According to a report, British workers would be paid around £2,100 more a year on average if wages had matched a boom in corporate dividends paid to shareholders over the past two decades.
Pointing to a divide between labor income and business ownership, think tank Common Wealth said far-reaching reforms were needed to rebalance power amid growing inequality.
Amid mounting pressure on workers as wages fail to keep pace with the soaring cost of living, he urged the government to take action to increase workers’ rights and the bargaining power of unions, as well as increasing funding for care and social assistance security benefits.
It comes as ministers face growing pressure to back a windfall tax on energy producers to tackle the cost of living crisis. Following a spike in wholesale oil and gas prices exacerbated by Russia’s invasion of Ukraine, energy companies Shell and BP are expected to post a sharp rise in profits later this week. Separate Common Wealth research showed the two companies had paid out £147bn to shareholders via dividends and share buybacks over the past decade.
Business Minister Kwasi Kwarteng has lobbied against a windfall tax, writing to energy companies over the weekend urging them to increase investment to prevent more drastic measures being taken by the cabinet.
Chancellor Rishi Sunak has signaled he is considering a windfall tax if Shell, BP and other exploration companies fail to spend excess profits on developing renewable energy projects.
Shadow Climate Change Secretary Ed Miliband said: “Kwasi Kwarteng’s letter is not worth the paper it is written on for millions of families facing the cost of living crisis.
“Families want action to deal with the bill crisis, not some empty, insulting political spin,” said Miliband, who added that energy investments were made over five to ten years and that the benefits unplanned and untaxed exceptional items would always be returned to shareholders. .
Common Wealth, in a May Day statement alongside a group of other progressive think tanks including Autonomy, the Center for Local Economic Strategies and the Women’s Budget Group, said the UK’s biggest companies were making booming profits while ordinary people suffered an unprecedented attack on their economic security.
The report’s findings, based on figures from the Office for National Statistics, revealed that total labor compensation for UK households increased by a combined 25% between 2000 and 2019 after taking into account inflation and the growth in the working age population in the UK.
However, dividend payouts by UK-based private companies increased by 132% over the same period.
Common Wealth said that if the ratio of wages to dividends had remained the same over the past two decades, earnings from work would have been 18% higher, or £2,100 a year per person of working age.
Official figures show Britain’s average wage remains below its pre-crisis peak of 2008 after accounting for inflation, after more than a decade of stagnation, in the worst wage performance since the Napoleonic wars . Forecasts from the Office for Budget Responsibility, the government’s independent economic watchdog, show the average wage is set to fall this year after inflation amid soaring living costs.
Mathew Lawrence, director of Common Wealth, said the government could launch a series of reforms to narrow the gap between wealthy asset owners and workers.
“Political decisions on labor law and rules governing business have created an economy where power is stacked in favor of capital, and collectively created value is concentrated upwards,” he said.
“What we have built, we can reimagine. We can create an economy where workers have a much larger share of the wealth they create. But this will require a fundamental rebalancing of economic power.