David Cameron's commitment in last week's Guardian - to set up a fair pay review and establish a pay cap of 20 times the earnings of the lowest paid for top public-sector executives - has certainly provided a much needed shot-in-the-arm for the current election campaign and years of sterile public-sector pay policy. The Guardian, through its own annual plc analysis, has charted the major rise in the differentials between the highest and the lowest paid in recent years, and the editors and bloggers have been quick to point to the positive examples of comparatively egalitarian private-sector companies such as John Lewis.
Cameron is right to re-assert the importance of fairness as both a national and employer pay policy objective. While it has been subordinate for many years to considerations of the market and performance (which have driven the growth in differentials), research clearly shows that perceptions of fair treatment at work affect not just levels of satisfaction with pay but also employee engagement and discretionary effort.
The proposal is in fact less radical than initial reports suggest, because the recent Parliamentary Public Administration Select Committee report also recommended a type of top pay commission for the public sector. And Cameron is only floating the idea of the pay multiples cap as a consideration, not a requirement.
But even then, has he picked the right target and the right vehicle for fairer pay? Public-sector pay differentials are still generally well below those in the private sector, and exclusive executive perks are much less common. A PricewaterhouseCoopers study last year estimated that public-sector pay levels were around half of those in the private sector for equivalent executive jobs.
In terms of the vehicle, the trouble with fixed caps is their lack of flexibility, which can lead to perverse effects. Thus, a small regulator with lots of professionals and specialists might be able to pay its top executives much more than a large local authority with lots of low paid workers. And, if it came in, watch pay levels inflate up to the 20 times multiple across the public sector, and the trend towards the outsourcing of the lowest paid jobs continue. This is why even John Lewis has not retained its maximum differentials policy, but instead uses its profit sharing scheme, as its former chairman expressed it, to "let the thin cats get a bit fatter".
But Cameron has certainly hit upon a key employment issue to look into if the Tories win the election. If pay transparency is key, why not make a start by forcing employers to disclose their earnings differentials along with their gender pay statistics? That would be interesting information for any new investor or recruit to consider.