Minimum or Maximum Wage

I was reading or watching something the other day (I can’t find it now) that mentioned having a maximum wage, and I thought the idea was interesting.

Why would this be an issue?

Well, the widening gap between the richest 1% and the rest of humanity has been a growing problem:

The combined wealth of the richest 1 percent will overtake that of the other 99 percent of people next year unless the current trend of rising inequality is checked, Oxfam warned today ahead of the annual World Economic Forum meeting in Davos.

So basically, instead of having a minimum wage, you would have a maximum wage. Either this would mean that people weren’t allowed to make over a certain number depending on their profession or (and I like this option better) depending on how much the highest paid person of that company makes, the lowest worker would be guaranteed a certain amount.

So for example (and these are hypothetical numbers) the CEO of company A makes $500,000 per year. This might mean that the lowest paid position in that company is guaranteed to make 10% of that amount, which would work out to $50,000 per year.

As wages for the highest paid positions go up, so to does the wages of the lowest paid positions.

The arguments I’ve heard against this position (or ones I could imagine) are that by capping wages, you take away the incentive to achieve more. This would especially be true in the first scenario that features a hard cap on wages, but the second scenario of scaling wages would still allow for wage increases but would simply mean that those wage increases would be across the board.

You could also argue that it will take a lot of bureaucracy to figure out a fair percentage between the highest paid positions and the lowest, but I don’t think that’s a great argument because it could be done given enough political will.

The most convincing argument against a maximum wage or scaled wage system is that it will chase companies away. They won’t want to operate within a system that doesn’t allow them to take advantage of…errr…increase their pay without also raising the pay of their employees.

Personally, I can see why that might raise concerns.

So what are your thoughts? Do you think either of these two ideas have merit or do you believe the way things run now is working better than either of these ever could?

Hell, I’m no economist. I’m surprised I’m even typing this because money and math both bore the shit out of me.

How did I get here? Where’s my teddy?

Anyhow, looking forward to hearing your thoughts.

 

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