Poverty. Starvation. Oil dependency. AIDS. Inequality. Climate change. Energy crisis. The list of global problems can go on and on, with little hope of permanent solutions. What if we were able to take one giant step towards solving all these issues?
Think, for a moment, about what this world could be like if there was such thing as a maximum wage. We know all about minimum wages. Most of us have probably worked a minimum wage job at some time in our lives. Most of us are probably also aware of people in this world such as sports players, movie stars, oil mongrels, etc, who are raking in millions at a faster rate than the average person could count the coins in their pocket.
However, what if there was a wage ceiling to prevent people from getting way more money than they even know what to do with? For example, what if a maximum wage was set: no person can earn more than 100 times the average yearly salary of that state/country. Let’s say the average yearly salary is $40,000. That means the maximum wage would be $4 million each year. Hmmm… if you ask me, that should be more than enough for anyone to live off.
Meanwhile, the billions or trillions of extra money could be used to research and solve problems all over the globe. Studies also suggest that setting a wage ceiling could prevent inflation and support the economy.
Howard Gardner, a Harvard-based psychologist, has suggested a new policy that includes a maximum wage of 100 times the average yearly salary. Also, he says that nobody should be allowed to collect an estate worth more than 50 times the allowed income. Therefore, again using $40,000 as an average wage, no person should be allowed to collect a total sum of $200 million. Anyone with more than $200 million would be required to donate the “extra” to charity or the government.
Does this sound too tough?
Personally, I don’t know why anyone would ever need any more than $4 million each year. Also, collecting an estate of $200 million seems like more than enough.
Is it fair?
Tell me, is it fair for a baseball player to rake in $10 million each year when the high school coach who trained him makes $20,000? Nah…
With an income cap we can help boost the economy, solve energy problems, decrease oil dependency, even out unfair wages, and do so many other positive things. To me, setting a maximum wage simply makes sense.
http://www.alternet.org/workplace/62507/
http://www.guardian.co.uk/politics/2003/aug/06/executivesalaries.economy
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I don't know where I stand on this issue exactly. I think that you raise some great points, however, I personally believe in the effectiveness of capitalism in terms of moving us forward and bringing out creativity.
Also, wouldn't a "maximum wage" essentially be putting more power in the hands of the government, providing a "slippery slope" for further controls on earning in America?
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"Faith is to believe what you do not yet see; the reward for this faith is to see what you believe"-- St. Augustine
Capitalism has nothing to do with creativity. It helps very few at the cost of the masses. It promotes greed, dishonesty, and fraud.
If people were being paid fairly for their contribution to the society, people in the education profession and health profession would be paid the most, and I would have to agree that $4 million is a very comfortable salary.
We have a minimum wage out of fairness. I see the same idea in a maximum wage.
By the way, I'm not actually a communist, but when you disagree with capitalism, you pretty much get the title.
-Sonja :)
"Democracy works only when you vote. When you don't take the time to vote for the candidate you find the least offensive, you run the risk of electing the candidate you find the most offensive."
The essence of capitalism is to promote competition between service and goods providers. In order to compete, one must make a better quality product and/or sell the item at a lower price. Therefore, it does, in fact, promote creativity.
In theory.
Then again, communism also promotes everyone sharing and everything being fair. Toss in the human factor and see how well that works.
The issue that I've seen with capitalism is that there generally end up only being a handful of companies that provide any given good or service. The better of the two companies eventually wins out (either through good items at better prices or simply buying out the competition), resulting in more or less a monopoly. The monopolizing company then grows and grows to the point that any new startup is doomed to fail.
I am treated as evil by people who claim that they are being oppressed because they are not allowed to force me to practice what they do. ~D. Dale Gulledge
It is good business (but bad for capitalism) to erect barriers to entry. That said, I can't think of very many industries, if any, that are controlled by monopolies and while there are lots of oligopolies, there is steady churn in the players.
Microsoft comes to mind as a near monopoly. But actually Apple is kicking butt right now. And Linux, is also making some in-roads.
Linux and its GNU software license is a really interesting case study that somebody ought to write a blog about. It is practically the only example I can think of which contradicts everything I have said about the profit incentive elsewhere in my various posts in this blog. It is kind of utopian and successfully so. I think of it as the exception that proves the rule. But even that is changing and greed is making its mark.
I think part of the matter, too, runs below the surface. What may look like an oligopoly is actually a monopoly or near-monopoly.
I generally use the consumer electronics and retail industries because it's what I know best, but you might be able to find examples elsewhere. So I'll start there, as well as responses to your comment.
Apple is flourishing right now for two major reasons - 1) they switched to Intel processors and chipsets, making their products cost less, 2) Vista came out. Apple saw something like a 400% increase in stock prices after the launch of Windows Vista. And why not? Vista was such a jump from XP that getting a customer to go to Apple was a cakewalk, since they were going to have to adjust anyway (one of the difficulties of getting someone to switch to Apple from Windows is that Windows was familiar to them from the last time they bought a computer).
The Open Source community is also improving because of Microsoft shooting itself in the foot yet again. The changes in Office 2007 don't help, but the issues also have to do with the legal power Microsoft is trying to obtain. As a result, more people are slowly migrating to the Open Source alternatives (and we're not just talking Operating Systems).
However, Microsoft is its own can of worms best left to a blog entry in and of itself.
