The deserving and undeserving rich
Can openness around pay gap data drive faster and better solutions to poverty and inequality?
Data transparency around wealth is uncomfortable (for some)
‘If you have to give back, then you took too much in the first place’, observed Ricardo Semler on wealth, charity and business in his TED talk.
With philanthropy coming under increasing public scrutiny, and questions being asked about grant makers’ tainted sources of wealth, power and income inequality are in the spotlight.
Amidst all this and with the season of reflection and resolutions ahead, we take a look at the data on pay gaps as food for thought.
It’s not very fair but it’s more open
In the entire equality diversity and inclusion debate, arguably it is economic empowerment that heralds the greatest opportunity for levelling up. So there's perhaps no better place to start than data on pay gaps, i.e. the unequal distribution of income and disparities between different groups.
Since 2017 the UK government has made it mandatory (for organisations with over 250 full time employees) to publicly report their gender pay-gap data. It shows, unsurprisingly for many of us, the gap is quite big. The enforced transparency on the issue has been both enlightening and embarrassing, especially for those that have never questioned this before. Optimistically, according to the Office for National Statistics, the pay gap has been closing over the last twenty years. You’d hope so, 50 years after the Equal Pay Act! Unfortunately though, at a global level, it could take another 257 years for it to close completely.
So what can we do to speed things up, not just on gender but across all the protected characteristics (race, age, disability, sexual orientation, gender reassignment, religion or belief, marriage and civil partnership, pregnancy and maternity)? Well one approach is to look at pay disparities.
Pay ratios, comparing the hourly pay for the highest paid in the organisation with the hourly pay for the lowest paid, seem a logical broad approach. Exploring this across all the protected characteristics gives a fuller picture. However even at a broad level, the data turns out to be quite murky and contentious - full-time v part-time v zero hours; reporting averages rather than distributions, the relative scales of organisations’ operations. Then there’s this issue of what figure is taken as the lowest pay i.e. is it the minimum wage (or the national living wage as the government calls it) ? or real living wage ? or lowest wage in your organisation ? or the average wage. The picture is even more difficult to compare across different sectors.
What does the data say about pay ratios in the UK?
With the above provisos aside, here’s what we’ve been able to find about pay ratios (highest compared to lowest) in each sector.
Social enterprise
Pay ratio: 2.6 to 1
Source: State of Social Enterprise Report 2021 (For those with over 100 staff it’s 6.8 to1). 72% say they are living wage employers. Unable to see a figure for median salary.
Charities
Pay ratio: Maybe between 4.2 to 1 and 12 to 1
A bit smoke n mirrors. 2014 Inquiry Report into Senior Executive Pay suggested maybe between 12:1 and 8:1. Much finger pointing from the press over the years. 2021 report on CEO pay from charity commission yet to manifest. Some publish their own data and reports e.g. ACEVO’s annual pay and equalities survey is available for purchase here; Housing and other sub-sectors publish their own surveys.
Median CEO salaries ~ £58k
General
Pay ratio: Maybe between 5.6 to 1 and 7 to 1
Payscale research say median UK CEO salary is around £78k. ONS say ~ £97k
Public
Pay ratio: Maybe 18 to 1?
We don’t know exactly but over a decade ago the Hutton Review of Fair Pay in the Public Sector rejected a hard cap at 20:1 and recommended annual publication of the multiple of top to median pay every year by the Senior Salary Review Body in a Fair Pay Report. (It has been suggested rules should be applied to suppliers too). Feel free to peruse the 237 page 43rd annual report here
Among CEOs, median ~ £250k but, like everything in the public sector, it’s complicated.
FTSE 100 companies
Pay ratio: At least 145 to 1
Executive Pay in the FTSE 100, CIPD, 2019: Figure based on median CEO pay, compared to median UK full-time and part time worker. (Comparing to minimum wage it’s 208:1 according to Social Enterprise UK.)
40/100 say they are accredited with the living wage (this is a global measure and it’s unclear whether it means minimum wage or real living wage). Median CEO salary oscillates around the £3.8 M mark.
In future, publicly listed companies (with more than 250 employees) will be required to publish the ratios between the total remuneration of their CEOs and the full-time-equivalent remuneration of UK employees. Meanwhile the charity commission ensures salaries over £60k are reported on their website. Certainly there’s increasing scrutiny of top salaries across all sectors. Meanwhile, attention to the lowest paid is also gaining ground. The government recently named and shamed over 200 companies not paying the minimum wage. It will be interesting to see whether increased transparency is effective and leads to action and change. In the meantime, what can our own organisations be doing to address this?
Can better data lead to action and change?
Ultimately the question is ‘how differently do you value the time and labour of different people in your organisation?’ Data gives you the knowledge and evidence you need to call it out and initiate change.
In 2019 emh Group (a large social housing and care charity in the East Midlands) launched their five year equality, diversity and inclusion (EDI) strategy. They started with a review of the quality of their EDI data for staff, board and tenants. Among the analyses they asked Data Orchard to look into, was a review of pay ratios and pay gaps. At the time, the data quality was found to be too poor quality to explore for the nine protected characteristics, apart from gender. They have gone on to implement some considerable changes in their HR department and some major cultural change programmes across the organisation. Considerable progress has been made in improving the quality of their equality and diversity data. This means future analyses, including on intersectional dimensions, can be given with greater confidence when exploring recruitment, progression and rewards. Last year, emh Group published their ethnicity pay gap alongside the gender pay gap.
What can you do if you want to explore pay gaps?
If there’s a willingness and openness in wanting to understand and get better at this in your organisation, then take a look at your own pay ratios and pay gaps. Currently, according to the equality and human rights commission, only 3% of employers measure their ethnicity and disability pay gaps and this is largely due to a data deficit. If you would like some independent analysis of your data, do get in touch with us at Data Orchard. Meanwhile here are some useful resources if you’re considering exploring your own pay gaps.
Annual Survey of Hours and Earnings, Office for National Statistics, 2021
Ethnicity Pay Gaps in Great Britain, Office for National Statistics 2019
Search the gender pay gap index and compare by organisation or sector
Equality and Human Rights Commission, pay gaps
Disability Pay Gaps, Office for National Statistics, 2018
And so let’s raise a toast…
The approach of the festive celebrations and the year end often signals a time for reflection, gratitude and giving. If you want to spend in an ethical, socially positive, and fair pay sector this Christmas, ‘Buy Social’ is a great place to start
Meanwhile if you just want to raise a toast and sing ‘Rolling Home’ here’s a popular community choir belter, written by John Tams circa 1983, for the play Cider with Rosie by Laurie Lee:
So pass the bottle round,
And let the toast go free.
It’s a health to every labourer
Wherever they may be
Fair wages now and ever
Let’s reap what we have sown
When we go rolling home
When we go rolling home
Rolling home, (when we go),
Rolling home, (when we go);
Rolling, rolling, when we go rolling home.
We wish you all a joyful, caring and restful festive time and look forward to seeing you again in 2022.