Last week, United Kingdom Labor Leader Jeremy Corbyn reiterated an old idea of imposing a maximum wage for the nation’s top earners. He says that a wage cap would be one of the ways to rectify a “grossly unequal” economy. Corbyn, a socialist who has been hurting the Labor Party since taking over the reins, did not provide any details to this concept.
Here is what he told BBC Radio 4‘s Today:
“I can’t put a figure on it and I don’t want to at the moment. The point I’m trying to make is that we have the worst levels of income disparity of most of the OECD countries. It is getting worse. And corporate taxation is a part of it. If we want to live in a more egalitarian society, and fund our public services, we cannot go on creating worse levels of inequality.”
Due to the ridiculousness of such a policy and staunch criticism he received, Corbyn backed down from the idea of a national pay cap.
But the proposal of a national maximum wage didn’t just spring from the mind of Corbyn out of nowhere. It is a proposal that has been floating around for quite sometime and has garnered the support of a lot of left-wing activists, politicians, pundits and reporters alike – hey, what statist doesn’t enjoy meddling into the private affairs of individuals?
In 2014, host and comedian Bill Maher showcased his support of a $300,000 maximum wage because he thinks greedy CEOs and other executives are hurting the worker and not paying their fair share.
With a new report that found eight of the world’s wealthiest people own as much as the bottom half of the world’s population, it is rather likely that many Marxist professors will tell their students that a maximum wage is the only way to go to establishing an egalitarian society.
However, to suggest that all CEOs are making $50 million a year is pretty disingenuous and fact-free.
Indeed, the Satya Nadellas, the Tim Cooks, the Mark Zuckerbergs and the Jack Dorseys are all making considerable sums of money every year. On the other hand, a CEO of a business that develops plastics with 50 workers in Biloxi, Mississippi isn’t making that much money.
Akin to this past summer when Hillary Clinton and Bernie Sanders complained that CEOs are earning 200 times the average worker’s salary, they tend to neglect the fact that the average CEO only earns an annual salary of approximately $200,000 – this is actually around the same amount of money that Clinton made delivering hour-long speeches on Wall Street.
Another argument that is often made is that CEOs are overpaid and do not provide any value to a company. First, who can make such a blank statement that all CEOs are overpaid? Second, a private company decides what to pay its CEO. Third, the turnover rate of CEOs is rather high. Fourth, CEOs can offer an enormous amount of value to a company; just ask the shareholders at Microsoft or ask the likes of Zuckerberg at Facebook or Jeff Bezos at Amazon.
It is also important to pose the question: doesn’t a maximum wage deincentivize many people to work?
Another vital question to ask is this: who will set this arbitrary number? The government? Bureaucrats? Academics? All of these institutions and people have gotten most things wrong, especially in recent memory. So who says the number they propose is the right one? That is why Corbyn backed away from providing details to his plan.
Ultimately, establishing a business and running requires an immense amount of hard work, dedication and risk. It can be difficult to navigate the marketplace, determine what the consumer wants in the first place and then come up with ways to satisfy their wants, desires and needs. The amount of risk you place in the business – time, resources, capital, etc. – will inevitably offer you an enormous reward if you succeed. You can’t just open a business and expect millions of dollars in revenues over night just because you are the CEO and president.
A maximum wage is just as bad as the minimum wage. It will do more harm than good. Anytime a government intervenes in market prices by implementing price controls it only ever leads to distortions, destruction and depressions.
Perhaps proponents of maximum/minimum wage detest Econ 101 – as recent commentators have alluded to – but economics is reality, and, unfortunately, many liberals are foregoing reality in favor of unicorns.
Photo by Global Justice Now
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