Inequalities Seminar: Do Firms Manage Pay Inequality?

24th October 2017

Speaker: Professor Paul Willman (LSE Management)
Chair: Dr Aaron Reeves (International Inequalities Institute)

This talk examined the role of the modern firm in the creation of inequality of income. Specifically, it examined the growth in the use of asset based rewards for senior executives, combined with continued use of salaried rewards for other employees, and the impact this has on measures of inequality both within the firm and society. If asset values tend to outstrip GDP then, other things equal, policies that reward one group with assets and others with wages will increase income inequality within the firm over time. Willman further argued that, since employment in firms that use asset based rewards for executives remains a substantial proportion of overall employment, the use of the firm as the unit of analysis for the examination of societal inequality, whether from a theoretical or policy based point of view, has some merit. The talk presented data on intra firm inequality for the UK. Both commercial and government data indicate that some measures of intra-firm inequality have increased substantially since big bang  (1986).  Since the financial crisis, a combination of equity based rewards for senior executive pay combined with the use of inflation indices or linkage to the National Living Wage have tended to increase inequality within firms on some measures.

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Inequalities Seminar: Do Firms Manage Pay Inequality? Inequalities Seminar: Do Firms Manage Pay Inequality?