For other items, take a look at computers and their accessories, particularly monitors. Crack open an HP or a Dell and you're likely to find many of the same manufacturers. Samsung (Samsung, Gateway) and Toshiba (Toshiba, Westinghouse) are big names for LCD monitors, but also operate under a number of other names.
The car companies are also another big area. What appears to be a dozen manufacturers actually amounts to four or five that operate under different names (in this case, most were bought out, but kept the names for brand recognition purposes).
Now, that's not to say that those are monopolies. If I remember right, monopolies are (at least in a roundabout fashion) illegal in this country. As you stated, Microsoft comes closest, topping out at something like 95-97% of the market share (though they've never really done anything exactly legally). However, a natural trend in capitalism is toward either a monopoly or an oligopoly. Consumers buy the product that is better quality and/or cheaper in price. Therefore, the company with the favored product will prevail and make more money, thus enabling them to find ways to make the product even better and even cheaper. Larger companies simply have more resources to make better products cheaper and are therefore more likely to sell their products than a small company. Larger companies can also get larger bulk discounts from their suppliers.
Open Source is an interesting phenomenon. Unfortunately, I don't have to go into detail right now. Perhaps later when I have a little more time.
I am treated as evil by people who claim that they are being oppressed because they are not allowed to force me to practice what they do. ~D. Dale Gulledge
There seems to be adequate competition in most of the markets you mentioned where we are not seeing abusive monopoly pricing.
I am a fairly consistent participant in the computer market. It seems like I buy one or two a year. It seems like everytime I buy one they are both better and cheaper.
It is hardly the abuse one would get from a monopoly or even a price fixing oligopoly. I think it is an adquately competitive market.
There seems to be adequate competition in most of the markets you mentioned where we are not seeing abusive monopoly pricing.
Well, in the case of pre-built computers at the end-user, retail level (read Best Buy, Circuit City, CompUSA, etc), there's almost too much competition. Retailers actually lose money on most of the computers they sell, which is part of the reason why they also sell high-profit items like service plans and accessories (that, and the general user actually needs said items, especially if they're upgrading from a dinosaur of a machine or getting a setup for the first time).
However, I'm talking going deeper, to the component level. I've cracked open HPs and found Toshiba hard drives. Nearly every computer has a motherboard that is ultimately made by either Intel or Asus (there are other mobo OEMs, but they generally work with the custom people), the RAM is generally Kingston, Crucial, or Corsair. Processors are either AMD or Intel.
What I've seen, and I ran out of time before to explain this, is that one company generally gets ahead for a while, gets cocky, and the quality starts declining, or the competing company hits a breakthrough. The AMD/Intel competition is a good example of this. AMD was king until just recently, when Intel came out with their quad cores. Until then, though, AMD processors ran faster, cooler, and were less expensive. They broke even with the dual-core once Intel took the Centrino technology and made real dual-cores and throwing out the Pentium/Pentium D line. Now, Intel's doing better with the quad-core technology than AMD is.
The issue happens, however, when the balance doesn't shift back and the leading company stays the leading company to the point that the competing company folds, because finding ways to become better generally take investing in R&D and that money has to come from somewhere. I'm not sure of any in our market to do so (mainly because the stories I hear are of whole sectors folding [think dotcom era]), so it's mostly theory.
Like we mentioned before, Microsoft has come the closest to being an all-out monopoly, and not only with OS/PC systems, but also with things like web browsers (they shut out Netscape before Mozilla and Opera took hold). However, that company is a behemoth that has used its money to throw its weight around, which is precisely why the Open Source community has posed such a threat lately as it has been gaining popularity. Kind of hard to buy out something that was never intended or licensed to be sold in the first place.
I am treated as evil by people who claim that they are being oppressed because they are not allowed to force me to practice what they do. ~D. Dale Gulledge
Almost everything good that has been achieved in the way of human progress has been achieved by somebody who was motivated by the profit incentive. And given that most of the low hanging fruit has been picked, most future progress will require a combination of a great idea coupled with a vast sum of capital that can only come from the very rich, coupled with people highly motivated by the profit incentive..
Your idea will stikes at the heart of capitalism because it makes the accumulation of capital impossible and punishes people for being successful. It is a huge step towards communism and towards universal poverty.
Who exactly are YOU to say how much wealth someone is allowed to accumulate or how much income they should enjoy. How would it be consistent with FREEDOM for anybody to have the power to make this decision?
The problem with this type of thinking is that it assumes that wealth is a zero sum game; that if the rich get richer then the poor get poorer. While that sometimes occurs, the more common phenomena is that the rich, as they seek to convert their wealth in to goods, services and property that makes being rich worthwhile, make everybody around them richer.
It is precisely because we embrace the philosophies of economic freedom that in America that we are a rich country with even our poor being rich by any sort of world standard. And it is precisely because they do not embrace these philosophies that poor countries are poor. The best example of this is China. For decades they embraced the economic principles of communism which their people hated and which had to be imposed with totalitarian authority. Over a billion people lived in abject poverty. In little more than a decade, by embracing the free market and allowing their people to be motivated by profits and giving them the opportunity to accumulate wealth, the Chinese have managed to lift at least 400 million people out of poverty with conditions improving for most of the rest. This is new wealth which they manufactured from whole cloth and it was created by the magic of free markets and economic freedom/
You are offering us a recipe for pushing our people into poverty. In your blog you list a bunch of problems related to poverty. The solution to these problems is to make the poor richer, not the richer poorer. It is not a zero-sum game.
