A new TUC report details how UK businesses have prioritised the interests of shareholders over workers, and how profits have been directed away from wage growth and investment in favour of dividend growth.
New TUC analysis shows that over the last decade UK businesses have rewarded shareholders over workers, with dividends growing three times faster than wages.
The report outlines how the Conservative government’s failure to reform company law that favours shareholders over other stakeholders has left workers missing out.
The TUC compared the rates of wage growth and dividend growth (including share buybacks) before and after the financial crisis:
Before the financial crisis, dividends grew at double the rate of wages. Since the financial crisis, the gap has widened with dividends growing at more than three times the rate of wages.
Despite Conservative government promises since 2010 that ‘we are all in this together’, shareholders took inflation-busting dividends, while wages have been devalued.
If both wage growth and dividend growth had matched inflation since 2008, TUC analysis estimates that cumulatively £510 billion more would have gone to wages and £440 billion less to shareholders.
The TUC says this shows that the UK pay squeeze results in part from decisions companies make to favour shareholders over the workforce.
These outcomes are shaped by government policy. In the last decade, Conservative ministers have chosen to hold down pay across the economy, cut back the rights of workers and their unions, and leave Victorian era corporate governance structures untouched. And this has left workers losing out at the expense of shareholders.
The TUC says that the shift from wages and investment to excessive dividends holds back business growth and productivity gains. The results are shown in how poorly the UK compares with our counterparts in the OECD for business investment and productivity.
The report Companies for People looks at how we can fix some of the core problems that mean UK businesses fail to reward and value their staff – and fail to create the kind of sustainable economic growth that everyone in the UK can share in.
While big businesses are a vital part of our economy, generating much of our national wealth, they are not being run in a fair, efficient, or sustainable way for Britain.
Many of the laws and regulations that govern firms have been in place since Victorian times. They need modernising to make sure that firms give as much weight to the interests of their workers, and to the wider community that they operate in, as to shareholders.
Pay bargaining and employment laws also need modernising, so that working people get job security and more power to bargain for a fair share of the wealth that they create. This will also recycle the wealth that Britain creates through spending within our economy, instead of much of it leaving the UK.
TUC General Secretary Frances O’Grady said:
“If you work for a living, you should earn a decent living. But too many businesses are lining shareholders’ pockets without giving workers a fair deal.
“British companies are being used as cash machines for shareholders – because boardrooms have been given the wrong incentives.
“When you see working people fighting for better pay, they just want a fair share of the wealth they create. But boardrooms are raiding company coffers for shareholders, instead of funding fair pay rises and investment.
“We need a government that will create a fair balance of power between workers and employers – not one that pushes pay down, attacks workers’ rights and refuses to update Victorian company laws.
“It’s time to get back to solid wage growth and sustainable economic growth that everyone in the UK can share in. For this we need responsible firms that serve their workers and communities – not just their shareholders.”
