Capital trumps Labour: Income and Wealth distribution in the US.

The trends below are a phenomenon that is particularly marked in economies that experienced deregulation due to free-market pressures, particularly the USA and UK.

US income trends

From 1979 to 2007, real (inflation-adjusted) average household income, measured after government transfers and federal taxes, grew by 62 percent.

In other words, long-term real income for 80% of the US population fell behind the rate of inflation and vastly behind that of the top 20% of earners.

There is no dispute that income inequality has been on the rise in the United States for the past four decades. The share of total income earned by the top 1 percent of families was less than 10 percent in the late 1970s but exceeded 20 percent as of the end of 2012. A large portion of this increase is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs. But is the rise in U.S. economic inequality purely a matter of rising labor compensation at the top, or did wealth inequality rise as well?

Wealth inequality, it turns out, has followed a spectacular U-shape evolution over the past 100 years. From the Great Depression in the 1930s through the late 1970s there was a substantial democratization of wealth. The trend then inverted, with the share of total household wealth owned by the top 0.1 percent increasing to 22 percent in 2012 from 7 percent in the late 1970s. The top 0.1 percent includes 160,000 families with total net assets of more than $20 million in 2012.

wealth inequality graph, showing an exponential increase in recent years

Saez and Zucman show that, in America, the wealthiest 160,000 families own as much wealth as the poorest 145 million families, and that wealth is about 10 times as unequal as income. They argue that the drastic rise in wealth inequality has occurred for the same reasons as income inequality; namely, the trend of making taxes less progressive since the 1970s, and a changing job market that has forced many blue collar workers to compete with cheaper labor abroad. But wealth inequality specifically is affected by a lack of saving by the middle class. Stagnant wage growth makes it difficult for middle and lower class workers to set aside money, but Saez and Zucman argue that the trend could also be a product of the ease at which people are able to get into debt.

Furthermore, there’s reason to believe that such levels of inequality can have even worse consequences. The late historian Tony Judt addressed these effects in Ill Fares the Land, a book on the consequences of the financial crisis, writing:

“There has been a collapse in intergenerational mobility: in contrast to their parents and grandparents, children today in the UK as in the US have very little expectation of improving upon the condition into which they were born. The poor stay poor. Economic disadvantage for the overwhelming majority translates into ill health, missed educational opportunity, and—increasingly—the familiar symptoms of depression: alcoholism, obesity, gambling, and minor criminality”.

In other words, there’s evidence that rising inequality and many other intractable social problems are related. Not only is rising inequality bad for business, it’s bad for society, too.

Labour vs Capital

In both America and Britain, a radical shift in power from organised labour to large corporations and the banking sector has resulted in the capture of a large part of value from enterprise by top managers, financiers and the corporate sector.

Top corporate managers have become agents* of capital, resulting in declines in tenure, but massive increases in ”rewards”. Differentials between top and average pay have soared. US large corporation CEOs were paid 331** times the pay of the average and 774 times that of the lower paid. This trend is less marked in smaller enterprises, especially those that are not susceptible to stock market pressures. *See Agency Theory. ** In the UK, this is 170%

In a major revision of its traditional neo-liberal orthodoxy, the International Monetary Fund (IMF) recently released a study raising the alarm about the negative impacts of inequality on both economic growth and political stability, with IMF Managing Director Christine Lagarde warning that it created “an economy of exclusion, and a wasteland of discarded potential” and threatens “the precious fabric that holds our society together.”

Low levels of investment in the US despite strong profits appear to be reviving – in the midst of hard times for most workers – an "old-fashioned, almost Marxist [discussion about] capital versus labor". So as the Nobel Laureate economist Paul Krugman recently put it, in asking whether the explanation of the "paradox" of lingering high unemployment coinciding with corporations flush with cash lies in "robots" or "robber barons", ie new technology or increasing monopolisation.

The roots of this go all the way back to the political response to the labour militancy and profit squeeze of the 1970s. The answer to the stark question posed on the 14 July 1974 cover of Time magazine – "Can Capitalism Survive?" – was given at the end of that decade by the determination of the Federal Reserve under Paul Volcker to break wage-push inflation. This was achieved via sky-high interest rates and the unemployment this induced – the opposite of what the Fed's commitment to low interest rates today is designed to do.

Successive federal governments' promotion of the liberalisation of trade and capital flows also strengthened capital against labour. The economic restructuring that followed further undermined the historic foundations of trade unionism, exemplified by the collapse in the number of unionised workers in manufacturing from 7.5 million jobs in 1983 to 1.5 million by 2007. Even when unemployment recovered in the 1990s, workers now faced permanent insecurity in increasingly precarious jobs.

One of the main justifications for the inequality between labour and capital – that profits are invested for the general benefit – is today especially questionable because corporations and banks are sitting on their cash even as workers suffer insecurity and unemployment. Indeed, an IMF survey in June 2012 ("Rise of Inequality at Center of Economic Crisis") demonstrates this has gone so far as to undermine effective demand — which is why corporations are now reluctant to invest.

