A maximum wage?

[Winner]

The idea behind a minimum wage is to prevent the gap between the "poor" and the "rich" from growing too wide. It's been of course criticized from the liberal right standpoint as being actually damaging for the "poor", in terms of increasing unemployment and reducing the flexibility of the labour market.

I am just curious, has the opposite of a minimum wage ever been considered?

This morning I saw a report on BBC that the average pay of the top executives in Britain keeps growing, despite the crisis, despite austerity, despite all the mess the financial sector brought about - the people on top just keep getting richer and richer.

So, what if a hypothetical government of a hypothetical country decided to promote social cohesion and lessen income disparity by introducing a maximum wage? That is, a fixed number beyond which all earnings would be subject to a 99% income tax (or something with a similar effect). The maximum wage could of course be set at different levels for different sectors of the economy, in order to promote some at the expense of others. Say, the maximum wage in the financial sector would be set far lower than that in industries which actually produce something.

What effects would that have, in your opinion?

 

[Kozmos]

Well obviously if you dont pay everyone an absurd amount you can hire more people. Most people would cry bloody socialism as well. As long as R&D would remain unaffected I would be for it.

 

[Mise]

Ever rising executive pay is a symptom rather than a problem in itself. There's really nothing inherently bad about $10m per year salaries; what's bad is the system of corporate governance that allows those salaries to spiral out of control, without any link to the underlying performance of the business, to the detriment of shareholders, other employees, and society as a whole.

What I'm trying to say is that the problem is poor corporate governance, not executive pay. Poor corporate governance causes far more and far greater problems than excessive pay at the top; limiting executive pay won't solve those or any other underlying problems.

 

[Silurian]

The CEO get paid so much because they decide each others pay.

Their approval of their pay should be decided to a greater extent by their share holders.

CEO should not be paid with short term share options or if they are they should pay hire tax on them.
Long term share options, say over ten years, would be better as they reward long term growth.

 

[SeekTruthFromFacts]

In the 1940s, Norway had income tax rates of more than 100%. That is what I call properly progressive taxation.

Of course, it was only on unearned income. You could pay your star CEO a lot, but his children wouldn't get to control the economy because Daddy was a business genius. (I'm looking at you, James Murdoch).

 

[Winner]

Ever rising executive pay is a symptom rather than a problem in itself. There's really nothing inherently bad about $10m per year salaries; what's bad is the system of corporate governance that allows those salaries to spiral out of control, without any link to the underlying performance of the business, to the detriment of shareholders, other employees, and society as a whole.

What I'm trying to say is that the problem is poor corporate governance, not executive pay. Poor corporate governance causes far more and far greater problems than excessive pay at the top; limiting executive pay won't solve those or any other underlying problems.

Possibly, though I am not sure that getting $10m a year isn't inherently bad. To me it seems totally ridiculous that someone who doesn't in reality have any superpowers or work 36 hours a day can receive in a year the amount of money other people wouldn't earn in their whole life, even if they worked from the cradle to the grave. It isn't right, and it isn't even rational.

I get that people are motivated by higher salaries, but above certain amount, does it really matter? And what about the costs to the society, and morality-wise, to the notion of basic human equality? How can an ordinary person believe that we're essentially equal when some idiot in a suit gets more money from being laid off for sheer incompetence than their family has accumulated through hard work in the last 10 generations?

So, wouldn't a maximum wage improve social cohesion and renew at least some level of trust between those at the bottom and those at the top?

 

[Tani Coyote]

CEOs should be paid whatever the shareholders think they should be paid. Or at least, 50%+1 of the shareholders.

Of course, usually a handful control the majority of shares anyway, so meh...

I can see the idea behind a minimum wage; it is basically the idea you will be able to earn a living no matter what you do. I can see benefits in saying "none shall starve." I don't see ANY in "no one should be allowed to have [arbitrary amount] more than anyone else!"

Maximum wages - tax rates of 100% - have been considered before, but always get shot down. And I'm glad.

