Page last updated at 13:40 GMT, Wednesday, 15 July 2009 14:40 UK

Just what is a big salary?

Folded 20 note

By Finlo Rohrer
BBC News Magazine

Boris Johnson refers to £250,000 a year as "chicken-feed". Manchester City offer six figures a week. Goldman Sachs doles out big bonuses. BBC bosses face flak over their earnings. But just what constitutes a "big" salary these days and how has how we feel about them changed?

Rarely a day seems to pass these days when there is not soul-searching over how much people are paid, whether it's bankers' bonuses or public sector salaries.

But are we clear about the levels of earnings that we are worried about?

WHAT'S AN AVERAGE SALARY?

Before you even get into what constitutes a "big" salary in the UK, you must first tackle the question of what an "average" salary is.

Boris Johnson referred to 250,000 as 'chicken feed'

The Office for National Statistics' Annual Survey of Hours and Earnings (ASHE) provides some of the most reliable figures.

According to ASHE, "mean" gross annual earnings across all employee jobs in 2008 came to £26,020. You may think that's rather a high "average" salary. And if you look just at the figures for full-time employees, that figure rises to £31,323.

Another way of measuring it is "median" gross annual earnings. According to ASHE, this was the more modest figure of £20,801, across all employee jobs. If you are earning that sum a year, you are "Mr or Mrs [or Ms] Mid-Point" - precisely half the surveyed working population earns less than you and half more. For just full-time employees, the median rises to £25,123.

SO WHAT IS A BIG SALARY?

It's safe to assume that for many people, mere entry into the top half of the earnings pyramid does not mean you are earning a "big" salary.

How about the top 25%? A gross annual salary of £31,759 - measured across all jobs - gets you into that club.

Women at work in an aluminium factory in the 1950s
Attitudes towards wealth have shifted repeatedly

How about if you make the top 10%? The ASHE figures reveal that a salary of £44,881 is enough to just edge into that top bracket.

A gross annual salary of £58,917 gets you into the top 5%.

But the standard that has cropped up in newsprint over the years is "the top 1%". It takes £118,027 to get into this bracket. And if you are earning £150,000 - the amount that triggers 50% income tax - you are in the top 0.6% of salaried people, according to the ASHE.

So does that mean that if you earn £45k that you are in the country's top 10% of earners? Sadly it's not as simple as that. The ASHE is a sample of 1% of people who pay tax via PAYE. It doesn't include the self-employed - businessmen, contractors etc - who make up the ranks of the really wealthy.

And many of those who we think of as being "employed" and therefore having a conventional salary - such as footballers and light entertainment stars - in reality sometimes receive their money in different ways. A television presenter might be self-employed and effectively offering his service as a contractor.

Boris Johnson's salary as Mayor of London takes him into the country's top 1%, but his "chicken feed" element of £250,000 - his fee for writing a column - could be paid as a conventional salary, or not.

DO WE KNOW WHAT BIG EARNERS ACTUALLY EARN?
Pile of gold bars

We know a bit about what chief executives of publicly listed British companies earn, but not as much about executive pay as they do in the US, says Dr Vicente Cunat, of the London School of Economics.

"In the UK they do disclose their salaries, but it is in a relatively opaque way," says Dr Cunat.

And even if you were to do a wide-ranging survey of pay among executives in the City - the place where most Britons assume the biggest wages are being earned - it wouldn't tell you the whole story, says Dr Cunat. There would be cases where individuals who were not top executives - such as star traders - earned more than their bosses.

Wealth and income have usually been tolerated if there is upward mobility
Prof Bill Rubinstein

Throw in the fact that conventional salaries are augmented by bonuses and long-term share options, and it's hard to get a fix on what is really being earned.

There are some professions where it's possible to get a rough idea from recruitment firms that can aggregate offered salaries and candidate's previous salaries.

Recruitment firm Reed's salary report for 2009 suggested the average salary for finance directors of financial services firms was £94,000, for pharmaceuticals firms £89,000 and for manufacturing firms £78,000.