Rather than worrying about confiscating the hard earned wealth of rich people when they die we should have policies that help poor people accumulate their own wealth and build their own estates. For example we could start by reforming Social Security so that people get to keep the money they pay into that fund and pass it to their heirs when they die. As it is, it is racist and confiscatory and the big losers are blacks who pay in the same proportion of the earnings but tend to die younger without getting their money back. Lets worry about making the poor rich.
You bring up some good points. I know the concept of a maximum wage has some huge kinks in it. However, I thought it simply is an interesting thought to consider. I don't know if it would be good to actually have in place, though.
Sure, in some people's eyes, having a maximum wage could put a limit on how successful someone can be. However, I find it sad that we measure success using dollar signs.
I agree that if we could focus on making the poor richer, that would be less controversial than taking money away from the rich folks. That is an extremely complicated issue, though. There are no easy ways to get more money to the poor. The money has to come from somewhere to provide that security. To me, perhaps the easiest way to find money for the people on the bottom is to skim off the top. Sounds simplistic, yes, but there it is. Do I think that will happen due to a new law or the government? No. Do I think it should happen simply due to the good, free will of wealthy people? Sure.
There are no easy ways to get more money to the poor.
You seem to be hung up on the idea that wealth needs to be taken from one person and given to someone else. What you don't seem to realize is that wealth is not a zero-sum game. New wealth can be created.
It is not easy to create wealth but it can be done fairly rapidly and the Chinese are a great example. They have lifted at least 400 million people out of poverty in about 15 years. They have accomplished far more in that time then all of the socialist wealth redistribution efforts of the United Nations have accomplished in the last 60 years. And the big difference is that China now knows how to create even more wealth while the UN clients are still just poor beggars dependent on future handouts.
And note that China has not taken their wealth from anybody else. They have manufactured NEW wealth with hard work. They manufacture new goods and sell them to us. They get our money so they are wealthier. We get their goods in exchange for our money. We are no poorer and are probably richer because while we now have less money we possess new goods that apparently have greater value to us then the money we paid or we would have just kept our money. The end result is that the Chinese are richer and we are richer. They have created new wealth. It is not a zero-sum game.
I note that in your profile you are living in Japan. Japan was abjectly poor after WWII and their history of creating wealth from nothing is very similar to what is going on in China now. Look around you at one of the wealthiest countries in the world! All of that wealth was created in the last 60 years on a few small islands that were not blessed with anything much that could be called natural resources. Yet they hit on the formula that creates wealth. It is a formula that could be duplicated across the world if only people would.
Wealth is either mined from the earth, grown from the earth, manufactured with labor and machines using inputs that were mined from the earth or invented. Wealth is not easy to create. All of those activities takes lots of work. We do that work in the USA, they do it in Japan and they are doing it in China now. Work is motivated by profits. Every other system but profit which has tried to motivate people to work has ended in failure. If you conficate profits you will end up with failure.
It also takes a few other things to turn work into wealth. We are not perfect but more than any other nation, the USA has hit on the right formulat. It takes:
- Economic freedom - people choose how and at what they work and they get to pursue these things without too much government interference or without the government confiscating the fruits of their labor.
- Respect for private property - the government does not confiscate the land or other factors of production from people who have labored to acquire them.
- Rule of Law - corruption and bribery kill investment and things like contracts must be enforceable in fair courts or people won't take risks
- Freedom to Fail - reasonable bankruptcy laws encourage the kind of risk taking that allow huge rewards.
- Publicly funded infrastructure that allows wealth creation like roads, schools, courts and law enforcement
- Respect for intellectual property- things like patents and copyrights must be enforceable or people won't invest in the R&D necessary to open the greatest wealth mine of all which is invention and creation.
The way to lift people out of poverty is not to confiscate the hard earned wealth of people who have worked hard to acquire it. Rather it is to create new wealth. I know a lot about Mexico so I will use it as an example. It is poor compared to the USA but richer than most of the rest of the world. It is a richly endowed country with many natural resources. It has hard working people. It could easily be a rich country if only it would.
- It needs land reform. Property law and ownership in Mexico is a mess and there is lots of land with very dubious title. And they don't let Americans own land along their coasts. Just reforming that would solve most of Mexico's problems because it would set off a building boom that created millions of jobs and created vast new wealth. It would result in a tax base that would fund schools and roads and other infrastructure.
- But people won't invest unless there is respect for private property. Mexico has a history of nationalizing land and they also have a history of consfiscatory taxes (like the ones you are proposing in this blog). So to create the environment where wealth can be created, Mexico needs reform probably at the Constitutional level.
- And then there is corrution or La Mordida (the little bite) as they call it in Mexico. They need to go to zero tolerance of this practice.
- I don't know the state of bankruptcy laws in Mexico so I don't know about freedom to fail. Failing seems to be the one thing that Mexico is really good at though.
