Pay inequality highlights broken world of work

But with a will, there's a way to limit gross inequality. Graphic: Reuters

We don't have to be slaves to our job. Working pay and benefits are something that we have the power to change, even though that power has to be gained in a struggle of wills between self-interested managers and investors, and those who actually produce the desired outcomes. In this struggle the government also has an important role.

The matter to remember is that working people are agents of their own destiny, as history bears testimony. US economist Dora Costa notes:

The length of the work day fell sharply between the 1880s, when the typical worker labored 10 hours a day, 6 days a week, and 1920, when his counterpart worked an 8-hour day, 6 days a week. By 1940 the typical work schedule was 8 hours a day, 5 days a week.

“That I should be so lucky!” might be an employee’s response to such figures, but overall reductions in work time came with increases in vacations, holidays, sick days, personal leave, and earlier retirement. Making this possible has been increases in productivity and the political adoption of regulations that limit working hours. 

A data-crunching organisation comments:

As the economists Diane Coyle and Leonard Nakamura explain, the study of working hours is crucial not only to measure macroeconomic productivity, but also to measure economic well-being beyond economic output. A more holistic framework for measuring ‘progress’ needs to consider changes in how people are allowed to allocate their time over multiple activities, among which paid work is only one.

The insight that employees are to a large extent agents of their own destiny with regards their working life is important to appreciate as more than 3000 employees of 70 British businesses begin a trial of a four-day work week. 

Second, the results are just out of the massive CEO versus employee pay gap in the United States. In the set of companies examined, the gap grew last year to 670 to 1, compared with 604 to 1 the previous year.

In my post last month,Economy of Communion - people before riches, I showed how business leaders are increasingly following their consciences and structuring their operations to benefit their employees more equitably, but also to recognise the needs of their community. 

This is done by rejecting Milton Friedman's principle that a business had a responsibility only to its owners, that is, the investors, an idea popular with managers, who tap into that source of selective wealth-building through share-related remuneration. 

However, with the multitude of resignations besetting companies and the appeal of home working for many people, it is clear that businesses have to look afresh at how to shape their business practices to show respect for the human, personal, family needs of employees, going beyond the myopic focus on output. Output, yes, but as always, in all areas of life, balance is key to success. So we mustn't forget the need to "sharpen the saw".

The gig economy is also a growing factor in the lives of many families. Thorough scrutiny of this sector needs to occur to ensure that the workers are not exploited, the many generating wealth for the few.   

So let's use the statistics just out from the US Institute of Policy Studies to see how gross inequality is occurring in the world's biggest economy. 

As the Guardian reports, the institute ...

... found the wage gap between chief executives and workers at some of the US companies with the lowest-paid staff grew even wider last year, with CEOs making an average of $10.6m, while the median worker received $23,968.

[T]he average gap between CEO and median worker pay jumped to 670-to-1 (meaning the average CEO received $670 in compensation for every $1 the worker received). The ratio was up from 604-to-1 in 2020. Forty-nine firms had ratios above 1,000-to-1.

At more than a third of the companies surveyed, IPS found that median worker pay did not keep pace with inflation.

This news report has illuminating information about how the gap continues to widen:

The report, titled Executive Excess, comes amid a wave of unionization efforts among low wage workers and growing scrutiny of the huge share buyback programs many corporations have been using to inflate their share prices. US companies announced plans to buy back more than $300bn of their own shares in the first quarter of the year and Goldman Sachs has estimated that buybacks could top $1 trillion in 2022.

Share-related remuneration makes up the largest portion of senior executive compensation and as buybacks generally boost a company’s share price, they also boost executive pay. Senator Elizabeth Warren has called buybacks “nothing but paper manipulation” designed to increase executive pay.

The report found that two-thirds of low-wage corporations that cut worker pay in 2021 also spent billions inflating CEO pay through stock buybacks.

The biggest buyback firm was home improvement chain Lowe’s, which spent $13bn on share repurchases. That money could have given each of its 325,000 employees a $40,000 raise, according to IPS. Instead, median pay at the company fell 7.6% to $22,697.

