I was asked to give my opinion on the idea of a maximum wage. Here is that opinion:
“The idea of a maximum wage is as close to drivel as we’ll hear outside a Greta Thunberg speech. It’s not your or my money which is being paid to the individual. How can it be our moral right – or duty – to determine how much is being paid? For example, the company belongs to the shareholders, their interests are and should be paramount. The money inside the company is the property of the shareholders. How much they wish to pay the CEO to manage that business is up to them.
Sure, we can try to wriggle out of this point, say that the owners are a dispersed interest who get hoodwinked by the cabal of professional managers. But private equity, which does not suffer from that principal/agent problem, pays more than public companies.
It’s not our money being paid, we don’t get to decide.
Beyond the basic morals there are certain technical difficulties with maximum wages. The people who really make money tend not to make it from wages. The sports or pop star, anyone self employed, by definition doesn’t get wages, their incomes are a mix of capital (human capital but capital all the same) and labour income. To insist upon a maximum wage is to limit only the incomes of the proletariat, those without access to the capital side of the income generation equation. It leaves entirely free the fortunes made purely from capital. A system in which wage income – that of the proletariat and much of the bourgeoisie – is capped and the wealth accumulation of the capitalist, rentier, is not doesn’t really accord with any notion of good sense.
Maybe we don’t mean a maximum wage but a maximum income. A 100% tax upon income above whatever level. Sorry folks, the Laffer Curve really does exist, there’s a tax rate at which people stop going to work any more. Our best bet, from Diamond and Saez, is around 54%. Charging a tax rate of near double the Laffer Curve peak isn’t the way to make a prosperous society. Rather, it impoverishes the future.
OK, the people who go into politics, the bureaucracy, they’ve noted that the incomes of people who do something useful for a living have soared above theirs. But the jealousy of the ruling classes really isn’t a good enough reason to have something as horribly stupid as a maximum wage.”
If you’d like to know what the other bloke thinks then that is here.