Ronald Reagan famously said that there are no worse words in the English language than ‘Hello, I’m from the government and I’m here to help’. Your opinions on the role of government in the lives of people will of course depend on your own political allegiance. The role government plays in social policy, in providing an allowance when you are out of work, or a health service free at the point of need when you are ill are entirely different from imposing rules on business. Many who are perfectly happy with the former, would be fiercely against the latter.
And so, with that caveat in mind, we approach the thorny issue of a national maximum wage. The gap between rich and poor in the developed world is getting wider. In certain sectors those in the upper echelons of companies are being paid more and more and are receiving bigger and bigger bonuses, while people further down the ladder struggle to make ends meet. Over the last ten years senior executive pay has risen nine times faster than that of a medium earner. Salary levels in the financial centres of the world are now astronomical, top executives regularly earn 1,000 times the UK national minimum wage per hour.
Would capping the amount that top earners can make be a good idea? The notion has been proposed in the past. It was proposed by the leader of the Labour Party, Jeremy Corbyn, only last year, before his ascendancy into the political spotlight was complete. Some have also proposed that there should be a fixed ratio of top earnings within a company to either the median or lowest salaries.
The capped figure would of course be more than enough for those successful in life to continue to live in the luxury that they are accustomed to. A cap would only prevent those earning ‘silly money’ from earning much more. The money sifted from the very brim of executive’s pay pots would of course be used to fund some of those social safety nets that we hold so dear in this country.
Of course a policy like this would be very controversial. The super-rich would flee the country and there would be a good chunk of people that would say the government has no place interfering in a free market economy. The market should set the maximum wage and that maximum should be the clouds. The market, some would even say, should dictate the minimum. The wealth, all be it concentrated at the top will, to use an another old Reagan term, ‘trickle-down’.
Your opinions on whether wealth does indeed trickle down will no doubt go in hand with your assessment of Ronald Reagan as a good or bad president. Views on a potential maximum wage need to be much more artful, a balance, as with all controversial matters, needs to be found.
Top executives do earn extraordinary sums, but how can you limit this and not constrain a free market economy? Take that argument too far and you march straight past the Gipper and down a much darker road. A balance between constraint and freedom would, of course, be all but impossible to find. But it is only through debate that new ideas start to be considered, which is why we shouldn’t recoil in shock when someone floats the idea of a national maximum wage.