A top qualified accountant might earn £100,000, suggests Brenda McManus, managing director of Reed Accountancy, but those jobs are few and far between.

WHAT DO WE THINK ABOUT PEOPLE ON BIG SALARIES?

Perhaps the most quoted thing that New Labour architect Lord Mandelson ever said was that "we are intensely relaxed about people getting filthy rich". He has subsequently complained that people always omit the other clause from the sentence - "as long as they pay their taxes" - but the fact remains his words are used as evidence of attitudinal change.

There has been a more accepting attitude to wealth in the UK from the 1980s up until the recent financial crisis, says Prof Bill Rubinstein, from the University of Aberystwyth, an expert on the history of the wealthy.

Captains of industry play Monopoly for BBC's Money Programme in 1970
Once upon a time tax rates made life harder for the aspirant rich

"Wealth and income have usually been tolerated if there is upward mobility. When there isn't, it isn't tolerated. One reason it's controversial now is precisely because a lot of people are not benefiting.

"In the last 15 years unprecedented levels of wealth and income were tolerated around the world but this can quickly change."

The last decades have provided a contrast to most of the 20th Century when it was harder to become rich and attitudes were different, suggests Prof Rubinstein.

"In the 20th Century there was a great deal of hostility for ideological reasons. Fifty years ago there was not only hostility from the left but a great many bars to becoming really wealthy."

Apart from anything the tax regime was "confiscatory", Prof Rubinstein says.

In a recent essay, he cites the extraordinary example of an Inland Revenue officer who in 1953 claimed there were only 36 people in the UK with an after-tax income of £6,000 or more. This might equate £200,000 today. Their pre-tax income would have been £56,000 or more.

But further back you can find examples of "big" salaries in the British Isles. In 1654, Oliver Cromwell was paid £70,000 a year, an astronomical sum.


Below is a selection of your comments.

In reply to Andrew from Oxford - As a civil Servant in the Pension Service my annual salary is £15,000 pa I work as hard as anyone else for this pittance. All this talk about civil servants on huge salaries and final salary pension schemes needs to be put in it's place. The only civil Servants on huge incomes are the spivs in Whitehall. The average wage throughout the civil service for grades 1 - 5 (which is 80% of all civil servants) is less that £20000 pa.
Stuart Wilson, Motherwell

Andrew, Oxford says: "To maintain any kind of decent lifestyle in the UK (especially the South East), one requires a salary of at least £60k. At £100k you might just have a reasonable house, a newish car and one foreign holiday a year for you and the kids."

Rubbish. My wife and I earn much less than 60k between us, and am happy enough with our house, car, and lifestyle. The figures in the article make a nonsense of what you say, unless you class a "reasonable" house as being one that is out of the reach of 99% of the population, and the only cars you consider are Porsches... Not a single teacher or nurse (you know, those "offensive" public sector workers) earns the "minimum" salary of 60k you describe - yet you do have some in Oxford don't you?
Rory, Bristol

The difference between the lowest paid and the highest paid in this country is appalling. The chief exec of the company I work for gets paid approximately 90 times what I get paid.

Fair? Definitely not. I'd like to see a rule that says top execs can only get paid 10 times what the lowest person in the company gets paid. Eg the lowest paid in my dept is £12,200 per annum, which would mean the top exec would get £122000 per annum.
Mike, Norfolk UK

I can't believe people are looking at just the numbers. You are paid what you are worth, what you aspire to and what value you add. Everyone has a valuable skill - maybe you should all find what it is and go earn more money - or maybe you don't want it as much as you complain? Apologies if that seems a little non-PC. Don't forget that even if people earn say £100k, they are more likely to be people who don't switch off, always working, thinking about work. Everyone has a choice, everyone has an amount of freedom.
Ash, London

