HR News Articles

Labor's pay policy merely hints at helping low paid workers rather than actually doing it

File 20181008 72106 101aa33.jpg?ixlib=rb 1.1
The pay gap between the chief executive and the typical worker in firms such as BHP is about 100 to 1. Shutterstock


Eugene Schofield-Georgeson,University of Technology Sydney

There is little dispute the pay packages for leading chief executives have reached gross and excessive proportions while the wages of poorly paid Australians have stagnated.


Pay ratios - a measure of disparity between the highest and median (representative) wages within a company - stand at around 100:1 in Australia’s largest firms. That’s up from 15:1 in the late 1970s.


This graph, from a study prepared by Labor assistant treasury spokesman Andrew Leigh and Melbourne University economist Mike Pottenger in 2013, shows the pay packet of BHP’s chief peaked at around 50 times average earnings in the early 1900s and then slid to just 10 times average earnings in the 1970s before soaring again to well over 100.





BHP chief executive remuneration as a multiple of average earnings, 1887 to 2012. Source: Pottenger and Leigh, 2013




Last week Leigh announced Labor’s response. In government Labor would require stock exchange listed firms with more than 250 employees to report the ratio of their chief executive’s pay to that of the median worker.


It is an idea adopted in the United States and in Britain, where it has been championed by Conservative Prime Minister Teresa May.


But a study of mine in the August edition of the Journal of Australian Political Economy finds no evidence such reports lift the pay of low or middle-ranking workers.


Reporting needn’t lift pay


Where reporting is not backed by laws requiring an increase in workers’ pay – and Labor’s present proposal isn’t - they simply encourage shareholders to take their chief executive’s pay and hand it to themselves.


My study found even where shareholders have voted to cut their chief executive’s remuneration (in some cases by as much as 32%) the funds freed have been passed on to shareholders rather than workers.


Numerous studies since the early 2000s have found about 60% of Australian shares and liquid wealth are held by the wealthiest 10% of Australians.


Accordingly, the only likely redistributive effect of pay disclosure laws of the type proposed by Labor will be to redistribute wealth among the already wealthy.




Read more: Australia should compare CEO and average worker pay like the US and UK




Pay disclosure laws can certainly serve an educative purpose by making public the size of shameful disparities. But as some British trade unionists have asked, “how do you shame people who are shameless?”.


In some form or other Australia, the US and Britain have already had pay disclosure laws for nearly a decade.


It’s an old idea


Australia’s Corporations Act requires listed companies to annually disclose the complete remuneration packages of all their directors and their five most highly paid executives. It gives shareholders the right to reject excessive remuneration packages.


Since the introduction of the provision in Australia, total chief executive pay has increased rather than fallen.


Other countries impose requirements


There are a number of measures Labor could take that would actually redistribute executive pay to lower paid workers.


One, proposed by UK Labour leader, Jeremy Corbyn and leading economist Anthony Atkinson would cap executive pay at 20 times the wage of a firm’s lowest paid worker and require equal pay for equal work.


It’s an idea Labor in Australia ruled-out on the ground that a scheme in the US that capped executive pay at US$1 million per annum failed because companies rewarded executives instead with stock options and bonuses.




Read more: CEO pay study shows how much Australians tolerate inequality




But as the UK think tank the High Pay Centre points out, that could readily be curbed simply by requiring companies to include all forms of remuneration (not just salary) in the calculation of the executive-to-worker pay ratio.


In countries such as in Spain and Germany workers are given an enforceable vote on what they perceive to be a fair ratio between CEO and worker pay. Where this practise exists at the Mondragon Corporation in Spain, the ratio between executive and worker pay is no higher than 9:1.




Read more: Viewpoints: should Australian companies set executive pay to a US benchmark?




Other measures include a pay ratio tax of the kind in force in Portland Oregon which imposes a 10% tax on the profits of companies whose pay ratios exceed 100:1 and the so-called Buffett rule proposed in the US which would impose a minimum 35% tax on incomes of more than US$300,000.


Another mechanism is compulsory company-wide profit-sharing of the kind that is required in French companies with more than 50 employees.


Australia could too, if it wanted


As Australian Labor’s announcement made clear, its new policy comes not from UK Labour or from innovative ideas being tried elsewhere, but from the policy handbook of the British Conservative government and Prime Minister Theresa May.


