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Vince Cable’s “solution” to high pay…another quango

August 17th, 2009 Posted in Culture, Economics by

john-terryOne hundred “progressive” public figures – including our very own Vince Cable – have signed up to the Compass campaign for a new quango to tackle the “excessive levels” of “banking and executive remuneration”.

Their headline grabbing stat is that an employee on minimum wage would need to work for 226 years to earn as much as a top FTSE chief exec makes in one.

My reaction to this was “so what?” Can we at least be open to the possibility it might be worth paying 226 times as much to some people as to others?

The new Premiership football season started this weekend and wage differentials in our national sport are pretty enormous.

Players at many Championship and League One clubs will be on approximately £150,000 a year. Manchester City are offering their top transfer targets salaries of up to £200,000 a week. So, a Southampton, Leeds or Norwich player could have to play football for more than half a century to match John Terry’s earnings from a single season (and despite the obvious jokes about Southampton’s fall from grace, we are unlikely to be start fielding players who are beyond retirement age). Is this a moral outrage? I’m sure some of Saints’ hard grafting, but limited, players would be delighted to be able to appeal to a panel of “experts” and insist that their salary needed to bear some “maximum ratio” relation to Frank Lampard’s. Do Compass think they should be able to?

My heart soared – fleetingly – when I read in the Compass statement’s opening paragraph “The unjust rewards of a few hundred ‘masters of the universe’ exacerbated the risks we were all exposed to many times over.”

Unfortunately, they were referring to the private sector – not to Members of Parliament.

56 Responses to “Vince Cable’s “solution” to high pay…another quango”

  1. Mark Littlewood Says:

    @ Gandhi “ML: To answer your question: I would say that to claim that anyone is worth 500 times more than anybody else is crazy”

    I’m not as clear about your insanity as you seem to be about mine. In the course of a few blog posts, you now seem to latch on to the 500:1 ratio…rather than the 226:1…would 50:1 be okay? Or 100:1…or 25:1????

    I think that to Chelsea FC, John Terry is worth 500 times the salary of the tea lady (at least).

    I don’t even see why this would even be controversial.

    I have yet to meet many Chelsea fans paying £80 a ticket who are doing so because they like the tea lady. I don’t think the Chelsea megastore sell many “Tea Lady” shirts – but they do sell thousands of Terry shirts. At a neat profit of c. £35 a pop.

    This doesn’t make John Terry a more worthy human being than the tea lady. But it does make him worth at least 500 times what she is to Chelsea FC. And it’s a little quirky – possibly even verging on insane – to argue otherwise.

  2. Gandhi Says:

    ML: If that’s what you think, consider John Terry uses his own personally built “stadium” in a remote fishing village or similar, does his own advertising (by shouting “hear ye” etc), collecting the tickets himself, providing refreshments himself, bringing his own football, and playing with himself (no pun) for 90 minutes.

    Are people going to pay to watch John Terry tap a ball about on his own week-after-week? How is he going to make big money unless he has access to TV revenues?

    Or is there something other than just John Terry that brings in the fans?

    Now consider what his never having existed would have done for the fortunes of his club – would you like to calculate the resultant reduction in today’s ticket price? The word infinitesimal comes to mind.

    You have fallen for a very simplistic illusion.

  3. Gandhi Says:

    While I think of it, even given the current system, the evidence is that John Terry (and other top stars) are overpaid.

    Chelsea etc think that their top people are worth that money to them but they are wrong. It is only the fact of their common incompetence that keeps the salaries (and transfer fees) so high. Premiership pay is just another bubble.

    Terry demands £60m deal
    Terry secures world-beating £35m contract
    Roman Abramovich clears Chelsea debt
    Latest figures show Premier League clubs owe £3.1bn


  4. Giles Freethink Says:

    I think it’s actually very kind of Gandhi to offer to step in and correct the commercial decisions of private companies. Perhaps they could set up some sort of quango by which well-meaning, hyper-rational bloggers offer their advice for free to badly-led companies, thereby gently nudging them towards a more profitable and socially acceptable course? I’m slightly annoyed I didn’t think of it.

    This problem is very specific to football clubs: the tournament model means that at particlar points in the “ability-outcome” curve, a small increase in the squad’s skill might produce a discontinuously sharp increase in the club’s fortunes. The sharpest such point lies at promotion/relegation to either the Champions’ League or the Premiership itself. If as a player you get to occupy that point, then you get to capture a lot of that uplift. It might be rational for a club to pay an extra £2m to a player if they think it increases the chances of getting into a league worth £50m by 5% or so.

    So not necessarily incompetence, though I bet Chelsea would benefit hugely from reading all this. It is just the footballers have a unique ability to monopolise a skill, the high value of which is largely a matter of the industry structure. They should be taxed, but trying to cap transfer fees or salaries would just produce flight and evasion.

    let’s move onto executives.

  5. Time for a high-pay commission? Says:

    […] Littlewood at Liberal Vision and Giles Wilkes at Centre Forum’s FreeThink covered the issue here and here, with Mark’s critical article of Vince’s intervention in particular provoking […]

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