I'll be on Eur 432k this year and I think its massive - but its the system of excessive reward that people allow to propagate, so who am I to turn down the fruits of my labours that society offers me? If any reader could command the same fee, they would - so its really only sour grapes. Remember, salaries are based on the amount of money you can make move around - and I make a lot of it move around, so quit whining or change the system.
Anonymous, Prague

I saw the interview and I believe Boris answered the wrong question. I am sure he thought at first he was being criticised about the amount of time he spent writing his column, not the amount he was paid. But in his haste to answer he interrupted the interviewer. I think he was thinking about trying to justify the amount time spent away from his Mayoral duties by describing "an hour on a Sunday morning" as "chicken-feed". Once he realised his mistake, in typical Boris fashion he just carried on, pretending the matter would go away.
TiM, London

One reason that wealth has been tolerated since the 80s is that the working classes were sold an illusion of greater wealth for themselves. They were encouraged to acquire more and more on easy credit and were told that their houses were getting more and more valuable. While the really wealthy paid themselves ever bigger salaries and bonuses, the rest of us were treated, through smoke and mirrors, to the illusion of wealth. The result was a colossal bubble that has burst in the last 12 months. So there will be pain for all of us in the next few years. Let us make sure that it is shared evenly, and that those who have done so well out of this bubble make a proper contribution.
Andrew A Morton, Lockerbie, Scotland

It's very difficult to have an "accurate" representation of the typical salary since the distribution of salaries follows a 'scalable' or power-law distribution, where the mean and median are meaningless statistics. Rather, the degree of inequality i.e. the exponent in the power law is a more reliable measure as it indicates the relative degree of 'unfairness' in society by showing how much wealth is controlled by what percentage of population a la famed 80/20 "law".
Suhail, London

Comparing total salary earned is very misleading due to the importance of taking into account the cost of living. For example, to keep it simple, say the cost of living is £20k per year. Someone earning £25k can then save £5k per year after cost of living is taken out of their salary. However someone earning £50k can save £30k per year. Therefore even though £50k is only twice as much as £25k, in terms of quality of life, £50k allows savings of 6 times as much per year. Now compare someone who earns £250k per year. That means they can save £230k per year, so it would take someone earning £25k per year 46 years to earn the same amount of savings. 46 years is a whole working lifetime, that the other person earns per year, so it's no wonder they have such a different standard of living. Most peoples salary is near to the cost of living so they struggle to save even just a few thousand per year.
John Swift, London, England

I always think that pay should be related to the hours that people work before it can be categorised as being high or not. The fact that Boris Johnson is paid £250k for say 100 hours work a year, would imply £2500 an hour earnings. Compare that to the finance director earning £78k for say 3,000 hours a year, and you have an hourly rate of £26. Everything is relative, and all pay should be compared on its merits.
Paul O'Donnell, Coventry

I'm baffled over the disparity between average earnings and average house prices. The sums don't add up if the average house is £160k+ and the average person is only earning about £20k. Likewise I'm earning well above average money, but it seems there is a huge number of people driving a more expensive car than me. These two observations could either indicate a huge amount of debt in the economy or the salary surveys are missing huge chunks of the population.
Alan Telford, Aboyne, UK

This is such a short-sighted view of an average salary. The problem in the UK is that we compare ourselves to people like David and Victoria Beckham and think that we're poor. When compared with the entire world's population if you have a roof over your head, food to eat and own at least one car you're in the top 10% of the world's richest people. If you own two cars you're in the top 5%. When we start to live more simply, releasing money for others to simply live - then and only then will this world start to become a fairer place for all of us to live. In the meantime let's get some perspective and start giving - one day we'll all be judged for what we give as well as keep.
Ashley Taylor, East Grinstead

Trouble is with this data is it only contains average people on average salaries. I work for a large London bank with a serious bonus culture and none of us are on PAYE for our bonuses - so they are all excluded. Same for footballers and the generally successful.
Christopher, London

None of these figures take into account regional cost of living. Not so long ago the BBC printed an article saying that Cardiff had the lowest percentage of wage left after taxes and bills for example.
Julian, Barry, S Wales

