Many of Britain’s largest employers must do more to increase pay for workers struggling with the cost of living crisis or face votes against pay increases for executives, investment managers have warned.
Peter Hugh Smith, the chief executive of CCLA, an investment manager for the pensions of charities and church organisations, said many employers were failing “to do the right thing” and meet the “basic standard” of paying workers a living wage.
“The cost of living crisis is a long way from over,” said Hugh Smith. “There is movement in places, but not nearly enough.”
UK annual consumer prices index inflation remained above 10% in March, after peaking at 11.1% in October. Within that, food prices rose by 19.1% in the year to March, putting the most pressure on lower-paid workers, for whom food represents a greater share of total spending.
CCLA, which manages assets worth about £13.5bn, is one of several investors that have raised the issue of low pay with British companies as many prepare to hold their annual meetings.
The UK’s largest asset manager, Legal and General Investment Management, and the largest workplace pension scheme, Nest, as well as Aviva Investors and Axa Investment Managers, joined a call this month for companies to give pay increases that help the lowest-paid workers with the effects of inflation, and for the real living wage to be paid across their entire supply chains. The real living wage – above the “national living wage” at £10.90, or £11.95 in London – is set by the Living Wage Foundation.
Dan Howard, head of good work at ShareAction, which organised the statement, said: “While everyone is feeling the pinch of the cost of living crisis, workers on low wages and insecure contracts are being disproportionately affected.
“The current crisis follows decades of falling real terms pay growth, leaving low-paid workers unable to cope with rising prices and forcing millions to go without basic goods and fall behind on bills. This will only widen the existing disparities in income and wealth.”
Hugh Smith said that low inflation and low interest rates during recent decades had meant that the lot of lower-paid workers had received less attention than it should have, but the recent increase in inflation had increased the scrutiny from investors, he said. He will also compare executive pay awards with those for employees.
“If we see that executive pay is going up more quickly, that is something that would likely trigger us voting against executive pay increases,” Hugh Smith said.
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CCLA and the Church Investors Group wrote in September to the 100 largest listed UK employers asking for their policies to help low-paid employees in the cost of living crisis. The group received 60 responses.
The banking sector proved to be among the most responsive industries in helping lower-paid staff, who are found mainly in their branch networks, with the rising cost of living, said Martin Buttle, CCLA’s better work project leader. However, hospitality, retailers, food producers and bookmakers were significantly worse, he said.
“In certain places the magnitude of executive pay versus workers has probably become extreme,” he said.
Hugh Smith added: “The investment industry can also do better. The investment management community, the fund management community has a lot of power. I would argue that it has a responsibility to do this.”