Overseas and Australian experience suggests that without specific action to redistribute executive pay, Labor’s policy will achieve little, merely suggesting redistribution instead of achieving it.The Conversation


Eugene Schofield-Georgeson, Lecturer, UTS Law School, University of Technology Sydney


This article is republished from The Conversation under a Creative Commons license. Read the original article.

Jobs Just For You, The HR Professional

Our weekly or daily email bulletins are guaranteed to contain only fresh employment opportunities


More info

Latest Jobs

Senior Workers Compensation Advisor - Contract
Victoria

Industrial & Employee Relations Advisor
New South Wales

HR Business Partner - 6mth Contract
Victoria

HR Coordinator - 4 wk Contract
Victoria

Global Mobility Consultant - Contract
New South Wales

Human Resource Consultant - 3mth Contract
Northern Territory

HR Advisor - 6 mth Contract
Western Australia

Work Health & Safety Advisor
Victoria

RTW Support Officer
New South Wales

HR Business Partner - Contract
Victoria

People & Culture Manager
Victoria

Recruitment Administrator - Contract
New South Wales

HR Advisor
New South Wales

Employment Consultant - Contract
Victoria

Recruitment Co-ordinator - Contract
South Australia

APS5 and APS6 Learning and Development - Contract
Australian Capital Territory

Recruitment Advisor
Western Australia

APS5/6 Human Resources Officer
Australian Capital Territory

People & Culture Manager - Maurice Blackburn
Victoria

Redeployment & Career Advisor
New South Wales

HR Business Partner - Part time option
New South Wales

Head of Remuneration and Analytics
New South Wales

HR Business Partner - Fixed Term
Victoria

Training and Development Manager - Contract
New South Wales

Organisational Design Advisor
New South Wales

HR Manager - Healthcare
Victoria

Recruitment Coordinator - Contract
New South Wales

HR Assistant
New South Wales

HR Advisor - Contract
Victoria

Recruitment Manager - 10 mth Contract
New South Wales

A03 Recruitment Coordinator - Contract
Queensland

Employee Relations Manager
New South Wales

Human Resource Manager
Northern Territory

HR Advisor
New South Wales

Onboarding and HR Administrator - Contract
Queensland

Organisational Development Advisor - 12 mth Contract
Victoria

Manager Human Resources & Quality - to June 2020
New South Wales

Human Resources Manager
Victoria

LMS Specialist
New South Wales

Senior HR Advisor
Victoria

HR Adviser - Contract
New South Wales

Senior Talent Acquisition Consultant - Contract
Queensland

HR Manager
New South Wales

IT Recruiter - Contract
Western Australia

HR Advisor - 6 mth contract
Western Australia

HR Administrator - short contract
Western Australia

HR Advisor
Queensland

HR Advisor
Queensland

Change Advisor - Contract
Victoria

Senior Change Advisor - Contract
Victoria

Human Resources Officer - Contract
Queensland

WHS Manager - Victor Chang Cardiac Research Institute
New South Wales

Recruitment Advisor - 12 mth Contract
New South Wales

HR Advisor - Energy and Manufacturing
New South Wales

Senior Strategic Change Manager - AS07 or AS08 - Contract
South Australia

HR/ Recruitment Administrator - Contract
Queensland

Recruitment Coordinator
New South Wales

Senior HR Advisor
New South Wales

Human Resources Business Partner - Contract
New South Wales

Recruitment Officer - 12 mth Contract
Victoria

HR Team Lead - Permanent
Australian Capital Territory

HR Business Partner
New South Wales

HR Business Partner - Contract
New South Wales

Organisational Development Consultant - Contract
New South Wales

Team Lead - People & Culture
Victoria

People & Culture Analyst - Bank Australia
Victoria

HR Coordinator - short contract
Victoria

HR Manager
New South Wales

HR Officer - Contract
New South Wales

HR Business Partner - Part Time - Contract
Victoria

Human Resources and Payroll Specialist
Victoria

Talent Acquisition Specialist
New South Wales

HR Advisor
New South Wales

Recruitment Officer - Contract
Victoria

Senior HR Advisor
New South Wales

HR Employee Experience & Systems Specialist
Victoria

APS5 Case Manager - Contract
Australian Capital Territory

Talent Acquisition Specialist - 4 mth Contract
Victoria

Workplace Relations Investigator
Victoria

Work Health Safety & Injury Management Co-ordinator
New South Wales

Browse All Jobs