Introduction of a Maximum Wage

Jim Shannon Excerpts

Tuesday 10th February 2015 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I apologise to the hon. Member for Inverclyde (Mr McKenzie) for not being here at the start of the debate—I was at a Bill Committee that I am serving on. I am conscious that that Committee will have several votes. I apologise to the shadow Minister and Minister because I will have to leave early, if they do not mind.

I am privileged to contribute to this debate on a maximum wage. I will try to strike a balance between the need to bring up the wages of those on poor pay and the need for those on very high pay to consider those further down the ladder, so to speak. The issue is very sensitive. At a time when many people are struggling to make ends meet, find employment or put food on the table, sections of society are earning disproportionately large and astounding sums of money. We have seen the rise of the slogan “We are the 99%” and much theorising about how much the 1% earns, but we must be careful about how we handle this issue. We should proceed with empathy and tact.

The Prime Minister said on TV and in the papers today that we must encourage businesses to give their workers more money. It is good that we are having this debate, because it enables us to focus on the important things. We need to consider what benefit a national maximum wage would have for our social capital. It will make more people feel that they live in an economically just society and help to create a more equal society. However, there is no point in narrowing the gap between the highest and lowest earners if the wages of the lowest earners do not increase. That is what we have to do, and that is the thrust of what the hon. Gentleman said.

Nobody in this Chamber would argue that the gap between our highest and lowest earners is not vast and that it does not have to be addressed. However, we must balance fairness and competitiveness, and take into account the potential spill-over effects of moving towards a maximum wage. We need to minimise economic harm, while healing our social fabric.

The highest earners in our society are often those in charge of large corporations. They are the CEOs of companies that create jobs and contribute to growth, and we commend them for that. When we decide on a cap, it should not penalise those individuals. However, we cannot put on the back burner the fact that the disparity in earnings is UK-wide, and that its prevalence across the globe makes the global wage gap positively monumental.

Income inequalities have been increasing in the short term and the long term, and have been aggravated at both ends of the pay scale. I do not mean that the rich have become poorer in correlation with the decrease in pay of the poorest; rather, the poorest have fallen further behind the average, while the richest have moved further ahead. That is not a criticism of those who earn lots of money, but that gap has to be addressed and I hope that this debate will be a way of doing that.

When we think about introducing a maximum wage, we must consider many issues. First, we need to take into account the regional differences in the cost of living in the United Kingdom of Great Britain and Northern Ireland. Secondly, we must address the critical issue of how to deal with pensions in the private sector. The biggest issue is that we must show that we are not against innovators, strivers and those who create jobs. Job creation helps the economy to grow, provides wages to individuals and helps their local areas to thrive. There is a wider social issue to be addressed, which is eating away at the social fabric of our society. We should not shy away from the challenges of opening such a debate. Undoubtedly, it will be difficult to harmonise everything at stake, but that does not mean that we should not make an effort to do so.

It is of great concern that the public perception of corporate executive wages has become so intense that they have been labelled “institutionalised robbery”. It is hard to argue that there is not something unsettling about the disparity between executive pay packages and average wages. Regardless of the hard work of executives in running companies or corporations, it is difficult to justify the fact that some chief executives receive more than £6 million while their employees live hand to mouth in minimum wage jobs.

There is also the issue of performance-based bonuses, which affects the banks in particular. We have seen the general public in a frenzy about the fact that those they see as most visibly to blame for the economic crisis are being rewarded, while their own wages are either being pushed down further or do not exist due to redundancy. The fact that more directors are choosing not to accept their bonuses signals that there is a sense among the highest paid that the gap has become too big. I congratulate those at the higher levels of companies who have refused to accept their bonuses.

To reiterate, the proposal is to put a cap on the maximum wage that can be paid to a person in any one year, as the hon. Gentleman said. It is important that we address this issue. There are various means by which we could do that—perhaps through proportionality. It does not have to be arbitrarily about fundamental equality; it can be about increasing fairness and narrowing the gap.