A much better idea would be tying wages to the performance of the business. CEOs have an incentive from then on to look after the best interest of the business. Now, shouldn't they do that by default, you say?

Not necessarily. Once you're in the billions, why care what happens to the business? You can just fly out to some micronation and spend the rest of your life in luxury while tens of thousands are left unemployed once your mismanaged business goes under.

 

[luiz]

Possibly, though I am not sure that getting $10m a year isn't inherently bad. To me it seems totally ridiculous that someone who doesn't in reality have any superpowers or work 36 hours a day can receive in a year the amount of money other people wouldn't earn in their whole life, even if they worked from the cradle to the grave. It isn't right, and it isn't even rational.

I get that people are motivated by higher salaries, but above certain amount, does it really matter? And what about the costs to the society, and morality-wise, to the notion of basic human equality? How can an ordinary person believe that we're essentially equal when some idiot in a suit gets more money from being laid off for sheer incompetence than their family has accumulated through hard work in the last 10 generations?

So, wouldn't a maximum wage improve social cohesion and renew at least some level of trust between those at the bottom and those at the top?

We've been through this many times. It's not that someone making $10m is morally superior to someone making 50k. It's just that he has a set of talents for which there is a more favorable supply/demand ratio.

The perfect example are professional athletes (who can make much more than even the CEO of Exxon). It's not that their jobs are more useful, or "morally superior" or whatever to those of janitors. It's just that you can find a lot more people who can do decent janitor's job than people who play football like Messi.

If the shareholders (of a football team or a large corporation, it's all the same) are willing to pay someone lots of money, who are we to say they can't? It's their money, not the government's.

Granted, as Mise said there are governance problems that may lead to executives granting themselves large bonuses at the expense of shareholders. But that's not really the whole story. Frequently the representatives of the shareholders will themselves offer multi-million dollar packages to attract some talented executive. Again, who are we to say they can't? If they think it's worth the money, how do you know it isn't?

Edit: As for equality and "social cohesion" and whatnot. We're not really equal, I think anyone with a bit of real world experience has long realized that, even if it's not very PC to say it out loud. Some people are vastly (and I mean vastly) more capable than others. That's the way it. Crucify me.

 

[downtown]

The perfect example are professional athletes (who can make much more than even the CEO of Exxon). It's not that their jobs are more useful, or "morally superior" or whatever to those of janitors. It's just that you can find a lot more people who can do decent janitor's job than people who play football like Messi.

That's an interesting example to bring up, since many sporting leagues DO have max salaries, and fairly strict salary caps. Three of the four major pro leagues in the US have them. While the most talented athletes end up being under compensated (Lebron James, in terms of value generated to his organization, is easily worth a 50 million a year salary, although the NBA forces him to take one less than half of that), salary caps end up being a major boon to competitive parity, which boosts the value of all the teams, and in turn, the league.

The wildly most successful professional sports league in the United States is the NFL, which has the strongest salary cap. Players are still stupid rich. The NBA has a salary cap, and I believe it has a higher average compensation than any other professional league in the world, even the EPL, although that may be skewed, because there are fewer basketball players.

I'm not really sure if those principles would translate to other industries. My gut says no, but maybe I could be convinced otherwise. I think it has been unquestionably good for pro sports, and I think other leagues should adopt them.

 

[luiz]

That's an interesting example to bring up, since many sporting leagues DO have max salaries, and fairly strict salary caps. Three of the four major pro leagues in the US have them. While the most talented athletes end up being under compensated (Lebron James, in terms of value generated to his organization, is easily worth a 50 million a year salary, although the NBA forces him to take one less than half of that), salary caps end up being a major boon to competitive parity, which boosts the value of all the teams, and in turn, the league.

The wildly most successful professional sports league in the United States is the NFL, which has the strongest salary cap. Players are still stupid rich. The NBA has a salary cap, and I believe it has a higher average compensation than any other professional league in the world, even the EPL, although that may be skewed, because there are fewer basketball players.