- Publicly funded infrastructure is a chicken and the egg problem. You need it to create wealth and you can only pay for it after wealth is available to tax. In Mexico's case they are starting to make some progress in this direction. But corruption is killing them. Their school system is crippled by a teachers union that makes ours look good. The woman who runs the school union is a billionaire and somehow educational dollars don't make it to the kids. There might be a connection. Mexico has vast mineral wealth but it lacks the domestic industries or capital to extract this wealth and use if to solve their infrastructure problems. They currently have Constitutional Prohibitions which effectively prevent attracting that capital which is just crazy! They need a good dose of economic freedom.
Rather than confiscating wealth as you propose which will get exactly the wrong results, you should look around the world and observe what countries are doing right and then if you want to help the world's poor you need to convince their government's to duplicate those successful policies. Hard work, economic freedom and trade wil float all boats. I want everybody to be rich. There is no reason why everywhere cannot be like America where even the poor live decently with very few people hungry and most people having a car and more than one TV and a place to live that offers reasonably decent shelter.
Let me see if I understand you, Jackboy:
-Everybody who wants to tax the obscenely rich is a zero-sum, medieval mercantilist?
-When Mexico allowed US settlers it ended up losing 40% of its territory. Do you think this might had a slight impact on their economic output, or in how they perceive foreign ownership of land nowadays?
-Everything worthwhile in humanity was achieved by some form of egoistic search of profit? How on earth do you support that assertion?
-Would you classify the Chinese government (from Mao's time to the present) as communist, or as a bloody right-wing dictatorship with some communist trappings?
-Forced collectivization of land for agriculture largely failed in different degrees across history. It faltered in Jamestown and was abandoned by the English settlers, it produced only modest success in Mao's China and soon stagnated, it failed miserably in communist Russia, and it ended up failing in Israel, despite the kibutzim's subsidies and enthusiasm. However, isn't it a bit of a stretch to dismiss any form of collectivization as inefficient?
- China contradicts the very points you make at the beginning, regarding freedom, civil society, infrastructure. They are blighting their environment, dis-investing in infrastructure, and keeping a tight lid on any form of political dissent.
Mexico, even by your own standards, cares more for its civil society, its infrastructure investment, its environment, and its people, than China.
But let's hear what you have to say yourself: Making the abstraction, for a moment, that you don't belong to a white supremacist right-wing group, answer honestly: Where would you prefer to live, Mexico or China?
There are deffinatley Pros and Cons to this though. First of all, everyonw who could already got paid that amount would see no purpose in bettering themselves, being they where at the top of thier gain, and few people would work as hard as they should.
At the same time, this will help the ecomony out alot, in more ways then imaginable, throughr research and such
I think if wealthy people were no longer able to hide salary in tax free investments, we'd be a lot better off as a society. Also, ending wealthfare would be a good step. I think getting rid of the taxable income caps would reduce the need for such a measure as maximum wage. Also, we need to close up tax loopholes. If this was done, we could shorten the tax base on the other end of the spectrum.
An example of how the rich get richer and the poor get poorer:
From Executive Excess 2007:
*CEOs v. Workers*
THE PAY GAP
--CEOs of large U.S. companies last year made as much money from just one day on the job as average workers made over the entire year. These top executives averaged $10.8 million in total compensation, over 364 times the pay of the average American worker, a calculation based on data from an Associated Press survey of 386 Fortune 500 companies.
--The private equity boom has pushed the pay ceiling for American business leaders considerably further into the economic stratosphere. The top 20 private equity and hedge fund managers, Forbes magazine estimates, pocketed an average $657.5 million, or 22,255 times the pay of an average U.S. worker.
--Workers at the bottom rung of the U.S. economy have just received the first federal minimum wage increase in a decade. But the new minimum wage of $5.85 still stands 7 percent below where the minimum wage stood a decade ago in real terms. CEO pay, over that same decade, has increased by roughly 45 percent.
THE PENSION AND PERKS GAP
--CEOs at major American corporations enjoyed, on average, $1.3 million in pension gains last year. By contrast, only 58.5 percent of American households led by a 45-to-54-year old even had a retirement account in 2004, the most recent year with data. Between 2001 and 2004, the retirement accounts of these average households gained only $3,775 in value per year.
--CEOs of S&P 500 companies, according to Corporate Library data, retire with an average $10.1 million in their Supplemental Executive Retirement Plan, just one type of special account large American companies routinely set up for their top executives. But most Americans now move into their retirement years with no pension protection whatsoever. In 2004, only 36.3 percent of American households headed by an individual 65 or older held any type of retirement account. The accounts that did exist, on a per household basis, averaged only $173,552 in value, a miniscule 1.7 percent of the dollars in the supplemental accounts set aside for America’s top CEOs.
--The top 386 CEOs took in perks worth an average $438,342 in 2006. These perks ranged from using private company jets for personal travel to reimbursements for country club fees, commuter expenses, and even the extra taxes due on bonus income. A minimum wage worker would need to work for 36 years to earn the equivalent of what CEOs averaged just in perks last year.
*U.S. Business Leaders v. Other U.S. Leaders*
--Compensation for American business leaders now wildly dwarfs the pay that goes to leaders in other sectors of American society. The 20 highest-paid individuals at publicly traded corporations last year took home, on average, $36.4 million. That’s 38 times more than the 20 highest-paid leaders in the nonprofit sector and 204 times more than the 20 highest-paid generals in the U.S. military.
--The 20 highest-paid figures in the private equity and hedge fund industry collected 3,315 times more in average annual compensation in 2006 than the top 20 officials of the federal government’s executive branch, a group that includes the President of the United States.
