"We’re invited to believe that a CEO can somehow ‘earn’ £10m per year, whereas a teacher ‘earns’ £25k per year. That’s only possible if you divorce the word ‘earn’ from any of its actual meaning. No one can actually work enough hours, or create enough value, to equate to £10m."
I think this is the essence of the recent debate about inequality. I think most people would not have a problem with those who are genuinely producing more getting more as well. Think back to school, did you ever complain about your grades if you knew some other kid had worked harder? Me neither. Of course there were times when it seemed arbitrary as well, seemingly having no relevance to quality.
It's a big problem creating a notion of fairness when you move on from school, where everyone is the same age, in the same class, doing the same homework. To create software, for instance, what do you typically find? There's people of various ages, some managing, some selling, some writing code, some doing testing. You need all of them to get the job done, and the job has some sort of value, however vaguely defined, that is greater than the sum of its parts. Nobody on the team could do all of the team's work as effectively as the team.
So then we have the problem of attribution. There's no real way to say what fraction of the value someone created. The only thing we really have is negotiating positions. If you're able to say "Give me half or I'm taking my ball" convincingly, your teammates will give you half. They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable.
This will have some interesting effects. If you're already making a lot, you'll probably need a lot to want to participate. You have more savings in order to hold out for a better offer. CEO guy "genuinely" needs more pay because why wouldn't he just retire now? Janitor guy will take any offer, because he needs to be running to stand still. Actually a lot of people will be in that position, even though their labour is generally seen as useful, like teachers.
Which is all just a long way of saying that the negotiating process does not in itself take merit as an input.