Hospital cleaners worth more to society than City bankers, says new nef research

As City bankers plan how to spend their generous Christmas bonuses, a report from nef (the new economics foundation) published today, Monday 14 December 2009, unveils a new method for calculating the true value to society of different jobs.

A Bit Rich? Calculating the real value to society of different professions questions whether pay reflects the true value of different jobs and shatters some of the myths used to justify high pay.

Controversy over bankers’ bonuses raises fundamental questions, not just about the pay of senior executives, but also about the relative value of everyone’s work in society.  A Bit Rich? brings an entirely new perspective to this issue, using a robust valuation method, Social Return on Investment, to quantify the social, environmental and economic impacts of six professions, looking at how each produces – or destroys – value for society. For each activity, the analysis measures the conventional economic returns, including job creation, but adds in, for example, attributable environmental degradation, and changes in well-being – either positive or negative - to individuals and communities in wider society.   The research reveals that overall:

• Elite City bankers (earning £1 million-plus bonuses) destroy £7 of value for every £1 they create. 
• Hospital cleaners create over £10 in value for every £1 they receive in pay.  
• Advertising executives destroy £11 of value for every £1 created.
• Child care workers generate between £7 and £9.50 for every £1 they are paid.
• Tax accountants destroy £47 for every £1 they create.
• Waste recycling workers generate £12 for every £1 spent on their wages.

Eilís Lawlor, Head of the Valuing What Matters team at nef said: “This report is not about targeting individuals in highly paid jobs.  Neither is it simply suggesting that people in low-paid jobs should be paid more.  The point we are making is more fundamental – that there should be a relationship between what we are paid and the value our work generates for society. We’ve found a way to calculate that. ”

A Bit Rich? demolishes a host of myths about pay and value. In particular, it challenges the claim that high pay does not matter so long as poverty is eradicated. High pay comes on the back of extraordinary profits, made possible because companies do not have to pay the full costs of their activities. Some of the costs of production may be hard to see, such as greenhouse gas emissions or the impacts of sweated labour, but someone is bearing them now - or in the future. A Bit Rich suggests that until the prices of goods and services reflects the true costs of their production, incentives will be misaligned. This means damaging activities will be relatively cheap and profitable, whilst positive activities will be discouraged.

According to Eilis Lawlor: “Pay levels often don’t reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit, rather than those that generate profits at the expense of society and the environment.”

nef believes that there should be a positive, direct relationship between what we are paid and the value our work generates.  The report argues that there are no quick fixes because issues around pay and value are rooted in the structure of the economy and the inequality it produces.  However, it offers policy-makers some starting points to tackle some of these structural barriers: for example:

• building social and environmental value into prices – making good things cheap and bad things expensive
• establishing a High Pay Commission to recommend a maximum national pay  differential
• launching a green industrial policy to replace the middle income jobs (or ‘missing middle’) of manufacturing
• reining in high pay by introducing maximum pay differentials
• introducing a transaction tax to reduce high risk and unsustainable trading