Falling pay gap between CEOs and their employees is nothing to celebrate

Research published today by the High Pay Centre found that the gap between chief executives’ pay and UK average earnings narrowed in 2020.

In response, Daniel Pryor, Head of Research at the Adam Smith Institute, said:

“Most people intuitively grasp why talented footballers get paid a lot and the same rules apply to CEOs. For large companies, a wide array of economic research shows that small differences in top talent have an outsized impact on results. It’s hardly surprising that they’re willing to offer high salaries to attract the very best in an era of global competition. 

It’s vital that British firms have capable leadership: especially as we begin to recover from an economically destructive pandemic. The right decisions at the top mean more innovation, job creation, productivity improvements and wage growth. 

The fact that High Pay Day falls later this year is nothing to celebrate—ordinary Brits aren’t better off as a result. The falling gap between top and median pay seems to have been largely driven by less bonuses being paid out: challenging economic circumstances in the worst months of the pandemic, pressure on firms that received financial support from the government and public relations concerns are all factors that appear to have played a role.”

Notes to editors: 

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The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.