Yet this has been the remit of decades of government support for strengthening capital against labour. To employ another "old-fashioned, almost Marxist" notion, one might call this not so much a new paradox as a recurrent contradiction of capitalism.

A Circle of Exploitation

Reductions in real income for a significant portion of the populace in the US, and to a lesser degree, Britain, have been accompanied by a huge increase in pressures to consume. A bloated advertising industry and pressures to borrow from the banking sector have caused mounting personal and household debt. This in itself is damaging enough, but a seldom noticed effect is the downward pressure on consumer prices, especially for fashion goods. This has in turn led to a vast “offshoring” of manufacturing to low wage countries – and constant pressures on manufacturers to reduce prices.

And the result is…

Many aspects of the average American’s material lifestyle can be attributed to trade relations between the United States and Asia. A significant proportion of the clothes they wear, the toys they grew up with, and even the technology they use, was produced somewhere in Asia. Commerce with major developing nations like China and Indonesia is reportedly crucial for America's own continued economic prosperity, since its overall manufacturing investments in developing nations are in tens of billions of dollars and huge numbers of plants there operate on a contract basis with American companies. However, many Americans are unaware that their appetite for consumerism fuels a deeply controversial industry, and just as foreign-manufactured goods are often more than meets the eye, the sweatshop debate is highly intricate.


The definition of a sweatshop remains broad, describing any factory which may have unreasonably authoritative overseers, dangerous and unhealthy (both physically and psychologically) working conditions, and enforces long hours with low pay. The term also frequently describes a factory employing child labor. Many developed nations, including the United States, have at some point engaged sweatshop production facilities on a large scale, and a major segment of the world’s remaining sweatshops are located in Asia. As the West continues its long-standing tradition of fostering what many would liken to slave labor, an ethical examination of these business practices becomes increasingly important.

From a business perspective, sweatshops are overwhelmingly lucrative since they capitalize on low-wage labor in developing countries and significantly reduce production costs. Many major clothing and footwear companies, for example, have been linked to sweatshops. Brands such as Nike, GAP, Converse and Levi’s, have all been guilty of numerous violations of requirements for reasonable working conditions in their production facilities. All of their headquarters and customer bases are located in the United States, while the manufacturing component of the production process is carried out in Asia. Such companies have been criticized as being complicit in the exploitation of workers because they fail to correct the manufacturers’ malpractices, of which they are aware but often claim are hard to correct. An internal report carried out by Nike, for instance, found that nearly two-thirds of the 168 factories making Converse (one of the company’s brands) products failed to meet Nike's own standards for manufacturing.

Sweatshops: The Ugly Face of Industrialization

One of the biggest hallmarks of sweatshop labor is that the workers are simply underpaid, especially considering the kinds of working conditions they endure. Minimum wage levels in countries such as Thailand, the Philippines, and China, are significantly lower than that of the United States. The federal minimum wage per hour in the United States is currently at 7.25 dollars, while it is 1.48 dollars in Thailand, 69 cents in the Philippines, and 67 cents in China. However, workers are frequently paid less than these estimates suggest—amounts barely enough to survive on even considering the lower cost of living in these regions. Many developing Asian countries have official minimum wage levels, but the lack of uniform and comprehensive regulations with nationwide coverage across all labor groups and industries remains a huge problem. For instance, minimum wage regulations are applicable in Cambodia only to the garment and shoe-sewing sector, and in Sri Lanka only to over 35 industrial trades. Furthermore, the lack of institutional regulatory effectiveness in enforcing compliance is an even greater problem.

And it’s not just pay and conditions…

On 24 April 2013, Rana Plaza, an eight-story commercial building, collapsed in Savar, a sub-district in the Greater Dhaka Area, the capital of Bangladesh. The search for the dead ended on 13 May with a death toll of 1,129. Approximately 2,515 injured people were rescued from the building alive. The building housed a number of separate garment factories employing around 5,000 people, several shops, and a bank. The factories manufactured apparel for brands including Benetton, Bonmarché, the Children's Place, El Corte Inglés, Joe Fresh, Monsoon Accessorize, Mango, Matalan, Primark, and Walmart.

Other countries

The radically different experiences of Social Market nations such as the Nordic countries, the Netherlands and Germany have been covered in other parts of this site. For examples, see Inequality.


What makes a motivational, high performing workplace?

Having skimmed lightly over inequality, exploitation and the increasing “financialisation” of many corporations and workplaces, it is time to look for the positive side of organisations and work. There are many organisations in the private and public sectors that have educated, productive and highly motivated employees. There are also many countries that have not allowed the power of large organisations and money destroy the balance of stakeholder influence. Some countries have even built collaboration between business, employee organisations and government into the ways in which they make major economic and social decisions. There is considerable evidence to indicate that such countries do not suffer economically – and have healthy societies with high employment, fair pay, good health, education and social support.