*U.S. Business Leaders v. European Business Leaders*
--American business executives appreciably out-earn their European counterparts. In 2006, the 20 highest-paid European managers made an average of $12.5 million, only one third as much as the 20 highest-earning U.S. executives took home last year.
-Sonja :)
"Democracy works only when you vote. When you don't take the time to vote for the candidate you find the least offensive, you run the risk of electing the candidate you find the most offensive."
Most tax free investments are things like municipal bonds. The idea is to attract capital to public infrastructure needs (roads, schools, public buildings, water works) which don't earn any income and are therefore not attractive as investments.. Because the bonds are tax free, the municipalities can offer very low interest rates which saves local taxpayers a lot of money. By eliminating tax free investments, all you will accomplish is make it difficult or impossible or much more expensive for local governments to raise money. The Federal Government might collect a little more money but local governments will have to raise taxes or live with inadequate infrastructure because their borrowing costs will go up. Local taxes like sales taxes tend to be regressive but if you don't mind, it doesn't bother me either. You should be aware though that the main impact of this policy will be to shift revenues from local governments to the federal government and not to actually increase total revenues.
I have no problem with eliminating anything that has the stench of a subsidy so I am on board with eliminating any sort of wealthfare whether it be special tax breaks, subsidy payments, or protective tariffs. They are all ultimately the same and they all distort the market and they are all unfair and bad. They should be eliminated. We are in agreement on this. I would favor a much simpler tax code where this kind of chichanery was not possible like the FAIR Tax.
Just about everything else in your post was just class warfare. I see nothing in the Constitution that gives the government even the slightest business in legislating how much money a person is allowed to earn or how much wealth they are allowed to accumulate. I dare say our Founders would be appalled at the thought! What business is it of anybody's but the shareholders, how much a corporation chooses to compensate a CEO? If the shareholders think it is too much then they can lower the CEO's compensation or send them down the road. It is totally inconsistent with freedom for anybody else to have a say in the matter.
And in America, nobody is forced to work at a particular job. If somebody does not like the wages they are being paid they are always free to quit. Only a very small percentage of our workforce works at minimum wage and the biggest groups of these are kids and secondary wage earners. Most anybody who works at minimum wage for more than a few months does so because they failed to take advantage of the free education that the taxpayers offered to them at great cost. They are living the consequences mainly of their own bad choices that they freely made.
The way to make lower wage earners richer is not to legislate higher wages (which is not a legitimate government function) but rather to quit importing low skilled immigrants (immigration policy is a legitimate government function) who cut our poorest citizens off at the knees.
You can't stop people from making money. That's against the American dream. People should be able to reach their full potential. Just because someone makes more money than others doesn't mean he or she should be brought down. If you want everyone to be treated the same, then become a communist.
Tegan.
The way rich use to do it and the way they do it now is completely diffrent and I think this blog barely touches on this point. We have a few gazillionaires that put alot towards humanitarian efforts. But more people need to do more. I am also for the government needing to back off, which means that setting a max is no good along with all its other interferences.
What we need to do is teach our children right and creat a society that is eager to help others as well as them selves (esspecially themselves). This means people will work for their money and succeed and quit asking for hand outs. It would also mean that those whom have made it will help those whom are still trying, with no strings attatched...a 'pay it forward' sort of mantality. All in all this would negate government dictation of the idividuals with welfare and national healthcare socialist ...crap.
Overall, good ideas, well thought out blog post and comments.
I Luv you people at Pro U
~Tanya
Just a brief idea
all truths are easy to understand once discovered; the point is to discover them ~galileo
I agree. People are so motivated by monetary profits to get ahead. It's time to focus worth on something more than just the money we make...
It's too bad that not more people care more about people than money. I really like the "pay it forward" concept. I would love to see it actually happen.
America is perhaps the most monetary oriented country on earth.
But if you start digging you also find that we are also the most generous country on earth. A few countries at the governmental level tax more and give away a larger percentage of their GDP as official charity.
But when you add our official government giving together with our private charity no country stacks up to the USA in terms of generosity and helping out the rest of the world. And that is before you consider the cost of "in-kind" donations like when our military shows up and starts helping out a country hit by a natural disaster. Those expenditures come out of the defense budget and don't count in the world aid statistics but they are huge contributions none the less.
Charity is only possible from countries that create vast wealth. Almost everything good and almost all human progress is driven by profits.
I think it is awesome that you brought up the military as a government charity from time to time...Awesome...I actually almost feel proud of my job now!
all truths are easy to understand once discovered; the point is to discover them ~galileo
They were fantastic after the big Tsunami a couple of years ago.
And they save a lot of lives in Pakistan after the huge earthquake there in the middle of winter a couple of years ago.
And closer to home, once the Governor of Louisiana gave them permission and over-rode the posse comitatus statutes, they did a great job in New Orleans.
I bet if you put it on a ledger you would find that our military in the past 50 years has saved more lives by providing emergency aid then they have killed in military operations.
I am not sure 50 is a good number to say. You do make a valid point but I think alot of killing has happened...maybe in the past 25 years...either way that would be good news. Good point
all truths are easy to understand once discovered; the point is to discover them ~galileo
OK, this is degenerating into outright craziness ...
