What About Maximum Wage?
America’s minimum wage is a step behind other countries—and its maximum wage is too.
Imagine a meeting at work. Some entry-level staff, especially those with college degrees, express their discontent about earning minimum wage. The person in charge explains “money is tight.” Meanwhile, that supervisor likely makes significantly more than those discontent with their paychecks.
Compared to other countries, the U.S. suffers massive income inequality between CEOs and their employees in lower positions. The Securities and Exchange Commission will require CEOs of public companies to disclose the rate of CEO pay to the median worker by 2017. It’ll be another year or so before we have all the data, but Glassdoor’s recent research reveals that in 2014, American CEOs typically earned 204 times the median worker. Asking CEOs to publicly disclose pay disparities may be the beginning of a new conversation, but it’s likely to be a controversial topic in most offices.
Talking about minimum wage is primarily focused on the lowest paid wages, rather than the highest.
Since then, California has enacted the Fair Wage Act of 2016, which will increase the state’s minimum wage to $15 by 2021. We’re currently in the middle of a national conversation about what constitutes a living wage, and whether the minimum wage should increase to allow full-time workers basic financial stability.
I’ve noticed the conversation is heavily focused on the average worker, who often holds the lowest-paid position within a company. We hardly discuss what the highest-paid positions earn. Although CEO wages are covered by the media from time to time, the idea of “what should a CEO earn” rarely breaks into everyday conversations.
We focus on minimum wage, not maximum.
A United States President has called for maximum wage before. The Institute for Policy Studies reminds us that Franklin Delano Roosevelt wanted a 100 percent tax on annual incomes over $25,000 during World War II. Although Congress didn’t pass this bill, it did pass a 94 percent tax on annual incomes over $200,000—which the Institute for Policy Studies calls “a move that would help usher in the greatest years of middle-class prosperity the United States has ever known.”
There are a few different types of maximum wage policies. We often think of a direct earnings limit, which caps how much someone earns. However, there are also maximum liquid wealth and relative earning limits. Maximum liquid wealth restricts the amount of money an employee can maintain over time, meaning a paycheck must be spent to earn more. Conversely, relative earning restricts employees from earning over a certain ratio of a company’s lowest-paid worker.
Although there aren’t any countries with a direct earnings limit, there are other policies way ahead of the United States’s minimum wage legislation.
- In 2011, Venezuela created a public salary limit for government employees. As Venezuela Analysis reports, the highest wage, including the president, is $3,415 USD per month. Venezuela is a poor example of how maximum wage can be enacted. According to Anadolu Agency, the country currently faces inflation, an abundance of protests, daunting power outages, and food and medicine shortages.
- In response to Arab Spring protests, Egypt attempted to enact a public salary limit of $5,000 USD in 2014 (and again in 2015), but failed. Daily News Egypt reports the Administrative Judicial Court of the State Council deemed the law was unconstitutional, after being approached by major national banks.
- Switzerland rejected a maximum wage referendum in 2013, explains U.S. News & World Report. Despite being voted down, the issue was able to reach voting booths and sparked conversations about pay inequality all over the world.
- According to the Financial Times, back in 2012, the prime minister of France wanted to cap CEO salaries at 20 times the lowest-paid worker. Although this isn’t enacted, a politician openly spoke out against corporate leaders early in his term. This is another proposition for relative earning limits.
There’s more to explore beyond the basic assumption “if CEOs made less, everyone else could make more.” Because a successful maximum wage plan hasn’t yet been enacted anywhere in the world, it’s difficult to predict the benefits and drawbacks. A future economic plan could include something more nuanced than a direct earnings limit. However, the nation’s top earners — predominately those in business and politics — likely won’t favor it if their paychecks suffer. Perhaps, there might be a way to please both parties, high-earners and lower-earners alike.
The way the American economy works now, I can’t foresee maximum wage happening in the U.S. anytime soon. However, with the rise of Democratic Socialism (thanks, Bernie Sanders) and the Fight for 15 movement, productive discussions of maximum wage are starting to happen.
The next time someone asks you what you think the minimum wage should be, ask them what they think the maximum wage should be.
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