created by these folks working every hour of the day and night, but by the workers they employ and exploit.  (See here.)

There have been warnings about the consequences of the increasing pay and income gaps.  For instance, John McGill of Strategic Pay, which carried out the last executive pay survey, says that the overall economic situation and levels of unemployment mean that especially large increases for executives wouldn’t be looked on with favour by many people.  CTU secretary Helen Kelly says the growing gap “feeds concerns people have about the rich getting richer” and that the gap “contributes to a whole lot of negative social indicators”.  John Ryall of the Service and Food Workers Union responded to the MSD report by saying, “inequality and poverty are growing at a truly alarming rate” and that members of his union, many of whom are among the lowest-paid workers in this country, were increasingly reporting that they simply can’t afford basic necessities like decent food, let alone pay for things like school uniforms.

All these comments are true.  But where’s the opposition to the gaps?  The top union leadership has no strategy whatsoever for mobilising workers, instead merely holding out hope for a future Labour-led government – despite the fact that gaps continue to expand under Labour governments (see here), as these union leaders well know.  The bigger problem, however, is the immobility of the working class.  The system will muddle along, with expanding inequality, unless and until the working class decides to move.