Over the past 150 years, the USA invaded pretty much every country on earth, provoking uncountable deaths. And you think that is somehow compensated by some humanitarian work done by the US military?
Nonsense!
As for American "generosity". Can you tell me how much of that supposed "aid" is Church-bingo-sponsoring-Somalian-orphan kind of money, and how much is monetary loans, capital goods, contractor fees, subsidies to American branches abroad, and other forms of "aid" that immediately bounce back into the American economy?
I like the idea of a maximum wage. Then the wealth can be spread among the masses!
~ *~
This is a signature, an automated thingy that pops up when I comment, not a demand to see my blog!
Mind Control is Easier Than You Think
First of all, those billions of dollars would go to the companies if not to the execs, not much difference. But supposing that there were some way to institute a 'maximum wage', it would be horrific for the economy.
Looking at the basic economics of it, setting a wage ceiling on labor is not different from setting a price ceiling on a good. When you set up a price ceiling, the demand price would decrease in relation to the quantity of a good, thus requiring lower prices. Similarly, if you were to set up a wage ceiling, the demand for labor would decrease with respect to wages. Thus, fewer people would be getting jobs, the value of currency would decrease, and workers would be paid less.
--Mike
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I think the best executives would just find a way to earn the big bucks anyway. They would just take their act offshore. They would probably take tens of thousands of good jobs with them.
What a great, yet simple take. Some of these things just require us to slow down and actually use what we've been taught in basic economics classes, this leads us (more often than not) to something so profound and stated so that a 3rd grader could understand.
Great thoughts Mike. My only question would be, "Have we already enacted a "maximum wage"?". Because fewer people are getting jobs, the value of the dollar is going down, and many workers are getting paid less as we speak.
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"Faith is to believe what you do not yet see; the reward for this faith is to see what you believe"-- St. Augustine
Wage is just a number relative to the amount of capital in the economy. It's why prices for things vary in certain areas.
The problems you bring up are, in my opinion, a result of minimum wage. There are many problems with minimum wage, as I'll illustrate in the following example:
An employer has $10 with which to pay workers for one hour each day. He needs them to move some boxes. In this scenario, there are only five viable potential employees. Ideally, the employer would like to hire 5 workers for the job. If you're doing the math, that means he values the workers at $2 each. Without a minimum wage, he can hire all the employees he needs for the hour at $2 each.
Now, let's add the minimum wage. Let's say that a minimum wage is set at $4/hr. Now, this employer could only hire 2 workers for the hour for the day. Thus, he has to choose which workers he wants to hire.
As a consequence, he would be more likely to hire those workers with experience, leaving inexperienced workers, the ones who would be more willing to work for $2/hr anyway, unemployed. Because of this, it is more difficult to get job experience, and people who are either dependents (who don't need the money, just the resume) or the homeless (who would be happy to receive an even $2 a day) are left unemployed.
In addition, the employer does not have all the workers that he needs, getting the job done less expediently than a business which does its work in an area with no minimum wage.
Also, minimum wage sets a lower limit of income. Thus, whatever that minimum wage is becomes the new $0 and everything else, in relation to the economy, becomes negative. Because that $0 is a number, people are content to accept it as their wage, and employers are more than happy to set that as the wage of employment.
Although minimum wage seems like something to help the working class, it really just ensures that the rich stay rich, the workers stay down, and the poor continue to struggle.
--Mike
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That's a pretty good, "Oh no the rain would fall" argument.
What's wrong with the money flowing back into the company? Isn't that what would spur more ingenuity and adaptiveness?
Is a person like William McGuire of UnitedHealth Group worth $124.8 million?
What's he going to do? Buy another sofa grande? Will his mansion be any less Feng shui if he's put on a leash? Sometimes I wonder a lot. Sorry.
"The Once-ler: Well, what do you want? I should shut down my factory, fire a hundred-thousand workers? Is that good economics, is that sound for the country?"
When I say the money would flow back into the company, I don't mean it would go to the workers; I mean it would go into corporate accounts as profit. Not to mention, there is no way to feasibly institute a maximum wage.
--Mike
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I'm not in favor of capping salaries, although it sounds swell in theory. You can see my full reaction to this post at http://www.progressiveu.org/205339-1960s-tax-dig
Perhaps there you will answer some of the questions I posed...
The Once-ler: Well, what do you want? I should shut down my factory, fire a hundred-thousand workers? Is that good economics, is that sound for the country?
The other responder is correct that if you lowered the cost of payroll at the executive level the company would show higher profits. After the government takes their share of the higher profits in the forme of income tax, the remainder of profits belong to the shareholders who put their capital at risk in hopes of realizing them.
Shareholders, through the Board, can decide to distribute this money to themselves as dividends or invest in growing the company or pay their CEO and Executive Team more in the hopes that increased the incentive would cause him to work harder and grow the company further and particularly its profits.
Or the shareholders could decide to pay the other employees more. But unless they felt it was strategically to their advantage and would lead to higher future profits, why would they choose to pay their employees a wage higher than the market demanded was necessary to retain them? It would be like flushing money down the toilet.
After much thought, I am against a wage ceiling. While it may sound good in theory, I don't think it would work particularly well in practice. And while it may not be fair that teachers earn pennies compared to big sports people, if people didn't want those sports people, they wouldn't pay to go see them. Plain and simple.
