During the BBC’s political debate show Question Time one audience member took the Labour Party’s spokesperson to task on the party’s use of salary statistics. The Labour Party plan to tax people who earn over £80,000. The Party claims that these people only make up the top 5% of earners. The man disagreed. He claimed that most people earnt more than £80,000. So what is the truth?
Basically, the man is wrong and the Labour Party are right. Earning £80,000 puts you firmly in the top 5% of the earning population. Thankfully the BBC provided a useful breakdown of the stats after the programme to try and clarify things. In fact around half of the British population are earning £25,000 or less a year.
One of the things that careers professionals and good career education can do is help people to understand what kind of salaries they can expect and how wealth is distributed across the country. I think that it is important that we talk about salaries more because it is an area where myths can run away very easily.
Based on these figures the overwhelming majority of the population should feel that (on the basis of income tax alone) they would be better off under Labour. And those earning over £80,000 should realise that they are a minority, who if people voted on tax alone, would have very little influence on the election. Of course that isn’t the case and I wanted to think about why this is.
The first reason is that people who earn over £80,000 have more power in our society. They are more likely to be in the media and politics, or to be friends with people who are. On one hand this allows them to set the agenda in a self-interested way – actively trying to mislead people into thinking that this is an issue for more people than it is. On the other hand the existence of a wealthy elite who mainly interact with others who are like them allows people to believe that their experience is ‘normal’ and to assume that everyone is like the people that they know.
The second reason is that people who are earning under £80,000 would probably like to be earning more. What is more we tend to over-estimate what others earn and also tend to compare ourselves (negatively) to people who are at the extremes rather than those in the middle. So if I have a friendship group of five people I tend to compare myself to the most successful, highest earning member of that group. That has some negative effects on my wellbeing, but it also makes me feel that the higher salary is possible for me, because it has been possible for my friend. If I can see my self as a potential £80,000 earner I might feel that I want to protect my future income even if it isn’t that likely that I’ll ever achieve it.
Finally we tend to over-estimate what money will buy us individually and under-estimate what it will buy us collectively. Once I’m out of the poverty line, another £5,000 across a year has very limited effects on my personal wellbeing or happiness. On the other hand an additional £5,000 for everyone in the population could be pooled to radically improve the NHS, education system and so on. Of course this kind of thinking requires that we trust government to spend the money on the right things, which in general people don’t.
The point here is that the debate on Question Time this week, makes no factual sense. People earning £80,000 are exceptions and as such can reasonable be expected to pay a bit more tax. However, there are a lot of psychological and political reasons why this logic breaks down in many people’s minds.
Given this, when we are discussing jobs in careers education and guidance it is vitally important that we link it both to a discussion of salary in context and to some thinking about what salary will actually buy you. Once we start having these conversations the link to issues of politics, social investment and taxation is inevitable. If we avoid these discussions we give people an impoverished understanding of what factors are likely to influence their career and also store up political problems of the kind that we saw running riot on Question Time.
Adventures in Career Development 
Very sensible Tristram. I’d like to add a few more points to this list, if I may
– In the UK, we seem particularly hung-up on earnings and are much less likely to talk about them then other nations. It seeps through into our own work, where salaries are usually the hardest piece of information to get through surveys. This has some interesting consequences, most notably the next point. A more open national conversation about salaries would probably be socially healthy.
– People don’t really know how much other people earn, and, interestingly, tend to overestimate the salaries of people and professions they don’t know very well. A few years back I assisted the BBC on some research for a radio show presented by Danny Finkelstein that explored this. The gentleman earning 80k probably, genuinely thinks he’s not in the top 5% at least in part because he thinks people not like him earn more than they actually do.This also affects policy where wonks – especially those based in London – have a tendency to overestimate how much money other people earn.
[…] On £80,000 and why careers education should talk about earning and taxation more. Continuing with a theme, this post talks about one of the key events in the election campaign – an argument about pay and taxation. In this post I argue that if we had better career education we wouldn’t be having these kinds of debates. […]