[Mr McKenzie]

Does the hon. Gentleman agree that it is abhorrent that millionaires, if not billionaires, are running large enterprises on the back of zero-hours contracts for their staff? In these days of austerity and food banks, they are running empires on zero-hours contracts.

[Jim Shannon]

The hon. Gentleman is right. Everybody in this Chamber is concerned about zero-hours contracts and the many other disparities that need to be addressed. I thank the hon. Gentleman for his intervention, for securing this debate and for giving us the chance to make our comments.

Although I support the principle of a maximum wage, I have concerns about how we would introduce one without its having a detrimental effect on our competitiveness. We must ensure that we raise wages in a way that enables companies to progress. I believe that that can happen. We have seen some small changes in the past few weeks and months. It is important that we enable people to achieve as much as they can. We cannot allow a maximum wage to result in complacency about raising bottom-level wages.

The United Kingdom, and Northern Ireland in particular, must compete internationally. We need big businesses to draw in investment as well as the best and the brightest. We must create jobs by attracting people willing to set up corporations. The last thing we want is to deter those people on the basis of a superficial narrowing of inequality, so any reform must bring about substantive social and economic effects. It must increase the lowest wages in a company, or at least make earnings proportionate to the lowest earner in the corporation.

The hon. Gentleman said that the average FTSE 100 chief executive officer is now paid 143 times as much as their average employee. In 1998—that does not seem so long ago for those of us of a certain vintage—the average was only 47:1. The increase from 47:1 to 143:1 in 17 years has resulted in a massive disparity. Average wages are not increasing, even in companies run by CEOs earning 143 times their employees’ wages. Those companies evidently have money in excess, but still there has been little or no change in average wages, and there is only a marginal chance that they will increase.

Last October, the Business Secretary granted powers that were supposed to require a firm’s remuneration to its executives to have the support of 50% of its shareholders. However, they failed to cap the maximum salaries going to executives, and they did not prevent the pay of the average FTSE 100 chief executive from increasing by £600,000 between 2012 and 2014. In contrast, figures from the Office for National Statistics show that the average pay in the UK is £26,500. A worker in a full-time job earning the hourly minimum wage of £6.31 would get an annual salary of just £13,124. I believe, as the Prime Minister said today, that we need change. We need business to pay more to those at the lower wage levels.

I am curious about why, in the space of less than two decades, such a monumental rise has occurred. It is not surprising that the everyday worker is discontented and looking for us to take action. That is why this debate is being held. The High Pay Centre has called for a debate on more radical measures to address the widening income discrepancy in the United Kingdom.

[Mr McKenzie]

The hon. Gentleman asked why the difference has increased so much in the past decade or so. Could it be that there is a bidding war for chief executives, with each company bidding more to attract a chief executive to stay for a minimum number of years before they move on?

[Jim Shannon]

It is always hard to speculate on the reasons, but chief executive officers are much sought after—and yes, there does seem to be a bidding war. Unfortunately, in that bidding war those in the company who do the hard work and get their hands dirty are being left behind, and that greatly concerns me. At the very least, we need to acknowledge what is going on in order to open a discourse on solutions, whether they be the national maximum wage or an alternative.

In conclusion, I urge the Minister to consider the fact of inequality, shown by all the figures that we have heard and will hear in today’s debate. On top of that, when we consider a maximum wage to decrease the gap between the highest and lowest earners, we should also think about the prospect of decreasing the gap through bringing the bottom range up. I believe we have a duty to be compassionate and a responsibility to ensure that those in the bottom levels have their wages increased. Again, we must tread carefully. We have to address this social grievance and take it seriously, but we must also be ambitious in doing that in such a way that the United Kingdom of Great Britain and Northern Ireland is still seen as a place for fruitful investment and business prospects.

I thank the hon. Member for Inverclyde for bringing the matter forward for consideration. I apologise to you, Mr Streeter, to the shadow Minister and the Minister —my phone has been going like nothing ordinary; I am being summoned to vote in the Bill Committee. With your agreement, Mr Streeter, and that of the shadow Minister and Minister, I beg leave to retire.

[Mr Gary Streeter (in the Chair)]

Thank you for coming.