When workers in the UK sat down for lunch on Wednesday, on average they had earned roughly around £150, or $185, so far this year. But by the time of that same meal, top British executives had already raked in more than £28,200, or $35,000 — surpassing the amount of money those workers expect to earn over the course of all of 2017.
That’s the calculation of the High Pay Centre, a nonpartisan think tank that tracks income inequality trends in the UK. According to their new report, in 2015 the median pay for chief executives of the FTSE100 — the largest companies whose shares are traded on the London Stock Exchange — was over £1,000 an hour, a figure that appears to include bonuses and other financial perks of being a CEO. The typical British worker over the age of 25 makes £7.20 an hour.
Here are some more sobering statistics: Recent research from the Equality Trust, a UK-based organization that campaigns against social inequality, found that an FTSE100 CEO earns 145 times more than an average British teacher, 172 more than an average nurse, 324 times more than an average care worker, and 401 times more than a minimum wage worker in the UK.
The numbers are reminiscent of staggering income inequality in the US, where top CEOs take home well over 300 times the pay of the average American worker every year.
In some ways, these statistics aren’t terribly surprising. The UK has one of the highest rates of income inequality in the community of developed nations — less than the US but higher than anywhere in Europe, according to recent OECD data. And UK executive pay is the most generous in Europe — chief executives of top UK companies make nearly 50 percent more than their German counterparts.
But the phenomenon the report highlights is an issue that remains urgent in British political life. Brexit — the UK’s decision to leave the European Union after a referendum in the summer of 2016 — brought to the fore huge levels of acrimony between average citizens and elites. While a great deal of the vote to leave the EU was driven by anti-immigrant sentiment, a pervasive sense of economic disenfranchisement and bleak prospects for jobs and wage growth in the future played a significant factor as well.
Defenders of the style of economy that leads to soaring gaps between average workers and executives of massive corporations in the UK typically argue that high pay is a useful incentive for extremely difficult, high-stakes work. In other words, exceptional performance deserves to be compensated with exceptional pay.
But there’s a great deal of research that suggests the way executives are paid in the Western world isn’t exactly meritocratic. One of the most recent contributions to that body of work is a Lancaster University Management School study of more than 10 years’ worth of data on the performance of Britain’s 350 largest listed companies, which found that the correlation between high pay and high performance is “negligible.” The study found that the executives received pay raises of more than 80 percent over the course of a decade or so, but investors in their companies saw returns on invested capital totaling less than 1 percent.
British Prime Minister Theresa May has vowed to crack down on runaway executive pay. In November she released guidelines for doing so at some companies that could require binding shareholder votes on executive pay annually rather than once every three years; set up caps for executive pay; and force companies to make public the pay disparity between executives and workers, as an accountability mechanism.
Those kinds of rules aren’t going to change the fundamental dynamics of Britain’s income distribution, but they could be a good first step.