Americans are concerned about what is going on, perhaps another cause of public alienation from traditionally respected institutions:

“CEOs’ pandemic greed grab has sparked outrage among Americans across the political spectrum,” said report lead author Sarah Anderson, director of the IPS Global Economy Project. She cited one recent poll that showed that 87% of Americans see the growing gap between CEO and worker pay as a problem for the country. 

Political action and resurrecting unions are key to answering the wealth grab the IPS report highlights.

But action in other directions is also necessary. To give more attention to the well-being of employees  as a counter-balance to the drive for output and therefore profit is also essential as the evidence mounts of  the loss of a sense of solidarity within society. 

This gives us reason to look more closely at innovations such as the four-day work week, where personal well-being is central to its operation. To cite one completed trial:

In 2018, New Zealand estate planners Perpetual Guardian entered their 240 staff into a four-day-work week trial, resulting in 78% of them saying they were able to better manage their work-life balance. 

As for the British trial just starting:

More than 3,000 workers across 70 companies are starting a four-day week today, on full pay, in the world's biggest pilot scheme, as the nation struggles with more job vacancies than staff available. 

The programme is being coordinated by campaign group 4 Day Week Global, think tank Autonomy and academics at Oxford, Cambridge and Boston College in the US. 

There are a range of businesses and charities taking part, including the Royal Society of Biology, hipster London brewery Pressure Drop, Southampton computer game developer Yo Telecom, a Manchester medical devices firm, and a fish and chip shop in Norfolk. 

Staff will be given 100 per cent pay for 80 per cent of their time — but they have made a commitment to produce 100 per cent of their usual output.

The team of researchers involved in the new pilot will study each company and assess the impact on staff, including stress and burnout, job and life satisfaction, health, sleep, energy use, travel.

They will also look gender equality, with the four-day week thought to benefit women, who make up a higher proportion of part-time and flexible-hours staff.  

The wider view of what employing people is all about comes through in comments by organisers of the trial:

Joe O'Connor, the chief executive of 4 Day Week Global, said the [United Kingdom] is at the crest of a wave of global momentum behind the four-day week.  

'As we emerge from the pandemic, more and more companies are recognising that the new frontier for competition is quality of life, and that reduced-hour, output-focused working is the vehicle to give them a competitive edge.   

'The impact of the "great resignation" is now proving that workers from a diverse range of industries can produce better outcomes while working shorter and smarter.' 

It's not just small businesses that can cope with the organisational demands of a four-day work week:

In August 2019, Microsoft Japan implemented a four-day week giving their 2,300 employees five Fridays off in a row.

The company said productivity jumped 40 per cent, meetings were more efficient, and workers - who were also happier - took less time off.

Nine out of ten employees at the company said they preferred the shorter working week and other benefits, including a 23 per cent reduction in weekly electricity use, and a 59 per cent decrease in the number of pages printed by employees, which were also welcomed by employers.

This kind of empathetic arrangement of employees' working week stands in contrast with the stance taken by the Chinese tech entrepreneur Jack Ma, who at least advocated if not imposed on his employees that they have a 9-9-6 routine. That meant a 9am to 9pm daily attendance, six days a week, a total of 72 hours a week.

According to Wikipedia, "A number of Mainland Chinese internet companies have adopted this system as their official work schedule. Critics argue that the 9-9-6 working hour system is a violation of Chinese Labour Law and have called it "modern slavery". It added that "9-9-6 was deemed illegal by China's Supreme People's Court on 27 August 2021".  

The court spoke out based on the court action employees took against their companies:

 “We are seeing a strong trend towards encouraging people to use the court system to go after tech companies. We think civil litigation will increase,” said Kendra Schaefer, head of digital research at consultancy Trivium China.

Collective action in support of the common good is needed to provide a balance those enjoying power derived from wealth and political influence.  

💢 See a White Paper on the four-day work week here 

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