The class ceiling should be a big worry

The persistent class pay gap is fostering a sense that success isn’t being shared

If there is one idea that enjoys almost universal support across our society, it is the belief in the importance of social mobility. The idea that hard work, grit and perseverance should allow anyone to overcome the circumstances of their birth seems almost hardwired into our national psyche. It is, perhaps, the closest we have to our own ‘American dream’.

However, while support for social mobility seems understandable, a belief in its prevalence seems less so. Some people are able (or fortunate enough) to ‘pull themselves up by their bootstraps’ – but many more continue to find significant barriers to their progress irrespective of their industry or ability.

Recent research by the Social Mobility Commission, carried out by academics from the London School of Economics and University College London, involved analysis of the data from the UK labour force survey – a snapshot of employment in the UK with more than 90,000 respondents. The researchers examined the average earnings of people in professional jobs with different backgrounds and found those who had come from a poorer family lost out by about £6,800 a year.

The biggest ‘class pay gap’ was found in finance, where those from poorer backgrounds were paid £13,713 less per year than colleagues with more affluent backgrounds. The medical profession saw the next highest gap at £10,218, followed by information technology at £4,736.

This class pay gap is demonstrative of a much wider gap that has emerged within many businesses: the gap between CEOs and their employees. In many cases these groups are similarly divided by their backgrounds, with around 45 per cent of CEOs and chairs of FTSE 100 companies privately educated, compared to just 7 per cent of the wider population. The pay gap between bosses and workers is now astronomical, with the average FTSE 100 CEO pay package of £5.5m around 147 times that of their average paid employee.

This matters, and should be a great concern to business. The class pay gap, and the huge gulf between bosses and workers, fosters a sense that prosperity is not being shared. It also inculcates the idea that only those whose ‘face fits’ have a chance to move up and on in their careers. Polling from the CIPD has found that nearly half of employees (44 per cent) thought their CEO’s pay was either too high or far too high, and employees were more likely to say that their CEO was not rewarded in line with the level of the organisation’s performance (38 per cent) than to say that it was (32 per cent).

Aside from representing a tragic loss of potential, the class pay gap is both a cause and a symptom of the damaging levels of inequality we see in our country. We know such inequality has a hugely detrimental effect on our health, wellbeing and the resilience of our economy – and it’s about time we addressed it.

Thankfully there is a lot businesses can do to both drive social mobility and narrow inequality. Whether it’s paying a living wage, publishing pay ratios or inviting workers on to boards, there are numerous ways in which they can be part of the solution and address one of the burning issues of our time. We just need employers to step up and act.

Dr Wanda Wyporska is executive director at The Equality Trust