Factors underpinning a constructive, high performing workplace

Building the Social Fabric of the enterprise:
Trust and Social Capital

We are used to being able to place a value on the money and physical assets that are invested in enterprises; their financial capital. And some try to place a value on intellectual capital, tangibly represented by patents and brands, more intangibly by know-how and skills locked up in an organisation’s staff. Of course, it is the more intangible aspects that can actually have more worth, because they represent the future value of the enterprise – physical assets, money, brands and patents will all deteriorate in value unless renewed by the genius of people.

But there is one other form of capital that is beginning to be recognised as very significant – Social Capital.

The central thesis of social capital theory is that relationships matter. The salient idea is that 'social networks are a valuable asset'. Interaction enables people to build communities, to commit themselves to each other, and to knit the social fabric. A sense of belonging and the concrete experience of social networks (and the relationships of trust and tolerance that can be involved) can, it is argued, bring great benefits to people and organisations.

There is now an impressive body of research* to show that societies and communities rich in social capital work better in many ways than those that are unequal and divided. Studies into divisions caused by educational and economic inequality show that divided societies with low levels of mutual trust have poorer educational, health, employment, life expectancy and crime records than more equal ones. Research into “Nordic Model” societies that enjoy high trust and social capital indicates that, in addition to the previous social benefits, they are also relatively productive and rich.

*Research Studies by amongst many others; Profs Andy Green of the London Institute of Education, Richard Wilkinson of University of Nottingham and Kate Pickett, University of York - and Eric Einhorn of University of Massacheusetts into the Nordic social model.

Constructive interaction between individuals ultimately becomes a shared set of values and expectations within a community as a whole. Without this interaction, on the other hand, trust decays; at a certain point, this decay begins to manifest itself in serious social and economic problems… The concept of social capital contends that building or rebuilding community and trust requires face-to-face encounters.

The same principles apply to enterprises. The contrast between the traditional British motor industry, which was based on oppression and conflict, and Japanese-owned motor plants in Britain is telling. Nissan’s Sunderland plant, which now employs an all-British management and workforce, is amongst the top rank worldwide in productivity and quality. This is simply based on a culture of trust that is underpinned by education, lack of social divisions, involvement and open communication. When they set up, they avoided recruiting any staff from the traditional motor industry on the grounds that they were likely to be poisoned by that experience. Rover cars, the last all-British company, collapsed in a welter of recrimination, leaving an unemployed workforce and a small group of managers who had feathered their nests to the tune of more than £40 million. (The same applies to the older parts of the US auto industry. The sight of the CEOs of major US auto companies arriving in private jets to beg money from Congress says it all).

Old-style UK industry was typified by oppression, segregation by employment status, secrecy, low trust, conflict and poor productivity and quality. It was in short, devoid of bonds between top managers and other employees and therefore of social capital:

“Trust is known to be a fundamental enabler of many workplace benefits. If trust levels are high, organisations experience more, and superior, problem-solving and co-operation, a reduced need for constant monitoring and quality checks and increased information sharing. There is also greater acceptance of organisational change initiatives. Fundamentally, research has shown that a sense of high trust between different levels creates a climate of well-being amongst all people in the workplace with better job satisfaction and greater motivation as beneficial outcomes”. (Professor Veronica Hope Hailey of London-based Cass Business School).

Research by Professor Douglas Kruse** and others shows that employee ownership in enterprises only works if supported by other practices aimed at enhancing involvement and trust

“Overall the results support the idea that workers can gain by sharing ownership, but whether this happens is contingent on other workplace policies”.

**Published: Douglas L. Kruse & Richard B. Freeman & Joseph R. Blasi, 2010. "Do Workers Gain by Sharing? Employee Outcomes under Employee Ownership, Profit Sharing, and Broad-Based Stock Options", NBER

How Managers can Build Social Capital

Creating Trusting relationships

By Personal contact

The most important facilitators of trust are personal contact, consistency of behaviour, honesty and respect between people. Inevitably, because they are the most visible, the burden of creating and maintaining trust falls most heavily on senior management. Top managers who listen, show respect to others and adopt a coaching style can also be demanding of high standards and if necessary harsh on those who do not try, provided their behaviour is felt to be fair and people respect their skills. The most vital aspect for top managers is visibility. Staff generally like to feel that they know their leaders as people and that they can respect them for their competence and values.

Through perceived Fairness

Having clear and understandable norms of conduct for the treatment of employees is crucial to maintaining high levels of trust. Organisations can be demanding and tough, provided that they balance demand with support and especially behave consistently towards employees at all levels. People may be dismissed for poor performance or dishonesty and this will be accepted by most, provided that they feel decisions are understandable and fair.

