Salary gaps becoming explosive

“A manager's only responsibility was to pursue the long-term profitability of a business and if that was done, then executives should be rewarded,” according to a South African labour market analyst in the face of and to justify the latest remuneration statistics indicating that average executive pay packets in the country are in the order of 250 to 300 times that of the average employee at the bottom end of the scale.

Another reputable analyst recently wrote: “The economy is improving. Pity about the jobs. That, in essence, seems to be the view of the most mainstream economists – a view that has hackles rising throughout the trade union movement.”

This was well illustrated when, in the middle of tough and sensitive wage negotiations between power utility Eskom and unions, it transpired that the management of Eskom on average afford themselves 84% increases. Prominent economist Mike Schussler described the situation as “immoral”.

Local executives took home more last year despite the recession, unlike some of their international peers who received minimal pay increases and no bonuses; although, according to the recently released PricewaterhouseCooper (PwC) report on practices and remuneration trends, the pace of increases did slow.

PwC’s Gerald Seegers cautioned that sensitivity on perceptions should apply under prevailing economic conditions.

The survey showed that the median guaranteed package for executive directors of large-cap companies is now R3.9 million, compared to R42 000 for the lowest paid workers.

Worldwide, a debate is gathering momentum on whether a simple chase for profit can still be regarded as the only yardstick by which to judge executives, particularly since bonuses  coupled to those profits are widely blamed for the financial crisis of late 2007 and the recession of 2008.

While South Africa still is month-on-month experiencing a net loss of job opportunities, commentator Terry Bell recently wrote in the Business Report that “a job-loss economy, let alone an economy registering no improvement in job creation, is a failed economy… When profitability and gross domestic product improve at the same time that more jobs are being lost, this indicates a further widening in the already huge wage and welfare gap.”

This ever growing gap is at times underlying increasing strains and stress in the social order, as manifested in high levels of crime and violent protests in poor and informal neighbourhoods.

Even in the United States, with reputably the world’s highest standard of living, the social mood is times threatening to turn ugly. Adrianne Appel very recently wrote in an article on the Information Clearing House site: “Times are tough for workers in the US, where the recession has a stranglehold on much of the economy, but life is perfectly rosy for those at the top.”

In Greece and elsewhere, anti-austerity strikes have caused serious disruptions; and it remains to be seen if the United Kingdom’s social fabric can withstand as much as 600 000 jobs being cut from the civil service.