Why do we stick with % pay increases? 7 November at 3:41PM in Campaigns corner 2 replies 101 views

CCopeland

Why do we stick with % pay increases?

 

Does this not mean that the rich get richer and the poor get poor

 

#% increase of 100, 000 is surely going further way from an income #% increase on 10,000

 

Why is not everyone just gets a flat rate i.e. £100 increase to all

 

Or is my maths just very bad

DullGreyGuy

Your maths is fine but your logic may not be.

My current client increased salaries by an average of 5% this year and so if that was a uniform 5% then in relative terms everyone stood still but in absolute terms the better paid would have pulled away.

In reality the 5% wasnt uniform and those in the lowest brackets were nearer 9% payrise and those in the top brackets were more like 1% payrise. So in relative terms the two extremes are now closer together and probably in absolute terms too.

Prices don't go up by a fixed amount but a percentage and many higher earners are also higher spenders so inflation bites into their lifestyle just as much as middle earners. A £100 pay increase wont make much difference to your life if your £500k mortgage has just jumped to 7% interest. 

tacpot12

It depends on how you work out what poor means. Usually 'poor' means someone who is earning less than a percentage of the average wage. So x% increase in wages will make someone poorer if they don't get this increase, but if they do get the same percentage increase, they remain equally as poor. (You can to the maths to show that if a rich person gets X% pay rise and poor person gets the same, the poor person's wage remains the same percentage of the rich persons wage). 

You are correct to suggest that to create a fairer society, we should be looking to close the gap between rich and poor, so this needs the poor to be given a greater percentage pay rise than the rich.

I am coming around to the idea that everyone should be paid a multiple of the national minimum wage. The top earners should perhaps be limited to 20x the national minimum wage, and every one else gets something less than 20x.