~C
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I'm guessing what you meant is it's NOT fair that teachers earn pennies compared to big sports people.
Sure, you said people want the sports people, therefore they pay to see them. People want (or at least should want) teachers too. However, teachers aren't getting even close to what they should. Maybe teachers aren't dribbling a ball or posing for a camera, but they're just as wanted or needed, although often overlooked or taken for granted.
People want good teachers. People also want good actors. But I guess people are only willing to pay for one of the two.
Since I don't know the actual numbers I am just going to make some up for illustrative purposes.
We need perhaps a million teachers in the USA and they need to be distributed across the country in the right proportion to where the families with children are located.
For the most part, at the current fairly low wage levels we don't have too much trouble finding a million people to fill those jobs. Some inner city schools and some rural locations have trouble getting teachers and they offer somewhat higher wages and those positions generally get filled too.
Remember that these low wages are generally only for 9 months of work. This means that a teacher gets a very long vacation and liesure time has a great deal of value or the teacher is free to take a summer job and supplement their earnings.
Lots of school districts would be willing to pay a premium for really gifted teachers but the teachers union has made that impossible. These school districts have learned that the only thing unions will allow is pay based on things like time in position and advanced classes taken. They have a tough time paying the good ones more because it essentially means paying the bads ones more too. And since it is almost impossible to get rid of a bad teacher there are LOTS OF CRAPPY TEACHERS WHO ARE OVER-PAYED. I'm sure all of you experienced some of those.
So basically the supply and demand equation is in balance and the wages being offered are about right. The sitution could be made better for the best teachers if the unions were not so powerful. And it could be made better for students if the worst teachers could be fired.
If there were a nation wide teacher shortage it turns out that there are lots of people who would like that job if it paid better so all that is needed to offer a slightly better wage and the shortage disappears. The supply is elastic.
Compare that to professional basketball. I am not a sports fan so again I am going to just make up numbers for illustrative purposes.
There are perhaps 20 NBA teams and each of them needs about 10 players meaning that the total demand side of the professional basketball players is 200 job positions. But even at that, the supply side of the equation is lacking. Very few teams are able to put more than 4 crowd pleasing stars on the court and they are lucky if they have even 1 superstar. God just does not create very many star quality basketball players.
The reason basketball players command extremely high wages is that there is three times as much demand as there is supply.
Also both demand and supply are totally inelastic. Inelastic supply means that the quantity offered (the supply) is barely effected by price. You can raise the wage by $10 or 100 million and it will not call forth a single new star; there aren't ANY unemployed stars sitting around waiting for a higher wage offer. And likewise demand is inelastic. There is so much money to be made in basketball that the owners will still demand superstars if they are asking $1 million or $100 million. The demand does not drop when the price goes up.
The result is that the wages paid to basketball players are set by the market and are appropriate given the supply and demand for that kind of extremely RARE talent.
Gah... that's the second time I did that yesterday. I'm tired, I apologize.
Think about it this way. Healthcare workers should be paid a great deal, should they not? I mean, they take care of our health for us... but where would that money come from? Right now, healthcare still costs a ton, and many people thus cannot afford it. If a healthcare worker wants to do well, they have to then cater to the rich... hence the advent of concierge medicine. At that point, though, not everyone feels they should continue to be paid as much, because their altruistic side (providing healthcare to those who cannot afford it) has disappeared. You can't pay them with government funds, because that would increase taxes all around and hurt the middle class that often cannot afford healthcare in the first place.
Now, if we apply it to teachers, they are also paid by the government. As the poster above me said, it's going to be a little more complicated than I point out, because unions make it difficult all around. So, if you want to increase the wage to the vast majority of teachers (those who work in public schools, rather than private schools), you have to find that money in the budget. And we've seen that the government isn't very good at stretching a budget (cause, let's face it... few of them have had to worry about money in their lives), so that means more taxes. That means that the middle and lower class are hurt, while the rich can just send their students to private schools with the teachers they want. Thus, if we don't want taxes to be raised, and we want to pay teachers more, we have to pay them ourselves, so our school system turns private. The only problem with that is that education is no longer free, and so only those who can afford school will be educated.
I think all that made sense... I'm a little tired right now.
~C
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You can look to basic economic theories for your answer.
In general people are paid based on their marginal product. People who make millions every year tend to have unique skill sets that make their marginal products much greater than the typical person, the prospect of these millions is what provides an incentive to cultivate such skill sets.
Think of the basketball player. A really good NBA player is not only good at playing the game, but also at getting people into the stands this can be because his presence causes the team to win, because he has charisma, or both. Either way his marginal product is very high, when measured not by baskets but by in the sales of tickets and merchandise. Even among NBA players there are very few who are truly exceptional players. A wage ceiling would provide fewer incentives for players to become stars and thus the basketball industry would decline, and so all of the other industries that are tied to basketball would as well. Why build a new stadium if it won't be filled? Why employ people to clean the stadium if no one comes anyway? Why stock the refreshment stands? Why pay for prime advertising spots during televised sporting events? Why televise sporting events?
Furthermore, your idea that "the billions or trillions of extra money could be used to research and solve problems all over the globe" is flawed. Even assuming that a decline in demand and productivity did not accompany the wage ceiling the money that would be saved on a CEO's salary would simply go back into the company as profit. Research and solving problems all over the globe require incentives... and in general the best incentives are monetary. Why invent a new drug/machine/tool/whatever? For the temporary monopoly power and the monetary gains that come with it.
