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Massive disparities in levels of pay and a lack of clarity about wage levels for the financial and business elite are divisive
On Tuesday, George Osborne will deliver his autumn statement. Unemployment is at a 17-year high; the numbers of young people not in work, training or education has risen to more than a million. Five people pursue each vacancy. No work means low tax revenue, increased benefits bill and next to no growth.
And the eurozone crisis rolls on.
Tomorrow, to add to the chancellor's woes, the Organisation for Economic Co-operation and Development publishes its forecasts of a British double-dip recession, information that has apparently sent "a lightning bolt" through the Treasury. No matter how robust Mr Osborne's rhetoric on Tuesday, the House of Commons will echo to the death rattle of Plan A.
In these circumstances, detailed probing of Mr Osborne's growth strategy and how he proposes to address the accelerating polarisation in society – a 0.1% increase for the poorest 10% of earners against a 49% increase last year for FTSE 100 chief executives – is definitely in order. Unfortunately, however, on Wednesday, some of the answers to these highly pertinent questions will be obscured by what could be the largest industrial action in Britain for a generation. A tidal wave of headlines will tell us not to put the bins out, send our children to school or take a plane as more than 2 million public sector workers from 33 unions hold a one-day strike over the government's proposed changes to public sector pensions. The action is understandable, the timing is abysmal.
As a result, scrutiny of Mr Osborne's plans will be temporarily curtailed by polemics about the alleged munificence awaiting public sector retirees. Both events this week, the autumn statement and the public sector strike, illustrate a disturbingly divisive and potentially dangerous fragmentation in our society that threatens the country's civic health. This divisiveness is driven by a mix of political will and long-term structural fractures that are stoking regional, gender and generational wars. For example, the youth contract announced last week may be subsidised by reducing the working family tax credit of families where many are working on the breadline, a move described by Tony Wilson of the Centre for Economic and Social Inclusion as "robbing Peter to pay Paul".
Again, the cuts are exacting a higher price from women, already traditionally on lower incomes. Yet, even in a time of austerity, Goldman Sachs reports that ending the long-standing pay gap between men and women could boost GDP in Europe by 13%. This national fragmentation is also seen in a regional imbalance. The north, during its heyday of heavy industry and manufacturing, was the country's engine of prosperity. It is now the south's poor cousin, with pockets of very high unemployment that are devoid of hope. Average earnings in Westminster are £39,745; average earnings in Blackpool in 2011 are £15,481.
Such rents in the social fabric makes it clearer every day that, far from being "all in it together", the coalition's mantra, we are heading for the vast income disparities that marked Victorian times. In this destructive direction of travel, citizen is pitched against citizen and facts become fogged by confusion. On the issue of public sector pensions, for instance, Francis Maude, the cabinet office minister involved in ongoing negotiations, says the current offer is "pretty bloody reasonable". The unions counter that their members will have to pay more, work longer and receive less. Calculations are complex but, according to the GMB union, a dinner lady, for instance, who has worked part time since the age of 40 on a salary of £8,000 will pay an extra £5,000 in contributions, retire at 68 and see her pension reduced by £672 to £3,879.
The average public sector pension is around £7,800. However, in the private sector more than 65% have no pension at all.
In March, the Hutton commission into public pensions insisted that provision should be affordable and sustainable, adequate and fair. The narrative, none the less, is now crude: why should the public sector enjoy a "generous" pension while the private sector has seen the demise of defined benefit schemes?
One possible response might be to frame the question differently: why are pensions in the private sector for those on low to middle incomes so desperately inadequate? The answer may be found in the rigorous final report of the High Pay Commission published last week. It pointed out that we have "a winner-takes-all system…" that is "deeply damaging to the UK as a whole". In 2011, top pay at Barclays is 75 times that of the average worker. In 1979, it was 14.5 times. In that period, the lead executive's pay has risen by a staggering 4,899.4% – from £87,323 to more than £4m.
While public sector pensions have been examined in forensic detail, it galls many that the demands for transparency and equity have not been more firmly applied to those who sit at the top of finance and business. On Thursday evening, David Dimbleby, chair of BBC 1's Question Time, had Justin King, chief executive of Sainsbury's, as a member of the panel. He is paid £920,000 a year, 40 times that of his average employee. "What exactly is it that you do," Mr Dimbleby asked, "that is so special?"
The government has rightly called for a rebalancing of the economy. That aim is not assisted when, as the union Unite points out, a typical public sector worker would have to work three lifetimes to earn Francis Maude's pension. The government needs to take heed – these disparities matter.
They matter because they sour trust and reduce the base of support that allows for the structural reform that is necessary to effect an economic transformation in which everyone makes sacrifices. In Germany less than a decade ago, trust between management and workforce, faith in the government's ability to plan long term, proper workers' representation in decision-making, sound apprenticeships and a far narrower gap between the top and bottom earners in society allowed the country to recover from its position as "the sick man of Europe". In contrast, research tells us, disengaged, distrustful citizens mean lower productivity, more sickness and poor growth.
So how to move forward? Unions are already negotiating trade-offs: no overtime, reduced hours means more jobs saved. Employees on remuneration panels might help. Legislation to address the poverty of pensions in the private sector is vital as is further effort in public sector pension negotiations. Ending avarice at the top is imperative.
Pitting one group of citizens against another not only displays weak political leadership, it wastes the most powerful asset available to government in difficult times. Namely, that men and women, young and old, private and public sector workers who genuinely have reason to believe that they are truly "all in it together", also see a mutual gain in collectively building a way out.