I'm not really sure if those principles would translate to other industries. My gut says no, but may I could be convinced otherwise. I think it has been unquestionably good for pro sports, and I think other leagues should adopt them.

The only sport that matters, football, has no salary cap whatsoever

But as for the ones that do have a cap, I suppose the sport execs find a way to make sure the most talented players end up receiving much more than their salary. How much does Lebron James get out of marketing contracts? I bet it's much more than your average NBA player. That meas in effect there is no cap. So while the cap may boost competition between the teams, they do nothing to enforce equality of wages among players.

 

[Patroklos]

The idea behind a minimum wage is to prevent the gap between the "poor" and the "rich" from growing too wide.

This is not the idea behind the minimum wage.

 

[luiz]

Another point (related to the OP, not downtown): the majority of the super-rich are rich not because of wages, but because of capital. The Warren Buffets and Mark Zuckerbergs of the world are billionaires not because of their wage as CEOs of the firms they created, but because of the shares they own. If you place a cap on CEO wage it will not affect them in any meaningful way (in fact I think Buffet's salary is just $100k a year).

So your proposal would not end the enormous gap between the super-rich and non-rich.

Even the most egalitarian country in the world, Denmark, has a handful of billionaires (that is, people much richer than the CEOs of Exxon or Goldman Sachs). Sweden has even more. The only way not to have super-rich people is to get completely rid of property rights and the capitalist system as a whole. I assume a Czech would not want that.

 

[Ziggy Stardust]

I would limit the amount of islands any one person can own to 1.

 

[Winner]

We've been through this many times. It's not that someone making $10m is morally superior to someone making 50k. It's just that he has a set of talents for which there is a more favorable supply/demand ratio.

Talents, right. A talent to do what? Buy shoes that cost more an Indian village makes in a year? Lose other people's money? Lay off staff while you get a nice bonus? And I know I am being a little too snappy here, but sometimes this just pees me off. I understand the concept, I am just saying it's gone way too far. Nobody should be making such ridiculous amounts of money, no matter what set of "unique" talents they posses. And if that makes me sound like a crazy leftie, so be it.

The perfect example are professional athletes (who can make much more than even the CEO of Exxon). It's not that their jobs are more useful, or "morally superior" or whatever to those of janitors. It's just that you can find a lot more people who can do decent janitor's job than people who play football like Messi.

I actually oppose the high salaries of professional imbeciles athletes too. I think it's time to move the slider more towards "moral economy" to be honest. Jobs that actually benefit the society in a meaningful way should be rewarded more than jobs that only benefit those who do them.

Of course, this is probably impossible to do in practice (not in a market economy), so we need some sort of regulation to at least mitigate the most glaring aberrations. I am thinking whether a maximum wage could do the trick.

If the shareholders (of a football team or a large corporation, it's all the same) are willing to pay someone lots of money, who are we to say they can't? It's their money, not the government's.

I don't care. There is a lot of regulation to how people can use their money, this wouldn't be any different.

Edit: As for equality and "social cohesion" and whatnot. We're not really equal, I think anyone with a bit of real world experience has long realized that, even if it's not very PC to say it out loud. Some people are vastly (and I mean vastly) more capable than others. That's the way it. Crucify me.

I mean equality as a principle and an ideal. You can hardly say a society is striving towards more equality when we're in fact creating an oligarchy that screws whatever it touches.

 

[Tahuti]

so we need some sort of regulation to at least mitigate the most glaring aberrations. I am thinking whether a maximum wage could do the trick.

Problem is, the only kind of regulation that will be able to solve this is a change in peoples' mindsets. Certain things are usually profitable for a reason.

EDIT:

Another point (related to the OP, not downtown): the majority of the super-rich are rich not because of wages, but because of capital. The Warren Buffets and Mark Zuckerbergs of the world are billionaires not because of their wage as CEOs of the firms they created, but because of the shares they own. If you place a cap on CEO wage it will not affect them in any meaningful way (in fact I think Buffet's salary is just $100k a year).

