Particularly interesting here is the part relating to “social capital” – trust and relationships in society.
Trust between bosses and employees is at an all-time low – not helped by Conservative Government policies that trample on workers and try to reduce their rights and remuneration. Look at the junior doctors’ strike for an example.
Mr Haldane is saying the direct result of this is harm to the economy, and we can see that this is true.
Why would any worker want to provide a high-quality product for an employer who is ripping them off?
And if they lose their job, why would the next worker want to provide a high-quality product for an employer who is paying them less than the last worker (because they can)?
The Tory attitude is that pay can be depressed to whatever level the market will still support – but Mr Haldane’s evidence shows that the market isn’t supporting such behaviour.
Look at the evidence of the last few years: We’ve had the slowest economic recovery in the UK’s history, and that’s largely because employers haven’t valued their workforce.
Excessive pay for top bosses is holding back economic growth in Britain, the chief economist of the Bank of England, Andy Haldane, has warned, in a significant intervention in the debate about executive remuneration in the UK’s biggest companies.
Mr Haldane, who has earned a reputation as one of the central bank’s most radical minds, highlighted in a speech in Westminster the fact that FTSE 100 bosses are now paid 150 times [as much as] the average UK worker.
This large and growing remuneration gap, Mr Haldane said, “drive[s] a wedge between management and employees…that in turn erodes social capital. A company, like a country, whose physical and social capital is being eroded is one whose wealth-creation capacity is being impaired.”
Social capital refers to trust and relationships in a society and Mr Haldane argued this matters “every bit as much to wealth and well-being” as financial capital such as stocks and shares and other such assets.
So far in 2016 there have been major pay revolts by shareholders at the oil giant BP, the mining group Anglo-American and the engineering company Weir, all over the level and structure of proposed remuneration packages to chief executives. A focal point of protest next month is expected to be the annual general meeting of the advertising conglomerate WPP where the annual pay of its chief executive and founder Sir Martin Sorrell is expected to soar to £70m.
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