Executive Pay and Wage Inequality in the UK

Research reveals that the ratio of FTSE 100 Chief Executive pay to median worker pay in the UK has widened substantially over the past decade (see Table 1). In 2021, top executives at these major listed firms received remuneration approximately 150 times that of their median employee.

Table 1: FTSE 100 CEO-to-median-worker pay ratio (UK), 2012–2021

Source: High Pay Centre

By 2021, average FTSE 100 CEO pay climbed to £3.6 million, representing a significant post-pandemic rebound. Over this same period, the FTSE 100 share index fluctuated while generally trending upwards, indicating a correlation some corporate boards use to justify high performance-related bonuses (see Table 2).

Table 2: FTSE 100 performance and average CEO remuneration, 2012–2021

Source: High Pay Centre and London Stock Exchange

This disparity is starkest when contrasted with the stagnant real wages of essential workers in retail, health, and logistics. Policymakers have suggested several interventions to curb this growing wage inequality, including:

• Introducing a higher top marginal rate of income tax on high earners;
• Levying a higher rate of corporation tax on companies with extreme CEO-to-worker pay ratios;
• Enhancing shareholder powers to make 'say on pay' votes legally binding.

In economic terms, wage determination is traditionally explained by marginal revenue productivity. However, in many high-level corporate and entertainment roles, measuring an individual's marginal physical product is extremely difficult. Instead, wages seem to be set by institutional power dynamics and scalability.