Mind the Wage Gap

What do you think is the pay differential between the CEO of a company and its lowest skilled worker? And what do you think should be the pay differential?

In research published last November in ‘Perspectives on Psychological Science’, Kiatpongsan and Norton investigate what pay differentials people desire and whether these differentials are consistent among people from different cultures. Gretchen Gavett has written a helpful article summarising their research. You can read it here.

Norton says:

“My coauthor and I were most surprised by the extraordinary consensus across the many different countries in the survey. Despite enormous differences in culture, income, religion, and other factors, respondents in every country surveyed showed a universal desire for smaller gaps in pay between the rich and poor than the current level in their countries.”

What is also extraordinary from the research is the sheer size of the pay differentials, for example around 350 to 1 in America. And most people are completely unaware of the size of the staggering pay gap.

Gavett writes in her article:

“We’re currently far past the late Peter Drucker’s warning that any CEO-to-worker ratio larger than 20:1 would “increase employee resentment and decrease morale.” Twenty years ago it had already hit 40 to 1, and it was around 400 to 1 at the time of his death in 2005. But this new research makes clear that, one, it’s mindbogglingly difficult for ordinary people to even guess at the actual differences between the top and the bottom; and, two, most are in agreement on what that difference should be.”

Indeed, Norton says: “The lack of awareness of the gap in CEO to unskilled worker pay — which in the U.S. people estimate to be 30 to 1 but is in fact 350 to 1 — likely reduces citizens’ desire to take action to decrease that gap,”

Over the years Relational Thinking developed a tool (Relational Proximity® Framework) that can help people, organizations and businesses to measure the closeness and health of their relationships. For this it looks at five factors or dimensions of a relationship: the fourth of these is power. While inevitably in companies some people will have greater power than others, the goal should be parity, so that people will be treated fairly and with mutual respect and understanding. As the research shows, everyone agrees that the huge pay gaps of the kind we see today are unfair. There is no parity between the low paid in the company and CEO at the top.

In ‘Transforming Capitalism From Within’, Jonathan Rushworth and Michael Schluter write “If, for instance, senior executives are paid more than 100 times the amount paid to lower-paid employees, which is not unusual, this can be seen as suggesting that the lower-paid employees have a worth to the business of less than one percent of the highest paid employee. Is it fair that the contribution to the business of the lower-paid employees is regarded as so insignificant as to be valued in this way?”

There are also wider relational consequences outside of the workplace  in undermining social cohesion. The highly paid will live in different locations, use different means of transport and different shops and go to different countries on holidays.

Higher rates of remuneration are certainly justified to reward greater responsibility and experience, longer working hours and often longer training, but there should be a regard for others. The key is not the same pay, but fairness.

In ‘Transforming Capitalism From Within’, the authors argue for a Relational Business Charter, which sets out ten principles which in a practical way provide a framework to indicate whether companies are being managed and operated in a Relational manner in the interests of all stakeholders. The sixth principle is that “[t]he dignity of all employees is respected by minimising remuneration differentials within the business”.  They recommend a maximum pay differential of 1:20, so that there is parity within the company. And as Kiatpongsan and Norton’s research  shows, most people would agree.

What are the pay differentials in your organisation? How can you encourage greater parity within your organisation? How can you improve its relationships?

To find out more, you can buy Transforming Capitalism From Within as hard copy here or here as an ebook.

Photo: Mind the Gap by gmacfadyen.

Relational Living (4): Forgiveness

Ill-health and even violence in a relationship between individuals, groups, tribes and nations is likely most often due to an asymmetry in power. More likely it’s due to an abuse, real or perceived, of that asymmetry by the powerful over the powerless. And even more likely it’s due to an acute sense of injustice over past abuses and an unwillingness or inability to forgive.

When you’ve been the victim of what you perceive to be an injustice you feel like someone owes you something. There’s a debt outstanding. And until that debt is paid, until “justice is done”, you cannot rest easy and certainly your relationship with that person or tribe or institution will not be happy or healthy. The deep tragedy of those unwilling to forgive, however, is that non-forgiveness represents a holding on, almost a dependency, almost a sense of powerlessness. It’s as though the offender dominates you, controls and manipulates you, keeps you from sleeping, keeps you from enjoying yourself, keeps you from “moving on” to form new and better relationships. And all this while they, usually, walk around blissfully unaware they’ve done anything wrong!

Relational Proximity Dimension #4 is Parity or Balance. The greater the asymmetry of power between me and someone else, the greater the potential for difficult and strained relationships. This asymmetry can be real or perceived, and its affect on relationships can be more about the use and misuse of power than the mere existence of power disparity.

That all sounds like a major power asymmetry to me. But in this case the exercise of that power, in what almost feels like even further abuse, is entirely self-inflicted. Yes, of course, if the offender somehow repays something then in a sense justice is done. But their attempts at righting the wrong mean nothing if you don’t forgive them.

It seems that one of the major reasons for relational problems caused by power asymmetry is that we equate power with value. The second major reason is that we ascribe or devolve power to another simply by not forgiving them. These two things we can evidently do something about. Can you imagine the mental and relational liberation if we saw people as equally valuable (no matter how powerful they were) and if we forgave them (even if they didn’t seek forgiveness)? These things are within our responsibility and ability to do.

However, the Power problem of forgiveness also works the other way, maybe more so. It’s less about you having a sense of powerlessness because you can’t let go of the offense of the other person. Rather, YOU hold the power over the offender because you refuse to forgive. This is where the language of ‘debt’ is helpful. Who holds the power, the lender or the person with the debt? If you know what it feels not to be forgiven when you’re desperately sorry, you know how much power the offended person has.

In any case, whether you’re the offender or the offended, whether you feel powerless or powerful, an awareness of this dynamic can help explain why the relationship feels as it does. It also points to the need for candid and courageous conversation where confession and forgiveness can happen.

In the series Relational Living, Simon Fowler explores what Relational Thinking means in our day-to-day lives. The articles appeared earlier on his personal blog and are republished with his permission. The first three in this series were published on 9,  16 and 23 January.