New analysis has highlighted the shocking gulf between dividends and employee compensation, showcasing why Britain has a major wealth problem.
The average worker has been left almost £3,000 a year out of pocket due to employee compensation running at a severe lag with shareholder payments.
Between 2000 and 2019, dividend payments grew 5.5 times faster than employee compensation on average each year.
Had it grown at an equal pace, workers’ compensation by 2019 would be almost £3000 a year more per head on average.
Common Wealth argues this represents a widening of the gap between the economic fortunes of workers and shareholders.
Mathew Lawrence, the director of the association, said: “We have built an asset economy that puts shareholders first, with working people paying the consequences with lower wages and higher inequality.
“But what politics made, it can refashion. We need a new settlement that rebalances power between labour and capital. Not only would this create a more equitable society, empowering workers to claim a bigger share of income is the foundation of a more dynamic economy.”
Since the 1980s, ownership of the UK stock market has become highly internationalised leaving dividend income flowing disproportionately to investors all over the world.
Between 1988 and 2019, labour compensation increased by an average of 1.6 per cent per year, while the figure for dividends grew by 4.2 per cent.
If both had risen at the same pace of 1.9 per cent (i.e. the sum of the two items were to stay the same but the split between them was held constant), labour compensation would be 8.9 per cent higher per hour by 2019.
Annually, this is equivalent to an extra £2,844 per worker, underlining the extent to which dividends growth has outpaced growth in compensation to workers.
Chris Hayes, Chief Economist at Common Wealth, said: “For decades now our economic model has sacrificed wages and investment at the altar of shareholder value maximisation.
“This needless deterioration in workers’ living standards long pre-dates the UK’s much discussed productivity slowdown, and it is a sorry indictment that it took a pandemic followed by a full-blown energy crisis to interrupt this pattern.
“If we do manage to muster a tentative return to economic growth, then letting this pattern resume once more will pull the rug out from under any nascent economic recovery.
“Strengthening labour’s bargaining power would not only restore to workers more of the value of what they produce, but would underpin a healthy demand environment in which investments can bear fruit.”