High involvement and communication, low social distance

The range of work practises exemplified by Nissan and other high performance businesses include extensive education, free communication, low status differentials, work rotation and involvement in improvement. These and other features of the workplaces build high levels of trust across the whole organisation and thus high performance.

And Justifiable Rewards

There is growing evidence that huge differentials between top managers and others is creating growing alienation and cynicism in the bulk of employees. In particular, the sense that top managers are the massively rewarded servants of distant uncaring investors is very undermining.

This book does not set out to solve the problem, but it can be stated that organisations based on a sense of mutuality between employees and directors - and sometimes customers in the case of the Co-operative Group (not bank!) - seem to generate a higher sense of loyalty and commitment than those where it is absent. This means that some family companies and smaller organisations with working owners; partnerships like the giant John Lewis retailing group - and organisations based on mutual and co-operative principles may be better places to work and higher achievers than those that create a sense of exploitation.

Aligning stakeholder interests

Much research into high achievement uncovers the fact that dedication by all to a common cause is a major performance - enhancing factor.

Meanwhile many studies of high performing organisations of all kinds identify an overriding concern with the quality of the customer experience by everybody is a prime feature behind consistent high achievement. But it is not the only one - some companies have placed concern for employee well-being at the centre of their value systems - for example, retailing superstar John Lewis Partnership was set up with the declared intent of enhancing the well-being and happiness of its partners, and the 3M's company places innovation high on its list of priorities. Johnson and Johnson’s Credo, shown in Appendix…, is an excellent example of paying proper respect to the needs of all stakeholders.

What emerges from all of this is that it is the interface between customers and staff that lies at the core of high achievement. Staff will treat customers broadly in the ways that their managers treat them. When staff and managers share a commitment to customers, it encourages joint problem-solving and can remove much of the emotion that can be associated with “pulling rank”.

The Quality of Organisations and the experience of working

Building Healthy, Open, Learning Organisations

In order for learning to be an organisation-wide phenomenon, certain very important conditions need to be met. Organisations must be valued as human institutions that have a communal life, distinctive culture and can harbour a sense of destiny. This idea of organisations is a far cry from commonly-held notions of organisations as machines or as collections of assets that can be manipulated, bought and sold. Machines and assets do not learn – in fact they do not increase in value unless activated by human ingenuity and skill. Therefore for an enterprise to have a future, its organisation needs to be treated as the organism that carries the current and future business – and this means motivating and encouraging people to give of their best and learn continuously.

Here I consider a range of practices that will enhance the life and viability of organisations and some that will debilitate them.

Organisations designed for purpose

I will discuss issues of organisation design in some detail in Section Four. For the time being, it is sufficient to say that there is no standard form of organisation. The factors causing differences will be:

Supporting a Learning environment

There is a choice to be made by top managers between favouring “stick and carrot” and coercion or supporting learning and encouragement. Unfortunately in the modern world, there are many examples of leaders that have chosen diktat and coercion as their favoured tactics – and there is an undercurrent of approval from investors and business media for 'toughness' and hard driving as chosen styles.

There is little evidence that driving people remorselessly creates lasting high achievement, in fact often the opposite. For example, Al "Chainsaw" Dunlap macerated Scott Paper and Sunbeam and was eventually indicted for fraud. - The previously mentioned Sir Clive Thompson of Rentokil was known as "Mr Twenty Percent" because of his relentless drive for extremely high year on year performance improvements. He and the company eventually came to grief because the people that he drove became overstressed and de-motivated. So is there an alternative?

An answer lies in using learning as a major tool for improvement. This means using every opportunity to foster learning and exploration, both formally through employee development, but equally important building learning into the routines of organisational life. There is a close connection between organisational cohesion and learning, innovation and adaptability. The best learning is that which is shared and passed across the organisation. Learning should not be confined to particular levels of seniority or particular functions. There is a place for external training programmes, especially for developing specialist knowledge and skills. But the best form of learning is likely to be internally sourced and managed. It is also likely to bring together people from many levels and functions, so that there is a sharing of perspectives and views of the world.

Planning and Strategy formation as Learning

Planning provides rich opportunities for dialogue about the business, competitors, customer needs, corporate strengths and weaknesses and opportunities. The opportunities for learning can either be opened up by adopting a collaborative and exploratory format and style or closed by making the process threatening and adversarial. The extension of planning processes to involve employees from top, middle and front lines can also enhance learning at all these levels, but especially the most senior, because they are the people that are most likely to be cut off from personal understanding of the customer and competitor. Strategies built on involvement also seem to be easier to enact.

Free flow of information

Andre de Waal’s research chimes with my experience in that it finds that high achieving enterprises are concerned to ensure that all staff feed off a common base of information. They also concentrate in enabling free flows of information and learning. Nissan follow a “Seventy Percent” rule. This means that seventy percent or more of all information is freely shared across the whole organisation.

