Should we have a maximum wage?
Should we have a maximum wage?
The super-rich are now very different from the rest of society. Everyone is watching the unbalanced wealth, power and control of this small group. But if we put a limit on earnings, would this help to balance society?
YES - Faiza Shaheen Senior Researcher on Economic Inequality at the new economics foundation
We need a maximum wage because we have a minimum wage. We need a maximum difference between the pay at the top and at the bottom in companies and in work areas. It’s wrong for the top people to earn more than 250 times what the cleaning staff earn. The most important three reasons are:
1. To have more equality: there is more inequality now because of wage differences. If we stop both ends of the pay scale, we can help everyone live well. This will stop all the bad results of inequality (eg. higher crime, bad public health).
2. To control the pay of top jobs: very high pay has made the top earners take risks (which lead to the banking crisis). Also, these risks do not help companies to do well.
3. To do something about everyone buying and spending too much and getting into debt: we always compare ourselves to others. People who try to buy what other people around them have often get into a lot of debt. The planet cannot survive if people use, buy and consume so much.
So this affects society. But also, research has shown that when people earn above $80,000 per year, their life improves very little. So a maximum wage would help business and society, and would not harm the lives and happiness of the rich.
NO - Max Wind-Cowie Head of the Progressive Conservatism Project at the think-tank Demos and the author of Everyday Equality
It is not true and not helpful to see inequality as evidence of people working hard, or as the main cause of modern social problems.
Big gaps between the earnings at the top and at the bottom can be bad for society, behaviour, health and happiness. But inequality is not just simply wrong. It might be wrong that the Chief Executive of a company earns 250 times the wage of the lowest salary in the company. But it is surely fair that the lowest earner should earn a lot more than someone who chooses not to work and gets benefits. Inequality is not always wrong: sometimes it is good for society as it makes people work harder and succeed.
If we control top salaries, we will limit the money that is produced and enjoyed by business people. We don’t want this, but we do want to encourage business leaders to help reduce the difference in earnings.
The best way to do this is for society to put pressure on companies to introduce pay ratios (where the difference between top and bottom pay is not too big). For example, “Living Wage in London” has worked well. We could get good results like this without simplistic, legal control.
YES - Faiza It is not always true that unequal wages makes us work more. Some people, of course, deserve more pay. But research in psychology (eg. by Dan Ariely etc) shows that too much pay is bad for work performance. One alternative, like in the Australian IT company “Atlassian” is to give workers rewards in the form of more freedom, more time to think and be creative, more holiday. This has helped them produce far more and be far more creative. Imaginative solutions like this can limit pay and also encourage business.
Maybe inequality is not the main cause of all social problems, but it separates the different levels of society. It is very difficult for poor people to challenge people who earn 250 times more than them. Social pressure (eg. Living Wage campaigns in the US and London) have raised wages for lowest earners (mainly in public organisations). But only a very small percentage of people earning the minimum wage have benefitted.
It would be difficult to restrict pay at the top of companies, because the people with the most money also have the most power. A maximum wage would help restrict the power of the very rich and make society and democracy stronger.
NO - Max The research by Professor Ariely said that “too much money” is bad for work performance, but what is “too much”? The way bankers were paid was more important to creating bad banking than the money itself (they were paid in money bonuses, which did not value their work enough). How we pay people can be more important than how much money they get. We can look at bankers, footballers or businesspeople and say they earn too much. But we cannot say how much they should earn, because it is not our money – it is the shareholder’s money.
If we insist that companies are open with their pay, we can make shareholders more active and make businesses more responsible. With public money, we must be more fair. And this change in public pay is helping the private sector change too (eg. Bank of America, Merrill Lynch and L’Oreal are private, but all of them pay the Living Wage). The Living Wage puts moral and market pressure on companies. Society and politicians can also put pressure on them. So change can happen without the government suddenly introducing a maximum wage.
YES - Faiza
People made a human ring around the European Parliament in Brussels to fight against poverty and inequality in the EU (Nov 2011). Thierry Roge / Reuters
If social pressure was enough to fight against unfair wages, we would not need the Living Wage movement. Everyone should get a “living” wage, or people will have to live in debt or have a very bad home and social life. Most companies will never choose to introduce a maximum wage as the most powerful people will never agree to earn less.
It is common to say that if the government introduce restrictions, this affects individual freedom. This argument is often used against fairer wages. But individual decisions can affect society. Too much pay at the top causes greater inequality. It also makes people consume more. The people who make decisions about pay in a company do not think of these negative effects when they make their decisions.
From research, we can see that a maximum wage does not have to mean people are less happy or less productive. It can also show what is too much money and what is not. The most important research shows that it is very important to do something about economic inequality. A maximum wage is one good way of cutting the pay of the rich.
NO - Max I believe strongly that we need to balance the problems with any action we take. People who want a maximum wage believe that inequality is the most important cause of all the problems. It is one of the causes, but I cannot accept that it is the only cause of social problems, crime and health inequality. Other things are as important as this or more important: culture, family, wealth inequality and education. If we passed a law to stop the inequality in wages, this would harm the people who work very hard and harm society if we lost the top people. So it is not fair and not helpful to do this and pretend that we have solved the problems of society.
It is not because conservatives are weak that we think social and political pressure is good, but because we are strong. We know that smaller gaps between the top and bottom will make companies successful, and we know that society can put pressure on companies and get good results (eg. Living Wage, fair trade and international human rights). We know that change must not be too fast if it is to be fair: if we cut the wages of the top earners suddenly, we might cut inequality, but we will also cut growth and make valuable people leave the country. Yes, fight for more equality of pay. But do not forget how complicated society is, and do not think that one change in the law will make everything perfect.
As this article has been simplified, the words, text structure and quotes may have been changed. For the original, please see: http://www.newint.org/sections/argument/2011/09/22/maximum-wage-debate-income-inequality/