Why are British employees so secretive about how much they earn? This attitude, I believe, plays in favour of employers who offer less (or more) to different employees doing the same job, with women being the main losers. Besides, if people do state their income, they tell the GROSS YEARLY figure (instead of the ACTUAL net monthly earning), which further creates the illusion of a big salary. Alright, then, how much do I earn? I'm not telling you.
Marco, UK

Interesting, but what was the modal class of income? Mean and median do not tell the whole story: we need to know what the distribution of salaries/earnings looks in the population like to get a grip on the range of income. My hunch is that there is a large group of the the population whose income is well below both the mean and the median.
Peter Robinson, Cambridge

A "big" salary is totally dependant on where you start from. I am fortunate, currently secure in a full-time job earning the largest salary of my life, but to a top footballer it would be "pocket money". I consider that I am on a "good" salary but can only dream of pop star fortunes or winning the lottery. A billionaire wouldn't get out of bed for my annual salary, but unemployed, homeless, etc. would give their "right arms" twice over. It is all relative I'm afraid.
David Ayers, High Wycombe, UK

This is just middle class nonsense when you live in Sandwell in the West Midlands where over 50% of the population have an income of less than £5000 a year. A salary of £20k is regarded as high and £40k is astronomical, £60k is obscene.
Pete Smith, Smethwick, West Midlands

I have just changed my views' regarding Mr Johnson! referring to 250k as "chicken feed". I would love to earn a quarter of that a year, Mr Johnson, you want to try surviving on my £18,600 per year, bringing up a family. I work 40 hours a week as a civil servant (there's a hint there in "servant") often taking work home with me as there isn't enough hours in a day.
Helen, London

Studies in behavioural economics show that it is not the figurative value of your wealth which matters. Instead it is the reference point of wealth-happiness that you assume. That is to say, if someone earning £200,000 a year suddenly dropped to £100,000, should we assume that they are still happier than a person who increased their salary from £12,000 to £25,000 a year? No. The person on £12,000 has experienced a jump up the earnings ladder, while the other has experienced a considerable fall, their happiness, as derived from their earnings, is affected accordingly.

I think Boris Johnson calling his £200,000 "chicken feed" says more about the kinds of circles of wealth he has grown up in and continues to associate himself with. I would advise him to move into a housing estate in Bow in East London and he'll certainly feel much better about his salary.
Ronan, London

These numbers are senseless. According to them I'm in the top 10% but I am broke? My partner, a child minder, earns enough to also put her in the top 10% but she is broke. I need a £10k pay raise just to get me back to where I was pre-Labour, if I want to advance my lifestyle to any degree I would need at least a £15k increase.
London Banker, London

"A top qualified accountant might earn £100,000" - this is probably for an employed accountant in industry, a senior partner in a large accountancy firm will have earnings (self employed, thus not on PAYE) of far, far more than this.
David, London

I get paid an average salary for far more responsibility than most people will ever know. I don't mind, but I do mind when people moan about others who earn too much. They have worked for it and have probably earned it.
Police Constable, UK, Centreshire UK

To maintain any kind of decent lifestyle in the UK (especially the South East), one requires a salary of at least £60k. At £100k you might just have a reasonable house, a newish car and one foreign holiday a year for you and the kids. "High" salaries don't offend me if the performance is there to justify it. What offends more are the public sector workers who, remote to competitive pressures, put in the minimum effort and yet earn significant sums plus a final salary pension.
Andrew, Oxford

Interesting snippet about Oliver Cromwell. That would equate to between ten and one hundred million pounds per year today depending on whether one compares with trends in retail prices or earnings (EH.net). However, Oliver Cromwell was the first of only two heads of state who were not royal and wealthy; payments made to him were effectively made to run the country. His son, who succeeded him as Lord Protector, fled the country a few years later to escape creditors.
Mark Porter, Coventry



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