Letting people have some 'slack' time for exploration and experimentation.

Most enterprises that have been rated as inventive give time and support to enable people try new things and follow projects of their own in the belief that the results will be worthwhile.

Being demanding and supportive.

Long time horizons should not be used as an excuse for enterprises to get off the hook of high achievement and relapse into quiet torpor. It is crucial that leaders exhibit two related behaviours. First, they need to be demanding of high performance and to keep the expectations high for the whole organisation. Ex-Redland director Bill Yearsley, now a professor at the University of Colorado, developed a motto, "Give freedom, expect results". His behaviour as a manager was a potent mix of high demands - on the organisation that he led and particularly so of his direct reports, who knew that he sometimes had a lashing tongue. But on the other hand, he was felt to be consistent and fair, and particularly very developmental - he gave praise where it was due and insisted that all in the organisation spent ample time and energy on learning and improvement. Yearsley made sure that his requirements for people to learn were taken seriously by investing in substantial individual and group development programmes and by visibly taking his own development seriously. The combination of high demand and high support created a culture that enabled the organisation that he led to become a paramount performer in its industry and also a generator of talent for developing the business.

Making organisational politics a force for good.

Every organisation has 'politics', because every organisation is a place where power is deployed, where people may have differing views about important issues and decisions and where they will seek to influence outcomes. This is a pretty good description of a "politics-rich" environment. To establish my position, I believe that politics are inevitable, and there are "good" and "bad" politics. My working definition of bad politics is power or influence used to further personal interests or drive through decisions based on power plays, both regardless of the wider and longer-term interests of an organisation. Good politics is influence or power used to further the interests of the organisation.

It is crucial that healthy politics are practiced from the top, because that will infuse through the whole organisation.

Alas! There are many ways of undermining organisations. Here are some…

Insularity and complacency – and leaders cut off from their organisations

There is a large body of evidence showing that managements can become insular and stuck, even arrogant, if they are lulled into a sense of invulnerability by success or simply ignorance and complacency.

Problems particularly arise when top managers become insular and cut off from both their customers and staff. Close-knit cadres of top managers, strongly bonded by long association or affiliation to strong leaders can develop a resistance to feedback from the organisation. This can result in a pattern of thinking described as “Group-think”, which can result in all manner of inappropriate behaviour – ranging from wild corporate escapades to complacent inertia.

On the other hand, some managers become cut off from their own organisations by identifying too closely with the financial markets or some other powerful external forces. They may never achieve real connections with staff and customers because they are not there long enough - or they may believe that an ‘upward and outward’ focus is best for the business or for their own reputations. Similar kinds of behaviour can be manifested by middle managers who become alienated from senior colleagues.

EMI Records UK, once a well-known music company, had eleven managing directors in twelve years and became quite immune to new top managers until the arrival of one who stayed for more than seven years. As the last “newcomer” was also competent, the positive effect on performance became quite dramatic.

Fear and conflict

Many organisations are frightening places to work. Bullying and harassment is common in some industries, the financial services sector being reported as one of the worst. The popular media lionises people who are capable of striking fear in the minds of others. Some top managers cultivate frightening personas and initiate reigns of terror. The much-revered Jack Welsh was described by an ex-colleague whose business was acquired by GE as a very frightening man, who sat at the back of a meeting in which he was making a presentation, from time to time shouting "Bullshit".

Lord Alan Sugar has become a popular TV personality through his programme “The Apprentice”. His catchphrase is “You’re fired”. The programme seems to encourage the apprentices to compete and undermine each other. Such behaviours are seldom hallmarks of high achieving enterprises.

Insufficient or excessive performance expectations

Organisations are not inexhaustible machines, and they can be driven too hard, or left to languish in inefficient sloth. They can also be underfed and deprived of intellectual challenge and stimulation. For each organisation, there is a 'zone of optimal performance'. Drive it too hard to over-achieve and it will eventually flag and deteriorate.

But it is also possible to let organisations grow fat and happy, and not stimulate them sufficiently. The effects of slack management and poor practices are equally catastrophic. Eventually such organisations will fail to satisfy customers or make insufficient returns to sustain the business.

Initiative overload

People who haven’t worked in the boiler-houses of organisations and experienced what it takes to make positive change take root are not, repeat not, in a position to impose programmes of transformatory change on large organisations

A common cause of confusion and unintended consequences is pressure by impatient and distant leaders or external stakeholders, who want change and want it quickly. Often, they issue ordinances, targets, diktats in a constant flow, not waiting for the impact of one set of initiatives to become clear before embarking on another round of change.


Motivation Defined

Motivation has been defined as the psychological process that gives behaviour purpose and direction; a predisposition to behave in a purposive manner to achieve specific, unmet needs; an internal drive to satisfy an unsatisfied need and the will to achieve. For this purpose of this article, motivation is operationally defined as the inner force that leads individuals to accomplish personal and organisational goals.

