LadyEllen
Posts: 10931
Joined: 6/30/2006
From: Stourport-England
Status: offline
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This maximum x7 of minimum wage looks good to me. This would indicate a maximum wage of around GBP 70k in the UK.
It would be easy to bring this in for public service careers - indeed many UK public service careers are geared to pay scales already, which would only require adjustment, rather than a wholesale review.
For the private sector - far more difficult, because as many have pointed out, such careers exist in a free market; if you want the best, then you have to pay an attractive and competitive salary in an international market, which can result in outrageous levels of salary when corporations are competing for a limited number of top executives. Controls here, implemented in one or a few countries, would lead to the migration of top executives to economies not under such control. We had a similar situation in the UK in the 1970s, with 90% income tax for top earners - it led to a phenomenon known as the brain drain, as those who could command a high salary, migrated to countries without such tax rates.
The only way I could see of avoiding this, would be to ensure that all members of the G8, as well as members of the EU such as the Netherlands (healthy market economies but non G8), and countries to which such top earners could easily transfer their careers because of language (Australia/N Zealand/S Africa etc), all introduced legislation to cap earnings. That said, private corporations must be free to compete for executives, so what if we introduced a 90% tax rate on earnings over the c. GBP 70k ceiling? This would allow them to compete, but not to ridiculous extent as now, given what is and is not affordable to them.
The problem with this however, is the short to medium term when those currently receiving large incomes, suddenly see their income fall. Those who have bought the London house at several million pounds, on a salary previously sufficient to meet their obligations under a mortgage, will suddenly find they cannot afford these houses - and neither can anyone else when they come to the point of having to sell. We would therefore see top executives bankrupted, and ergo rendered legally incompetent to run a UK corporation, because of their bankruptcy. The bankers who gave the mortgages in the first place will repossess these houses, and find that in the new economy, their value has decreased to such an extent and that there are so many of them, that the banks will suffer heavy losses, to recoup which they will have to increase the mortgage rate on those lower earners who also have mortgages, increase their loan and credit card charges, and decrease their savings and investments rates.
We must also bear in mind, that the sudden reduction in salary costs at the top end of a corporation, will not be of any benefit to those further down in the organisation. The corporation will smile with glee at having saved a lot of money for redistribution to its shareholders, not to its workforce. Indeed, there is the possibility that corporations will seize the chance to adjust downwards the salaries of all workers - if the chief executive can only earn GBP 70k, then why pay middle management anything more than say, 35k? and junior management 20k, and clerical staff and the rest minimum wage only?
Also, the excessive spending capacity of top executives being removed, the banks will experience a loss in money they formerly invested for top executives - money some of which was loaned to those further down in society in former times. Also, with no more excessive spending possible by these top executives, many businesses which rely on them will fold - restaurants, stores, car dealers etc, as well as the likes of cleaners, cooks and the host of people such high earners employ.
Eventually of course, the economy would probably stabilise, but only after causing a lot of pain - and not only to the top earners, but to everyone.
In short, I like the principle, but would like to know how it could be made to work, without hurting all of us?
E
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In a test against the leading brand, 9 out of 10 participants couldnt tell the difference. Dumbasses.
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