The Role of Business in Inequality

By 03/03/2017Blog, Events

Inequality in the UK is increasing year on year; a fact highlighted in recent months by releases from Oxfam, the Resolution Foundation  and the Joseph Rowntree Foundation. These reports come as Philip Hammond is rumoured to be announcing a plan to ‘extend austerity’ in next week’s Spring Budget: policies estimated to hit the poorest the hardest.

Why is inequality an issue?
Wilkinson & Pickett provide ample evidence that as the gap between the richest and the poorest increases, happiness and levels of fulfilment decrease; not only for those at the bottom, but for those at the top too. This gap, and the stress associated with it, is contributing towards mental health issues and reducing productivity at work – bad for both business and society.

Inequality also decreases levels of social mobility. As gaps in society widen, it becomes harder to move up and down the ladder: meaning that those who start life at the bottom are likely to stay there.

To top it off, inequality significantly affects the economy and the size of the spending market. People on low earnings are less able to buy anything deemed unnecessary for survival. This stands to significantly limit the ability for growth for organisations within the consumer-goods market.

If left untreated, rising levels of inequality could damage societal cohesion and lessen demands on the market: ultimately impacting business success. Therefore, acting on inequality is both a moral and business imperative.

How is business related to inequality?
Evidence suggests that some businesses may operate with an unconscious bias: offering job and training opportunities to those who are already well-educated or similar to the in-keeping stereotype. Practices such as these fail to address inequality in wider society, by doing little to empower those on the lower rungs of the ladder. These practices reinforce echo chambers and do not recognise the value that inclusion of different backgrounds, circumstance and voice may add to the organisation – factors which are increasingly recognised as powerful perspectives within our current society.

The second way that business is related to inequality, is through pay. If organisations have a narrow focus on maximising short term profit and see people as a resource to exploit, as opposed to an asset, they may miss the opportunity to value their employees at their full worth. Many remuneration packages today are based on the financial contribution (in terms of revenue created) of an individual to a company. The company seeks to reciprocate that value, also in monetary terms: via a high pay cheque.
This narrow perspective assumes that people are inherently motivated by money. An alternative view, is that people value respect, dignity and a richness in their quality of relationships with others. Therefore whilst they want to be paid fairly, many people may prefer a purposeful existence and a positive working environment over a large pay packet – evidence keenly demonstrated by the number of millennials now choosing purpose over pay.
By looking more broadly at the contribution each person makes, business has the chance to recognise a wider remit of what ‘value added’ means, and how that value can be demonstrated and reciprocated to the individual. This is particularly prevalent when, on aggregate, 80% of company assets are now intangible (such as brand, intellectual property and human capital).

If businesses were to widen their focus of what they value and how they express that value to their employees, the disparity in pay between the highest and lowest ranks of an organisation, and between different departments and job functions, may well be decreased– therefore reducing inequality both at a company and societal level.

Businesses can choose to operate in a way which either lessens or proliferates inequality. If we are to strive for the creation of a sustainable, just and equal society, business leaders must firstly recognise their role in this debate, and secondly begin to question: who do I value? And how do I value them?

Bex Dawkes

On Tuesday 7th March, Blueprint is running a panel debate and film screening to discuss inequality. Please click here for more information and to register your attendance.