Professor Fred Herzberg was influential in drawing attention to different factors affecting work satisfaction and motivation. His Motivation-Hygiene Theory, also known as the Two Factor Theory (1959) of job satisfaction. According to his theory, people are influenced by two sets of factors:

Motivator FactorsHygiene Factors
  • Achievement
  • Recognition
  • Work Itself
  • Responsibility
  • Promotion
  • Growth
  • Pay and Benefits
  • Company Policy and Administration
  • Status
  • Job Security
  • Working Conditions
  • Personal life

Herzberg’s most important point was that hygiene factors were not effective motivators, but they could be significant causes of dissatisfaction. The practical import was that organizations should provide satisfactory hygiene factors and then concentrate on the Motivator factors.

Meaning as a Motivator

Gurnek Bains, Chief Executive of business psychology company YSC, compiled a book titled “Meaning Inc”* with colleagues. The thesis of their work was that once basics such as fair rewards had been dealt with, creating meaning through work can act as an important motivator. Meaning, to Bains was “Enabling people to connect their work activities to things that matter to them”.

The diagram below describes some of the “things” that YSC believe to be important. They include: Creating a sense of worthwhile purpose, attractive values and culture, a “brand” with a positive image, enabling people to find self-fulfillment through work, creating a sense of belonging and fair rewards for effort and results.

Examples of ways to create meaning for staff

Last, but by no means least: Gender and Employment

Women do not enjoy equal rights or opportunities in most countries of the world. Discrimination ranges from outright denial of the right to employment of any kind beyond domestic slavery at one end of the scale, to gender pay discrimination, in which women do not receive the same pay as men for the same work. Maybe Sweden and the Nordic countries have the most equal practices and a culture of respect for people regardless of their gender or ethnicity – but some glaring differences still remain….

Swedish practice

In professional life, the proportion of women in top posts is increasing. In 2012, the share of women heading companies – private and public sector combined – was 36 per cent compared with 29 per cent in 2006. The majority of managers in municipal, county council and central government were women (64 per cent), but in listed companies, the representation of women remained weak, with only 4 per cent of board chairpersons and managing directors.

Pay differentials between men and women can largely be explained by differences in profession, sector, position, work experience and age. Some, however, cannot be explained this way and may be attributable to gender – these are unjustified pay differentials. On average, women’s monthly salaries are 94 per cent of men’s when differences in choice of profession and sector are taken into account. Pay differentials are most pronounced in the private sector

In Sweden, parents are entitled to 480 days of parental leave when a child is born or adopted. This leave can be taken by the month, week, day or even by the hour. Women still take most of the days – in 2012, men took about 24 per cent of parental leave.


The pay gap between men and women in the workplace has widened and the UK has dropped out of the top 20 countries for gender equality, according to a new report by the World Economic Forum (WEF).

According to the research, the UK has fallen from 18th to 26th place in the rankings of the Global Gender Gap Report, recording its lowest overall score since 2008.

The countries which scored best in the research were Iceland, Finland, Norway and Sweden, in that order.

The UK’s lower position this year was blamed on a lower score in economic participation, which measures the ratios of women in the workforce, wage equality and the number of women in senior roles.

Commenting on the research, the WEF said:

“[In the economic participation subsets the UK] appears to remain some way off, with the country ranking 48th in terms of both labour force participation and wage equality and 66th for estimated earned income.

“Unlike many of its peers, it has still yet to close its educational attainment and health and survival gaps (ranking 32 and 94 respectively), while it does moderately better in the fourth area we measure, political empowerment, where it ranks 33rd.”

While the UK failed to register in the top 20 in any of the report’s four categories – economy, education, health and politics – a number of middle-income and developing countries finished above the UK, including Rwanda, Nicaragua and the Philippines.


Gender gaps in education and employment in the United States are small on average.

Young women in the US generally outperform young men in education. At age 15, boys score better in math on average, but girls have a much bigger advantage in reading literacy. Young women are more likely than young men to have a university degree: 46% of women vs. 36% of men aged 25 to 34. However, young women shy away from pursuing much sought-after scientific degrees: for example, in 2009 only 21% of tertiary degrees in computing were obtained by women. To get more girls to study these subjects, it would help to raise awareness of the consequences of educational choices on career and earnings prospects.

In the US, 62% of women are employed, 6 percentage points above the OECD average. In 2010, women in employment accounted for 43% of managers in the US (vs. 32% in the OECD) but with a 19% gender pay gap, the US remains above the OECD average of 16%. The gender pay gap is even wider at the top of the pay scale (23%): the “glass ceiling” seems still hard to break through in the US. Legislation like the recently introduced Lilly Ledbetter Fair Pay Act may help to reduce the pay gap further.

Pay and Gender

A final thought

In each of the developed countries covered, there are significantly less women at the apex of large companies subjected to the scrutiny of the investment markets …… Curious?