I would hold that a wage ceiling would damage the economy, rather than support it... And as far as inflation is concerned i would argue that the speedy increases in the salaries of CEOs, movie stars, and sport stars are not reflective of inflation, but rather economic growth. If these incomes had a significant impact on inflation then we should have seen significant rises in inflation in the past several years not a relatively constant, healthy rate of inflation. The present inflation is due to increased demand for oil, and thus the increase in costs of production.
-m-
The present inflation is due to increased demand for oil, and thus the increase in costs of production.
I don't completely disagree with your statement above but only a portion of the higher price of oil can be explained by increased demand. A large portion of it can only be explained by the decline in the value of the dollar.
I believe that it was the incomparable Milton Friedman who observed "that infation was ever and always a monetary phenomena".
Our Congress is engaging in massive deficit spending which is tantamount to printing money. And our Federal Reserve has ridiculously inflated the money supply by keeping interest rates low.
I have enjoyed reading all the comments to my thoughts. I agree with a number of arguments presented on both sides of the topic. Although many aspects of a maximum wage make sense to me, I definitely see the negative sides to it as well.
I highly doubt such a "law" would ever pass (and don't know if it would be good or bad if it did). However, I wanted to put the idea out there to see what others think about it.
Since the others have shot down the idea on a private level, I do want to bring up what my first thought was.
What about people starting a business?
Many startups end up shelling out millions, or even billions, before collapsing after a few years (because it doesn't turn a profit until about 5 years after it starts, the money has to come from somewhere). You say that one cannot have an estate worth more than $200 million, yet most business locations are worth more than that when you include not only the land and building, but the merchandise, as well. And a business owner has to have more than that to get everything off the ground.
It seems to me, then, that if the same cap applies to entrepreneurs, then we would no longer see as many (if any at all) because they can no longer gain the capital to start up by themselves and would require outside help in order to circumvent the cap.
I am treated as evil by people who claim that they are being oppressed because they are not allowed to force me to practice what they do. ~D. Dale Gulledge
I made very much the same point in my post above entitled "Almost everything Good". One of the conditions necessary for creating new wealth is the ability to accumulate capital. It takes vast sums to get a new business of any size off the ground.
I've read most of the posts in this thread and I am pleased to see that there are quite a few posters with an excellent grasp of economics. It bodes well for the next generation.
In some ways the world is progressing in the right direction. China is definately making big strides to help its people. India is doing considerably better at creating wealth too. We are seeing some of it in South America. Brazil seems to be an increasingly well governed country. Sadly Argentina which was emerging nicely is now moving in the wrong direction. Africa remains the place where it is hard to find a success story.
Given where world population is headed, the world is going to be in a world of hurt if it does not get serious about creating wealth at least as fast as it is growing the number of people that need to be fed.
Putting a maximum wage is the opposite of capitalism, which is what i would "hope" we all want. Sure, theres a bottom of the barrel, but at the same time theres that capitalistic opportunity to better your situation, the problem is corruption in congress where they give the rich tax breaks and the poor the burden. I don't think the question should be "do we want to move to a more socialistic economy", i think the question should be "why are we putting these people in office that keep voteing against our wallets. It's a simple task of researching candidates voteing habits before you vote for them, thats a sure fire way to tell if they're really who they say they are.
Can I tempt you with this article? I found it interesting and I'd like to hear what you think...
http://healthcare-economist.com/2006/02/14/united-health-ceo-earned-1248...
The Once-ler: Well, what do you want? I should shut down my factory, fire a hundred-thousand workers? Is that good economics, is that sound for the country?
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-Sonja :)
"Democracy works only when you vote. When you don't take the time to vote for the candidate you find the least offensive, you run the risk of electing the candidate you find the most offensive."
Wow. In all honesty, I have never considered the notion of setting a maximum wage. When trying to determine it's fairness, however, there are pros and cons for both sides, too many for me to really make a decision about which would be the better option. Life isn't fair, and regardless of the benefits of establishing a maximum wage, I think it would still be strange to try to tell Americans that there is a limit to their earning potential.
Of course their is an infinite number of jobs, like teaching, where their income should be much higher. There should definitely be an initiative to raise the salaries of those jobs that require dedication and passion - like teaching, nursing, coaching, etc.
A bit of unsung history: Here in the United States we once had a President who proposed what amounted to a maximum wage.
Back in 1942, Franklin D. Roosevelt asked Congress to enact a 100 percent top tax rate on annual individual income over $25,000, about $315,000 in today's dollars.
Congress didn't buy FDR's 100 percent top marginal rate. But lawmakers did set the top rate at 94 percent on income over $200,000, and that rate would hover around 90 percent for the next two decades, years that would see the greatest period of middle class prosperity in U.S. history.
Where did FDR get his idea for a maximum wage from? Calls for an income cap had been circulating since the Robber Baron era. A recent book that goes into this maximum wage history now has its full text online. More at http://www.greedandgood.org/BookPDFs/gghistoric.pdf
I'll be sure to check that site out!
Have you heard of Thom Hartmann's book about the middle class? It's an excellent read. "SCREWED, the undeclared war against the middle class, and what we can do about it."
Earth First: we'll destroy the other planets later.