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Mar 03 2014

Why not a maximum wage?

Bill Maher discusses the recent trend of people having all the power acting like they are the oppressed ones. And as the oligarchy and their lackeys fight furiously against raising the minimum wage at all, let alone to anything even remotely resembling a living wage, he raises the reasonable question of why we are not considering a cap on incomes.

13 comments

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  1. 1
    Dalillama, Schmott Guy

    Because FREEEEEDDDDDOOOOOOOOMMMMMMMM!!!!!!!!!!! Seriously, that’s the best answer you’re going to get out of the people who will show up to attack the idea.

  2. 2
    A Masked Avenger

    It’s been done. In fact, a cap on incomes played a part in the creation of our spiraling health-care costs:

    During WWII, wages were frozen, as part of a comprehensive price-control package ostensibly intended to combat wartime inflation. Competition between employers was fierce, what with so many men being overseas killing Germans and whatnot, but salary competition was illegal. Various “benefits” were introduced at the time, one of which was employer-provided health insurance.

    The connection to spiraling costs is basically that: this benefit became widespread; the government encouraged it with tax breaks; and competition among employers and insurers led to insurance paying for routine care. This removed most incentive to comparison-shop, and allowed prices to rise without consumers really noticing.

    But the upshot is that if a maximum wage is imposed, you’ll see an explosion of new non-salary compensation ideas. If the cap is low enough, relative to what someone is willing to pay, then the benefits will have to be pretty epic. So you’ll see CEOs making $85K, living in corporate-owned estates, flying in the company jet, riding in the company limo with the company chauffeur, vacationing in the company-owned beach house on the French Riviera for 16 weeks a year with pay, sending the kids to Choate on company scholarships, eating on the company meal plan (which involves a personal chef making house calls), etc., etc.

    Once the company has provided most of the things that CEOs used to buy with their salaries, there would still be a huge gap left, of course–a CEO making $85M probably only lives on, say, $40M or so. So a pension plan worth millions would of course be included, along with stock options, etc., but there’d STILL be a gap. The gap would most likely be filled by simply not working–the 16-week vacations I alluded to–or by additional heights of consumerism. I.e., they’d receive benefits they wouldn’t have bought with their own income. My guess would be a shift toward employing labor–i.e., a move back toward personal secretaries, personal valets, chambermaids, full-time groundskeepers, and probably bodyguards and oh, say, footmen. The need to come top the perqs offered by other corporations would, I’m betting, lead to a humorous resurgence of Edwardian traditions like those. You’ll see Larry Ellison driving down the street with men in livery riding on the running boards, and trumpeters heralding his arrival.

  3. 3
    A Masked Avenger

    Too wordy. I could have made the point in four words. “The Pope is unpaid.”

  4. 4
    Alverant

    The simple answer is that the ones in power will find a way around that rule.

  5. 5
    A Masked Avenger

    Alverant, “the ones in power,” yes. But not only the ones in power. Supply and demand isn’t just a good idea: it’s the law. It won’t just be CEOs who get imaginative new benefits. Anyone whose salary is bid up to the legal maximum will be offered non-salary compensation as an inducement.

    Whether that’s the top 1% (cap of $389K), the top 3% (cap of $250K), or the top 21% (cap of $100K) will make a big difference. If it were that last, then a majority of computer programmers, for example, would be driving company cars and seeing the company masseuse.

    Whatever the cap, there will be political pressure to lower it, on the one hand, and inflation lowering it de facto, on the other. Within a generation or three, a large percent of salaried workers would receive a substantial part of their compensation as other than salary.

    (Conversely, a cap will never be passed, because politicians are beholden to their rich donors. So there’s that. With virtually no exceptions, the ones who criticize the excesses of the filthy rich are bullshitting you and me by pretending to bite the hand in public that they lick in private.)

  6. 6
    moarscienceplz

    The Pope is unpaid.

    Ummm, suuuuure.
    Except that he gets free lodging, free board, free clothing, free transportation, free medical care, all at a princely level of quality. I think I’d be willing to exchange my salary for that.

  7. 7
    moarscienceplz

    Oh, I see the point you were making now. Sorry, my bad.

  8. 8
    doublereed

    Ummm, suuuuure.
    Except that he gets free lodging, free board, free clothing, free transportation, free medical care, all at a princely level of quality. I think I’d be willing to exchange my salary for that.

    That’s his point. Rich people will find ways around the rules in weird ways.

    I always thought a better idea of a salary cap is where the cap is based on the employee’s wages. Like the CEO can’t make more than 20x the median compensation of the employees. The idea of course is that it encourages them to invest more in their employees.

    Or just high marginal tax rates. That also encourages people to take less income and invest in their business more. That encourages them to use it more for PR things like community programs or just better benefits for employees.

  9. 9
    doublereed

    Or we could send a bunch of IRS people over to the Cayman Islands and Switzerland and make them comply with our laws. There’s a very limited number of places that rich people hide their money. If we didn’t want them to do that, we could simply not let them. Obviously, rich people will lobby and pay money to let them hide money. On the other hand, governments don’t like it when you lose them moneys.

  10. 10
    Emu Sam

    I love the brainstorming going on here. A combination of legislative, social, and other incentives and disincentives will lead to improvements, some day, I hope.

    I like the idea that the top paid executives of a company should make no more than X times the median employee. Encourage a normal curve, forbid outlying by too far. Six sigma company? Salaries should be six sigma, too – no more than six standard deviations from the median, which should be close enough to the median and the mode that the calculation makes sense.

    You don’t need to outlaw it. Just introduce a 100% tax rate on incomes above X. Anyone who’s only working to be playing the game for the sake of the biggest salary can still have those bigger numbers on the check, but that will be the only benefit they receive. (We should probably discourage such people from having power over other people, but that’s not this comment thread.)

  11. 11
    Eric Riley

    I proposed something similar ages ago – like doublereed, I wanted the maximum to be a multiplier of the lowest paid employee’s annual wage (multipliers include all benefits from both sides), but I also tied the multiplier to the log of the size of the firm: essentially take the number of digits in the number of FTE times ten, that’s the multiplier. You want more? There’s two ways to get it: (1) increase the pay and/or benefits for the least compensated person (people); (2) hire more people.

    The idea is to generate feedback in the system that pushes towards hiring and doing right by those ebing most abused by the system. The people on top will take care of themselves.

  12. 12
    Scr... Archivist

    In Kim Stanley Robinson’s novel Pacific Edge, the characters mention an income cap. As I understand it, higher income levels are taxed at higher rates until people become “hundreds”. I think this means that income over a certain amount is taxed at 100%, for personal or business income.

    People can choose what public services they most to support, up to 60% of what they pay. The rest is redistributed among other people who live in the same town as the person or business in question. The town shares are in addition to the national income floor.

    I don’t know if Robinson came up with this himself, or if he borrowed someone else’s idea. In a more recent novel, 2312, he mentioned the Hahnel-Albert model, which would not just affect incomes but how jobs themselves are put together. You might need to go that far to disallow cushy jobs with lots of servants.

  13. 13
    corwyn

    How about a maximum compensation ratio? A company can pay their executives as much as they want, and give them as many perks as they want. BUT every employee must get at least 1/10 that total compensation.

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