Social Enterprise and Community Empowerment

Most developed societies contain deep pockets of poverty and deprivation. These are most widespread in societies that suffer from great inequality, such as the United States and Britain. In Britain, the New Labour government made extensive and genuine attempts to reduce the symptoms of community deprivation: poor educational attainment, inter-generational unemployment and poverty, ill-health and depression. These genuine attempts had only a modest impact, despite the spending of £billions: now the problems are showing signs of becoming even worse. Under the current coalition government, there are two distinct problems:

Several tendencies on the part of government and the Charity Commission undermine social entrepreneurship and effective community action.

Particular amongst them is an obsession with scale. There is a tendency to regard scale as efficient, and large organisations as more reliable receivers of funding. In fact, there is a real danger that organisations whose orientation is to provide services for others can become distant from real problems in communities. This tendency is likely to create dependency and make the solutions provided by distant external agencies insensitive to the real issues in communities.

Implications for Community-Based Action

An increasing weight of research indicates that initiatives to reduce deprivation and poor educational and health outcomes that do not aim to increase social cohesion will, as they have to date, tend to fail or lack sustainability. They do this because they will not add to the stock of social capital within and between communities.

In particular, strategies that focus on individuals, market forces and choice or are aimed at communities through uncoordinated initiatives from distant institutions are unlikely to create the conditions for sustained community-led action for improvement. Initiatives need to create both bonding and linking social capital. The same applies to voting structures and consultation, which, whilst welcome as a manifestation of official concern, do not amount to community-led action.

This has several important implications for policy:

Social Enterprise and community development. What works?

Since the 2010 general election, the rhetoric of government, the “Big Society” theme, massive cuts in public expenditure and a broad disillusionment with the inefficiency of central government interventions have raised expectations about what the community sector can achieve and how local initiatives can be made to work.

Government rhetoric favours devolution of responsibility from the centre, with a preference for local enterprise. How can this work?

Vital ingredients for success

There is now a considerable body of UK based research from bodies such as the Joseph Rowntree Foundation, the Institute of Philanthropy, the New Economics Foundation, the School for Social Entrepreneurs and various universities*. The findings of these studies all point in the same direction and identify the same features that lead to sustainable change at local levels. It is worth picking out some findings that are particularly relevant.

* Summarised in “Sustainable Paths to Community Development”: Charlotte and Don Young, SSE 2008

Viral Development versus Scaling Up

Some forms of enterprise can benefit from scale; through large organisations and extensive financing.

But social enterprise tends to spread virally – through many initiatives in many places. The best way to spread good examples is often not by “scaling up” through forming larger and larger organisations, despite the fact that this approach has often been advocated by the Charity Commissioners and Central government.

The formation of networks and learning opportunities through them can work very effectively and over time spread beneficial activity widely. Good examples are the work of the Hub in providing opportunities for people at various stages of development to meet and support each other. The Fellowship networks of many SSE Schools. Fellows have access to each other and also to the experience of a group of experienced volunteers.

Those concerned at the national level often dismiss individually driven and highly particular initiatives as being a pin-prick. This however fails to understand that these small beginnings can have large-scale consequences which amount to a major change in attitudes, levels of trust and community effectiveness.

Implications for wider society – Creating Social Capital – Shifting from Contracts to Trust

The World Bank ranks Social Capital as an essential ingredient in healthy and prosperous societies. The essential ingredient in creating social capital is Trust.

Research has identified two types of social capital – bonding and bridging. Bonding social capital is typified by the links between people of similar backgrounds, interests and beliefs. In some societies, there is also a willingness to understand wider interests that link groups in a wider context – that of a whole Society. In these cases, there is a willingness to trust people with different interests and to give up a modicum of narrow interest for the good of others and society as a whole.

The Nordic countries are rated as being collaborative societies with relatively high levels of trust across different stakeholders and interest groups. These societies have collaborative institutions that link trades unions, employers, local and national government in formulating and implementing economic and social policy. The results have been shown to be impressive in both spheres.

On the other hand, Britain seems to rate high in bonding social capital, but levels of trust between different stakeholders and in most institutions seems to be decreasing. This has serious effects when it comes to mobilising broad strategies to bring about social and economic change. Professor Onora O’Neill points out that trust is a high order human attribute which tends to reduce transaction costs to a minimum. It leads to strong relationships that provide support and create greater sharing of rights and responsibilities and wider emotional rewards. In other words trust matters because it is both satisfying and remarkably efficient.

