Cameron should follow Jesus on executive pay

 
Jamie Whyte
DAVID Cameron and Ed Miliband agree that corporate chief executives earn too much. If they earned less, the world would be a better place – or, more precisely, it would be a fairer place. The alleged victims of this injustice are those who earn far less. In an interview with the BBC on Sunday, Cameron sympathised with low paid people whose “blood boils” at the perception of undeserved rewards for others.

Cameron, Miliband and the rest of the “fair pay” brigade here part company with Jesus. His parable of the grape pickers goes like this.

It is harvest time and, in the morning, a vineyard owner goes to the local town square to hire casual labourers to pick grapes for the day. He offers them one denarius for a day’s work. At the eleventh hour, he sees that they will not complete the harvest by sunset, so he goes again to the square and recruits more workers for the final hour. When the day is done, he pays all the labourers a denarius, including those who worked only an hour. When one of those who worked all day complains of unfair treatment, the owner replies: “Friend, I am doing you no wrong. Did you not agree with me for a denarius? Take what is yours, and be gone”. (Matthew 20: 12-14)

Jesus may not be an infallible authority on justice. But the message of this parable is surely right. That others receive undeserved rewards does not mean that you have suffered an injustice.

For example, the tellers at Barclays bank receive their contractually agreed pay. And they would not earn more if Bob Diamond, the chief executive, earned less. Their pay is determined by supply and demand for the kind of labour they sell, not by the pay of senior executives at their firm. Even if Cameron is right in his speculation that their blood boils at the knowledge that Diamond earns millions more than they do, that does not mean they have been treated unfairly. Suffering feelings of envy is not the same as suffering an injustice.

But it is still suffering. Perhaps Cameron is right that high incomes should be reduced, not because this would deliver justice for those who earn less, but just because it would reduce their anguish. In a nation of envious people, aggregate welfare could be increased by policies that make some people poorer and no one richer.

Suppose that reducing Diamond’s annual pay by £2m would stop the blood of Barclays tellers from boiling. This would produce a net benefit only if the average Barclays teller, of which there are roughly 10,000, values her anguish at more than £200 a year.

But now you will see the problem. I doubt any low paid worker is so pathologically envious that she would be willing to spend £200 simply to deprive someone else of a high income. Envy is cheap.

Alas, so is voting. These tellers can vote to deprive Diamond of £2m at almost no cost to themselves. And Diamond has only one vote with which to resist. For politicians, peddling envy is a no brainer; it is a 10,000 to 1 vote winner. Which makes it no surprise that they so readily part company with Jesus.

Jamie Whyte is a senior fellow of the Cobden Centre