10 April 2012

Universal tax transparency will mean more inequality and concentrate power in the hands of the already rich.

Straight out of the box of ideas marked "Do Yourself A Favour And Say It Out Loud A Couple Of Times Before You Publish It" comes Polly Toynbee's suggestion that we should go down the Nordic route of opening up the tax and finances of every citizen to public scrutiny:
Something deep and visceral has shifted, ending the notion that income is a confessional secret between taxman and individual. The taboo is broken and must lead to universal transparency. Stripping off the veil of financial modesty would be a shock at first, but we would get used to earnings and taxes belonging in the public realm, not the private one – wills are already public documents. What is there to hide, except dishonesty or moral shame at earning multiples more than others who work as hard or harder?
It's a very confused piece, failing to distinguish satisfactorily between publicly funded rulers and the privately-earning ruled. Tom Chivers, the token lefty (OK, he's had to double up on that designation since Dan Hodges's arrival) over at Telegraph blogs has explained the illiberalism of all this, with biting clarity:
This is a direct mirror image of the Right-wing illiberalism of snooping on emails and pushing "victim's rights" in court. 
There is a further point to be made, over her central assertion that...
...Secrecy encourages inequality.
No. It doesn't. At least, not as much as full transparency will.

Once you are in work, one of the best ways of improving on your current salary and benefits is by moving between employers. This is because your current employers already know what you're on and your remuneration is anchored to that figure. One of the great (maybe only) advantages that you have as a job candidate over your new employers is that they don't know if that salary your negotiating is about the same, a bit better or a whole lot better than your current bunce. Information, as always, is power, here. Ms Toynbee wants to give that power to those towards the pointy end of the free market pyramid.

Let's say you take the job anyway. Now you and your colleagues can start looking up each other's salaries and realise the disparities. Disharmony ensues. And righly so, perhaps. But what will the response be? In the drive for equality and harmony, will attempts be made to raise everyone's wages to the highest benchmark? Or will they be driven down to the lowest? I'm going to go with lowest. Let me just spell that out: L-O-W-E-R, P-A-Y. And where will the surplus that would otherwise have been paid to employees go? (Clue: not to charity or on subscriptions to the Guardian).

That's all if you get the job in the first place. For in this utopia of open information, employers will be more reluctant to employ. Who wants a new colleague whom you barely know going over your personal tax and spend records and judging whether you or the business justify it? How can you be sure that they won't use the information negatively and resentfully? You can't. So maybe when the opportunity to employ a new administration assistant or finance a paid internship comes up, you think that it's probably not worth the scrutiny. And when a management post becomes vacant? Well, that'd be best filled by someone you already know and trust and is probably all too familiar with your fiancial situation. That is, friends and family. So employment opportunities become a little more closed.

How does any of this result in greater equality?


  1. Why wouldn't this lead to businesses knowing how much they need to offer to secure the best talent?

    On the other hand, I can't see how you could then hold the line on commerical confidentiality for companies if every individual in those companies had none of their own? But isn't publishing (say, public sector) contract pricing supposed to drive costs down as people compete for the business?

    Why wouldn't transparency drive up wages as firms bid for the best talent?

    Fat Sam

  2. Hi, Sam.

    The auctions you describe - for public sector contracts and for individual private sector labour - are different games.

    In the first, we want the sellers (the contractors) to sell for as low a price as possible. Best way to achieve that is through sealed bids at the point of tender. Transparency after that is important for Freedom of Information reasons, and I suppose may anchor renewal bids to a low norm.

    In the second, we want individuals to negotiate a salary as high as possible - i.e. as high as the market will allow. The candidate knowing waht the highest rate in the market for their labour is will strengthen their hand, true. For the leadership/director levels in companies this coudl mean a race to the top. But the employer knowing what the candidate currently earns, and what the average is amongst competitors, strengthens their hand to an even greater extent, especially for the more managerial and administrative levels of a company. Overall and over time, this would keep lower and middle income wages artificially low.


    p.s. thanks for commenting!