Social Enterprise and Social Capital

Social enterprise can be seen in a wider context, where a great many discrete bottom-up initiatives can be seen as part of a wider “movement” of people, mainly in the not-for-profit sector. The career motivation and values-base of many of these is directed towards making a better society which places trust at its very heart, recognising this not only as the essential glue that makes a society worth living in, but which needs to be recognised as a higher-order human feature that provides the means of highly efficient and effective transactions. Such a momentous change cannot come about overnight. We have been moving for some time, in a direction that builds systems of contract, detailed target setting and financially focused reward. These contractual relationships create and illusion of control and objectivity, but their effect is to erode relationships and to attack the very basis of human trust. Trust is a vital currency in any healthy society. Nevertheless, we trust one another far (and particularly our institutions) less than we did, especially those one-time solid institutions, big business, banks and politicians.

Schools for Social Entrepreneurs

The first School for Social Entrepreneurs started in 1997. The network of Schools has grown rapidly in the UK, Australia and Canada. Two major independent research studies were conducted by the New Economics Foundation (in 2006) and New Philanthropy Capital (2011).

These studies indicated that the SSE Network has been very successful in helping students and Fellows to create growing and resilient businesses and contribute to the creation of social capital through those businesses and the networks of Fellows, students, staff and volunteers thus created.

In summary, businesses formed by SSE supported students are:

The sum of contributions through networking and socially beneficial projects represents a very significant contribution to creating social capital.

Social enterprises are also bucking the gloomy economic trend. Last year 58% of social enterprises grew compared with 28% of mainstream small and medium-sized businesses.

Social enterprise – some data

Gathered from a variety of sources: Social Enterprise UK, UK Cabinet Office, Office for Civil Society and Third Sector research centre.


1. The roles of government and “official” agencies.

Communities and the official world

The combination of separation, poor educational and social skills and psychological alienation makes the problems of deprived communities remarkably difficult for 'official' institutions to cope with. It is by now evident that well-intentioned initiatives, strategies and programmes devised by local and national governments, agencies, quangos and large charities have not had a sufficient or sustainable impact on the problems, especially considering the amounts spent on them*. So, whilst commitment from all of these agencies is an essential part of an overall strategy for social enterprise and community regeneration, there is a vital ingredient without which little will happen of sustainable value. This ingredient is active involvement by communities in addressing their own issues and problems.

To avoid misunderstanding, this is not just about community representation on committees, working parties, project teams and the like, nor is it mainly about communities having a 'say' about the services that they receive from external bodies though this is necessary. It is about practically supporting and encouraging communities to exercise leadership and external agencies responding to help them create their own solutions to local problems. This apparently minor change in emphasis is actually huge, requiring fundamental changes of role and mind-sets from officialdom and activists within communities.

* New Philanthropy Capital in their 2004 publication “Local Action Changing Lives” estimates that the government spends over £1.8bn on Area Based Initiatives to reduce the impact of poverty.

Government has crucial roles to play: but not in controlling Social Enterprise

Of course, there are many roles that central and local governments should perform that do not require direct involvements in communities. These include infrastructure development, law and order, the provision of effective transport, securing earmarked funding for community development, directing funding to trusted intermediaries, subsidising those services that cannot be provided on a simple 'for profit' basis. (Post Offices are a good example).

But probably most important of all, I am convinced that the controlling and standardising tendencies of some professions and governmental agencies need to be loosened, so that communities can, with support, develop their own contingent initiatives. For example, the education system, with standardised curricula, targets and testing needs to be loosened, for it is clearly not serving the needs of many in deprived communities. We believe that there is a need for very different community-based learning institutions*, focusing, not on teaching, but on helping young people, their parents and communities generally to develop the skills needed to address tangible problems and develop social confidence.

* For instance, Danish and American models which were explored in the study by James Wetz, “Bristol Education Initiative” Final Report March 2006

Such institutions should be local, directly involve communities in deciding how they will be organised and complement 'official' schools by taking those young people who would benefit by a more practical 'learning by doing' approach. Similarly, the police should not have a monopoly in ensuring that social order is maintained. Communities should be supported to establish their own arrangements, with the police taking care of more serious crime.

Many politicians undoubtedly find the notion of social entrepreneurship and social enterprise enticingly attractive. It hits lots of buttons – apparently cheaper, politically more acceptable than commercialisation, looks “greener – more sustainable”.

But unfortunately all politicians are inevitably in a hurry. Whatever their party they are under pressure from media with a vested interest in simplification, sensation and trying to demonstrate that they speak on behalf of the populace, most of whom have been encouraged to want rapid, if not, instantaneous results.

If a government were wholeheartedly, but with a realistic timescale, to put a serious effort into shifting responsibility back to communities in the ways suggested above, the economic consequences could be very attractive. It could both considerably reduce the numbers of the population that remained stuck in the “Disengaged” box, with its attendant costs: it could also considerably cut the transaction costs associated with a contract society.

Such a government would also need to work out acceptable policies and inducements to encourage the capable individualists to make a fair and often fuller contribution to the wellbeing of their society.

2. Community regeneration: Key actions

3. Features of successful bottom-up initiatives

The following is a synthesis of a number of research studies carried out by a variety of reputable bodies.

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