For the last 10 years, the federal minimum wage in the U.S. has been $7.25 per hour. In that time, companies have fought tooth and nail to avoid disclosing the ratio of executive compensation to employee pay — because, as it turns out, the CEOs have leveled up to earning 287 times more money than they expect their workers to live on. Nobody argues the different jobs deserve strictly equivalent salaries, but beginning in the 1990s, the gap between these two demographics exploded, contributing to devastating economic inequality nationwide. Since 1950, that chasm-like ratio has opened by a factor of 1,000. It is obscene.
Happy Labor Day. Let’s have a maximum wage.
It’s frustrating that our progressives are often tied up advocating for small bumps to the minimum wage — and that more than half the states have been obliged to set that wage higher than the woeful, embarrassing federal level — when the other end of plutocracy has flourished unchecked. In a way, the debate over how little we can legally pay younger, female-skewing and largely service industry employees is a distraction from the inflated paychecks up top. As you see in the tweet above, Bernie Sanders even uses the latter problem to frame the former. But of course the minimum wage should be higher; had it kept pace with American productivity, it would be closer to $20. That’s a no-brainer, and that it’s up for debate is itself a political failure.
For now, it makes sense that Sanders and Elizabeth Warren would appeal to minimum-wage workers with emphatic support for increased mandatory pay — they need those voters, after all, if they want to scorn the mega-wealthy donors of the 1 Percent. Meanwhile, however, they’re touting plans to tax those elites at far higher levels, and from a messaging standpoint, there’s an opportunity to bridge the two ideas in a way that Sanders almost does when he points out the punishing disparity between the best- and worst-paid of society: call for a ceiling on wages, an absolute limit on what people may earn.
This may sound like a risky, radical proposal in a nation of the “temporarily embarrassed millionaire” who keeps faith in their future riches, yet it’s far from unprecedented. As labor journalist Sam Pizzigati wrote in the Guardian last year, the influential German-American professor Felix Adler argued at the end of the 19th century for a 100 percent tax rate beyond the point “when a certain high and abundant sum has been reached, amply sufficient for all the comforts and true refinements of life.” That idea was carried forward under President Franklin Delano Roosevelt, who pushed for a similar top tax rate shortly after the U.S. was drawn into World War II — with support from the American people — a few short years after overseeing the implementation of the first national minimum wage law.
There’s reason to believe that marginally improving the lowest wages in the country is an inadequate fix if we don’t also do something about skyrocketing executive assets, including performance-based bonuses and stock options. Those incentives bring short-term profit decisions that ultimately lead to major collapse, as the Great Recession showed us. And while the affluent rode golden parachutes to safety, the lowest-income workers were hit hardest by capitalists’ reckless behavior, bearing the total brunt of the unemployment crisis that followed. If we slip into recession again, the already vulnerable will again suffer most, whether or not they’re making $11 or $15 an hour.
On the flip side, lower salaries for top managers hasn’t harmed business in the Scandanavian region, where CEOs are content to have a single vacation home. Such curbs on excess are overwhelmingly popular, too: In 2013, Switzerland passed the Minder Initiative, which eliminated a range of bonuses and empowered shareholders to maintain stricter control of CEO pay, with 68 percent of votes in favor. Unfortunately, our populist efforts to these ends in the U.S. have been haphazard and harebrained, as when Bill Clinton and a Democratic Congress passed a law that “limited companies’ deductions for executives’ compensation to $1 million per executive per year.” Peanuts, in other words. The plan completely backfired.
No, an effective maximum wage system would probably have to reimagine corporations as we know them, not simply close a minor loophole here and there.
At present, there’s no ideal example of such regulation. The same Swiss voters who backed the Minder Initiative went against the so-called 1:12 rule, which would have prohibited executives from earning “more in a month than their lowest-paid workers in a year.” All the more reason, though, to start having that debate — and seeing that people consider not only their own financial security, but how their economic fate is closely tied to lush incomes for the C-suite.
Moreover, we’d need to analyze and control other forms of wealth: A good number of CEOs get around the bad optics of a hefty salary by taking around $1 in annual compensation — meanwhile growing vastly richer off their existing assets. Warren and other Dems want to go beyond the question of labor income and specifically target those capital gains, which are key to the billionaire class. The Quarterly Journal of Economics, for example, has found that the “top 1 percent derives over half of their incomes from capital, the top 0.1 percent more than two thirds today.”
Point is, minimum wage isn’t an issue separate from overall inequality. Unlike relying on bogus trickle-down schemes, capping wages and taxing currently inaccessible hoards of money could benefit the common good, not to mention companies themselves, which would obviously have more money to reinvest or reward employees at every level.
But the real upshot? It’s not just that the poor deserve more. It’s that the rich have enough.