Totally. In fact, Steve Jobs even received a salary of only $1, but that didn't stop him from holding an equity of $2 billion.

 

[downtown]

The only sport that matters, football, has no salary cap whatsoever

But as for the ones that do have a cap, I suppose the sport execs find a way to make sure the most talented players end up receiving much more than their salary. How much does Lebron James get out of marketing contracts? I bet it's much more than your average NBA player. That meas in effect there is no cap. So while the cap may boost competition between the teams, they do nothing to enforce equality of wages among players.

It's actually very much against the rules for sporting executives to do that..when they are caught, their teams are penalized strongly. Their agents may find ways for them to do that, but the NBA or NFL doesn't care too much that their players make extra money on the side for marketing purposes...they just want to make sure that one or two super rich teams don't distort the labor market by overpaying for a handful of guys (which happens in Baseball, our salary-cap less sport, every year).

 

[luiz]

Ok Winner, we could argue all day about whether we should dictate or not how shareholders pay people with their own money. But I think we don't have to because you'll be persuaded by this:

Another point (related to the OP, not downtown): the majority of the super-rich are rich not because of wages, but because of capital. The Warren Buffets and Mark Zuckerbergs of the world are billionaires not because of their wage as CEOs of the firms they created, but because of the shares they own. If you place a cap on CEO wage it will not affect them in any meaningful way (in fact I think Buffet's salary is just $100k a year).

So your proposal would not end the enormous gap between the super-rich and non-rich.

Even the most egalitarian country in the world, Denmark, has a handful of billionaires (that is, people much richer than the CEOs of Exxon or Goldman Sachs). Sweden has even more. The only way not to have super-rich people is to get completely rid of property rights and the capitalist system as a whole. I assume a Czech would not want that.

 

[Winner]

Problem is, the only kind of regulation that will be able to solve this is a change in peoples' mindsets. Certain things are usually profitable for a reason.

Honestly, and I want your personal gut feeling, is it right for someone to make ridiculous money by, I don't know, speculating on the stock market? What bloody benefit is this person? How does he help the progress of the human kind? At best, he's a good gambler, an agent of abstract market forces that manifest through his greed. A computer could probably do his "job" and do it better (and hopefully it soon will).

The same goes to the top executives and other jobs that are currently way overpaid. This madness needs to stop somewhere before we end up living in some sort of dystopian corporate feudalism with most of the wealth concentrated in the hands of a tiny fraction of the population.

 

[luiz]

It's actually very much against the rules for sporting executives to do that..when they are caught, their teams are penalized strongly. Their agents may find ways for them to do that, but the NBA or NFL doesn't care too much that their players make extra money on the side for marketing purposes...they just want to make sure that one or two super rich teams don't distort the labor market by overpaying for a handful of guys (which happens in Baseball, our salary-cap less sport, every year).

As I said, even if the salary can cap can indeed boost competitiveness among teams, by not allowing some super-rich team to monopolize all the talented players, it does nothing to enforce equality. Ultimately the fact that Lebron James is more popular will result in him making much more money than most of his counterparts, even if their wages are identical.

In Brazil usually more than half of the payment of the top footballers comes from marketing contracts. IIRC, Neymar makes about 15M USD a year, and "only" 5M are paid by his team. So even if there was a salary cap he'd still be making much more than most of his counterparts.

 

[Winner]

Ok Winner, we could argue all day about whether we should dictate or not how shareholders pay people with their own money. But I think we don't have to because you'll be persuaded by this:

You know, Czechs on average are actually very, very, very sceptical about the notion that the rich are rich because they worked hard and earned everything they've got. Maybe because most of the super rich in this country are outright crooked ex-commie pieces of *** and EVERYONE knows it. And since these people basically control both main political parties, nobody is doing anything to stop them from screwing our country. Even the Financial Times has finally realized that now.

So, if you're appealing to my anti-communism, this isn't really the most effective way of doing it